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


 
                         LIVING WITHOUT HEALTH
                          INSURANCE: WHY EVERY
                        AMERICAN NEEDS COVERAGE

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 25, 2007

                               __________

                           Serial No. 110-34


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov


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                    COMMITTEE ON ENERGY AND COMMERCE

    JOHN D. DINGELL, Michigan,       JOE BARTON, Texas
             Chairman                    Ranking Member
HENRY A. WAXMAN, California          RALPH M. HALL, Texas
EDWARD J. MARKEY, Massachusetts      J. DENNIS HASTERT, Illinois
RICK BOUCHER, Virginia               FRED UPTON, Michigan
EDOLPHUS TOWNS, New York             CLIFF STEARNS, Florida
FRANK PALLONE, Jr., New Jersey       NATHAN DEAL, Georgia
BART GORDON, Tennessee               ED WHITFIELD, Kentucky
BOBBY L. RUSH, Illinois              BARBARA CUBIN, Wyoming
ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
BART STUPAK, Michigan                HEATHER WILSON, New Mexico
ELIOT L. ENGEL, New York             JOHN B. SHADEGG, Arizona
ALBERT R. WYNN, Maryland             CHARLES W. ``CHIP'' PICKERING, 
GENE GREEN, Texas                        Mississippi
DIANA DeGETTE, Colorado              VITO FOSSELLA, New York
    Vice Chairman                    STEVE BUYER, Indiana
LOIS CAPPS, California               GEORGE RADANOVICH, California
MIKE DOYLE, Pennsylvania             JOSEPH R. PITTS, Pennsylvania
JANE HARMAN, California              MARY BONO, California
TOM ALLEN, Maine                     GREG WALDEN, Oregon
JAN SCHAKOWSKY, Illinois             LEE TERRY, Nebraska
HILDA L. SOLIS, California           MIKE FERGUSON, New Jersey
CHARLES A. GONZALEZ, Texas           MIKE ROGERS, Michigan
JAY INSLEE, Washington               SUE WILKINS MYRICK, North Carolina
TAMMY BALDWIN, Wisconsin             JOHN SULLIVAN, Oklahoma
MIKE ROSS, Arkansas                  TIM MURPHY, Pennsylvania
DARLENE HOOLEY, Oregon               MICHAEL C. BURGESS, Texas
ANTHONY D. WEINER, New York          MARSHA BLACKBURN, Tennessee         
JIM MATHESON, Utah                   
G.K. BUTTERFIELD, North Carolina     
CHARLIE MELANCON, Louisiana          
JOHN BARROW, Georgia                 
BARON P. HILL, Indiana               
                                     
_________________________________________________________________

                           Professional Staff

 Dennis B. Fitzgibbons, Chief of 
               Staff
Gregg A. Rothschild, Chief Counsel
   Sharon E. Davis, Chief Clerk
   Bud Albright, Minority Staff 
             Director

                                  (ii)
                         Subcommittee on Health

                FRANK PALLONE, Jr., New Jersey, Chairman
HENRY A. WAXMAN, California          NATHAN DEAL, Georgia,
EDOLPHUS TOWNS, New York                 Ranking Member
BART GORDON, Tennessee               RALPH M. HALL, Texas
ANNA G. ESHOO, California            BARBARA CUBIN, Wyoming
GENE GREEN, Texas                    HEATHER WILSON, New Mexico
    Vice Chairman                    JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado              STEVE BUYER, Indiana
LOIS CAPPS, California               JOSEPH R. PITTS, Pennsylvania
TOM ALLEN, Maine                     MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin             MIKE ROGERS, Michigan
ELIOT L. ENGEL, New York             SUE WILKINS MYRICK, North Carolina
JAN SCHAKOWSKY, Illinois             JOHN SULLIVAN, Oklahoma
HILDA L. SOLIS, California           TIM MURPHY, Pennsylvania
MIKE ROSS, Arkansas                  MICHAEL C. BURGESS, Texas
DARLENE HOOLEY, Oregon               MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York          JOE BARTON, Texas (ex officio)
JIM MATHESON, Utah
JOHN D. DINGELL, Michigan (ex 
    officio)
                                 ------                                

                           Professional Staff

        Bridgett E. Taylor, Chief Health Finance Policy Advisor
                    Robert Clark, Policy Coordinator
              Ryan Long, Minority Chief Counsel for Health
                 Christine Houlihan, Legislative Clerk
  

                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Frank Pallone, Jr, a Representative in Congress from the 
  State of New Jersey, opening statement.........................     1
Hon. Nathan Deal, a Representative in Congress from the State of 
  Georgia, opening statement.....................................     3
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     4
Hon. John B. Shadegg, a Representative in Congress from the State 
  of Arizona, opening statement..................................     5
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................     7
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     8
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................     9
Hon. Heather Wilson, a Representative in Congress from the State 
  of New Mexico, opening statement...............................    10
Hon. Lois Capps, a Representative in Congress from the State of 
  California, opening statement..................................    11
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................    12
Hon. Tom Allen, a Representative in Congress from the State of 
  Maine, opening statement.......................................    13
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, prepared statement......................................    14
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................    15
    Prepared statement...........................................    16
Hon. Tammy Baldwin, a Representative in Congress from the State 
  of Wisconsin, prepared statement...............................    17
Hon. Hilda L. Solis, a Representative in Congress from the State 
  of California, prepared statement..............................    18

                               Witnesses

Hon. Thomas A. Daschle, distinguished senior fellow, Center for 
  American Progress..............................................    19
    Prepared statement...........................................    21
    Answer to submitted question.................................   130
Michael K. Smith, secretary, Agency of Administration, State of 
  Vermont........................................................    23
    Prepared statement...........................................    24
    Answer to submitted question.................................   130
Gerald W. McEntee, international president, American Federation 
  of State, County, and Municipal Employees......................    25
    Prepared statement...........................................    27
Grace-Marie Turner, president, Galen Institute...................    30
    Prepared statement...........................................    31
    Answer to submitted question.................................   129
Gary Rotzler, Utica, NY, on behalf of the National Cancer Society    36
    Prepared statement...........................................    37
Tony Montville, president and chief executive officer, Healthtek 
  Solutions, Incorporated........................................    39
    Prepared statement...........................................    41
Susan Colburn, vice president, benefits, AT&T Services, 
  Incorporated...................................................    45
    Prepared statement...........................................    48
Heyward D. Wiggins III, PICO National Network....................    66
    Prepared statement...........................................    67
Robert E. Moffitt, director, Center for Health Policy Studies, 
  the Heritage Foundation........................................    69
    Prepared statement...........................................    71
David L. Knowlton, president and chief executive officer, New 
  Jersey Health Care Quality Institute...........................    74
    Prepared statement...........................................    76
Joseph R. Antos, Wilson H. Taylor scholar in health care and 
  retirement policy, American Enterprise Institute...............    79
    Prepared statement...........................................    82
Jeanne M. Lambrew, associate professor, the George Washington 
  University School of Public Health and Health Services.........    94
    Prepared statement...........................................    95
    Answer to submitted question.................................   130

                           Submitted Material

``Battery-Powered Health Insurance? Stability in Coverage of the 
  Uninsured,'' Pamela Farley Short and Deborah R. Graefe, Data 
  Watch, November/December 2003, submitted by Mr. Moffitt........   106
Daniel E. Smith and Wendy K.D. Selig, American Cancer Society, 
  submitted statement............................................   118
Sister Carol Keeham, DC, president and chief executive officer, 
  the Catholic Health Association of the United States, submitted 
  statement......................................................   119
John Graham IV, president and chief executive officer, ASAE, 
  Washington, DC, submitted statement............................   122
William B. Spencer, vice president, government affairs, 
  Associated Builders and Contractors, Incorporated, submitted 
  statement......................................................   125
Joseph M. Stanton, vice president, government affairs, National 
  Association of Home Builders, submitted statement..............   127


   LIVING WITHOUT HEALTH INSURANCE: WHY EVERY AMERICAN NEEDS COVERAGE

                              ----------                              


                       WEDNESDAY, APRIL 25, 2007

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:08 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Frank 
Pallone, Jr. (chairman) presiding.
    Members present: Representatives Eshoo, Green, DeGette, 
Capps, Allen, Schakowsky, Dingell, Deal, Wilson, Shadegg, 
Pitts, Rogers, Burgess, Blackburn, and Barton.
    Staff present: Amy Hall, Christie Houlihan, Purvee Kempf, 
Bridgett Taylor, and Robert Clark.

 OPENING STATEMENT OF HON. FRANK PALLONE JR., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. I will call this hearing to order.
    Today we have a hearing on ``Living without Health 
Insurance: Why Every American Needs Coverage.''
    This week, as many of you may know, is Cover the Uninsured 
Week, and as part of our efforts to highlight the growing 
number of Americans who go without health coverage, we are 
holding a hearing today on the issue. The statistics, I must 
say, are truly frightening. There are nearly 47 million 
Americans who go without health coverage for an entire year, 
and that is more than the populations of Connecticut, Maine, 
Massachusetts, New Hampshire, New Jersey, New York, Rhode 
Island and Vermont combined. Millions more experience periodic 
gaps in coverage over the course of a year, and even more are 
considered to be underinsured.
    The question is, who are these 47 million people? They 
really are no different than you or I. They are hardworking 
American families. They go to work every day. They pay their 
taxes and they play by the rules yet because of rapidly rising 
health care costs, insurance coverage is out of reach for many 
of them. As a parent and a husband, it is hard for me to 
imagine the uncertainty these families must face from day to 
day hoping and praying that their health holds out, and I don't 
think any American family should have to live this way.
    Now, what has led to this growing problem? First and 
foremost, increasing health care costs have weakened employer-
sponsored insurance, which has traditionally been a reliable 
source of health coverage for a majority of Americans. As a 
result, more and more employers have been forced to shift costs 
to their workers, who are in no better position to bear this 
grave financial burden. Alternatively, employers have begun to 
offer policies with less-adequate coverage, or stopped offering 
health insurance benefits altogether. Since 2000, the total 
number of Americans with employer-sponsored coverage has fallen 
dramatically. According to the Kaiser Family Foundation, since 
2000 the total number of Americans with employer-sponsored 
coverage has declined from 66 percent in 2000 to 61 percent in 
2004.
    If it were not for our safety net system consisting of 
Medicaid and SCHIP, the erosion of employer-sponsored insurance 
would have had a much greater impact on the number of uninsured 
Americans, and this is especially true for low-income children. 
But thanks to these public health insurance programs, our 
Nation's children have largely been able to access the medical 
care they need to grow up healthy. In recent years, however, 
the number of uninsured children has also begun to increase, 
and that is why as a first step to addressing the problem of 
the uninsured, we must take every effort to strengthen our 
public programs which provide health coverage to those who 
would otherwise be unable to access care. Reauthorization of 
the Children's Health Insurance Program, or SCHIP, will be our 
first step on a path to provide every American with access to 
meaningful health care coverage, and it is my hope that today's 
hearing will reemphasize the need for a strong and 
comprehensive SCHIP program.
    I know, however, that not everyone necessarily agrees with 
me. For instance, the President and many of my Republican 
friends in Congress have proposed to reduce payments to States 
that cover children above 200 percent of the Federal poverty 
line. Similarly, there are proposals that would further cut 
Medicaid spending, which provides health care services to 
millions more low-income families, and this would undoubtedly 
result in the loss of health care coverage for our most 
vulnerable citizens. It strikes me as both illogical and even 
immoral for anyone to suggest that we move in a direction that 
would actually increase the number of Americans without health 
coverage.
    But strengthening our public programs is only part of the 
solution. We must also look at private insurance markets and 
how to increase access, adequacy and affordability. 
Unfortunately, I do not believe that the administration's 
proposal to tax the health care benefits of hardworking 
Americans would achieve any of these goals. Instead, the 
President's plan would take a bad situation and make it 
substantially worse by taxing Americans who have worked hard to 
secure good health insurance coverage in order to subsidize 
less generous policies in the volatile non-group market.
    Now, we certainly have to look for more creative ideas. The 
States, as you know, have been making strides and they have 
been experimenting with new policies on how to achieve 
universal health coverage. From Massachusetts to California to 
my home State of New Jersey, States have been taking it upon 
themselves to develop new ways to provide their citizens with 
the means to afford and access health coverage. While I am 
eager to learn more about what is going on in the States, and 
we will today, their efforts do not mean that the Federal 
Government has been absolved of its duty to address the 
situation also.
    In the end, I am not telling you anything new here. We have 
had a growing problem with the uninsured for quite some time 
now in large part due to what I view as the failures of 
President Bush and some Republican policies designed to address 
this issue, but I think there is now a bipartisan momentum 
building behind efforts to tackle this problem, and I am 
looking forward to hearing from our witnesses today and 
learning from them on how we might achieve this goal.
     I now recognize our ranking member, Mr. Deal, for 5 
minutes for the purposes of making an opening statement.

  OPENING STATEMENT OF HON. NATHAN DEAL, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Mr. Deal. Thank you, Mr. Chairman.
    I think we all agree that one of the biggest problems 
facing our health care delivery system is the growing number of 
uninsured and underinsured Americans. In almost every year 
since 1989, the number of uninsured has increased. Continued 
growth of this population is not only unsustainable, it is 
unacceptable. I believe that members on either side of the 
aisle here would not dispute that we must address the problem 
in this committee of the uninsured. However, the composition of 
the uninsured in this country highlights the reality that the 
simple expansion of public programs and provision of 
government-dictated health care will not properly and 
efficiently solve the problem of the uninsured.
    According to a recent study, nearly a quarter of the 
uninsured population was eligible for public coverage but were 
simply not enrolled. Additionally, approximately 8.8 million, 
or another 20 percent of the uninsured could probably afford 
coverage but remained uninsured. These statistics indicate this 
problem goes beyond eligibility or affordability and reforms 
focused only on the expansion of eligibility criteria will fall 
short of providing coverage for every American.
    In the meantime, proposals which expand Government programs 
like Medicaid or Medicare to cover the uninsured will 
exacerbate existing struggles with these programs. The 
financial burden on State and Federal budgets will increase 
dramatically and it is shortsighted to assume the 
sustainability of our current programs will be improved by the 
expansion of eligibility to even greater populations, 
especially when the Medicare trustees reminded us on Monday of 
the rapid growth of Medicare spending, estimating that the 
Medicare Part A trust fund will be exhausted in 12 short years.
    To me, the growing number of uninsured stems from a broken 
health care system of soaring costs and limited efficiency. If 
we truly want to address the complex problem of the uninsured, 
we must consider broad reform of the health care industry in 
this country. As a guiding principle, I believe we must reduce 
the cost and increase the overall quality of our health care 
delivery system. The high cost of insurance has led to a 
downward spiral as the uninsured population only makes coverage 
expensive and in turn making it more difficult for the 
uninsured to buy coverage. This is why I am convinced that we 
must focus on lowering health care costs which would not only 
help cover the uninsured but make our existing programs more 
sustainable.
    There is a long list of reforms which could help transform 
our health care delivery system and in turn provide coverage 
for the uninsured, improving health information technology and 
the creation of an electronic system to track medical records 
will sharply reduce the number of medical errors and help 
eliminate inefficiencies and waste in the system, thereby 
lowering costs. State insurance mandates drive up the cost of 
purchasing health insurance and should be addressed. Moreover, 
we should consider allowing patients to purchase insurance from 
other States to find the plans that best fit their needs. Cost 
growth could be addressed by medical liability reform, which 
would address the issue of wasteful practice of defensive 
medicine and the astronomical cost of medical malpractice 
insurance.
    This list is by no means complete but it indicates the type 
of broader reforms which would begin to heal our health care 
system. I would hope that the growing uninsured population 
would focus our attention on broad-based reforms which address 
many of the underlying problems in our health care system and 
allow patients, not the Government, to control the system.
    I yield back my time, Mr. Chairman.
    Mr. Pallone. Thank you, Mr. Deal, and we will continue with 
opening statements. Next is our vice chair, Mr. Green.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman, and following our 
ranking member, I have to admit, I come from the State of Texas 
and we have some of the harshest medical liability laws in the 
country and yet we also have some of the highest percentage of 
uninsured in the country, so I don't know if it is a 
combination of us needing to do more with malpractice 
legislation on the national level because the States typically 
are taking care of it, but we still a lot of uninsured, I think 
the highest percentage in the country.
    Mr. Chairman, I appreciate the hearing on the important 
health issue. We couldn't ask for a better hearing topic for 
this week as we recognize ``Cover the Uninsured Week'' and 
examine ways to improve health insurance coverage levels across 
the country. More than 46 million Americans live without health 
insurance despite the fact that this country spends more money 
on health care as a percentage of GDP than most industrialized 
nations. Poll after poll indicates that Americans view health 
insurance, health care, and access to health insurance as a top 
priority as well as it should be since everyone ends up paying 
for the uninsured one way or the other. With less access to 
care, the uninsured are less likely to seek preventative care 
and only get care once their health problems reach emergency 
proportions. In fact, nearly 50 percent of the uninsured have 
postponed seeking health care because they can't afford it. 
Only 15 percent of individuals with health insurance have 
postponed care for this reason. The difference can literally be 
life or death.
    Unfortunately, the state of health insurance in Texas is 
worse than almost anywhere else in the country. Twenty-four 
percent of our Texans are uninsured compared to 16 percent for 
all Americans. Despite programs like Medicaid and SCHIP, the 
situation for Texas children is not much better with 21 percent 
of all Texas children currently living without health insurance 
as compared to 11 percent nationwide. Everyone can agree that 
something must be done to stem the tide of the uninsured yet it 
is important that we put in place policies that not only 
increase the number of Americans with health insurance but also 
ensure they have a quality of comprehensive insurance.
    Make no mistake about it though, health savings accounts 
and association health plans are not the magic answer. The 
success of insurance plan health insurance is that you spread 
the risk. However, both the HSA and the AHP models would 
separate out the healthy and the wealthy, leaving sicker and 
poor Americans to fend for themselves in an individual health 
insurance market that already is out of reach for most low-
income Americans. It is not the way to ensure Americans are 
healthy and productive members of our society.
    We do need assistance for small businesses who want to 
offer health insurance to their employees yet find themselves 
doing their best to meet payroll and monthly expenses. Again, 
Texas is a small-business State yet only 28 percent of our 
Texas small businesses with less than 50 employees offer 
insurance. I am glad to hear that our colleague from Maine will 
be introducing the Small Business Health Plans Act to create 
small-business health employer plan that offers small-business 
employees adequate coverage and benefits, and without question, 
the SCHIP reauthorization offers us our best opportunity this 
year for increasing the level of health insurance coverage in 
this country. With two-thirds of the uninsured children in the 
country eligible for SCHIP that are not enrolled, we should do 
all we can to expand the program and dismantle many of the 
bureaucratic hurdles that are barriers that serve to suppress 
the enrollment in this important program. I look forward to 
working with the chairman and our committee to ensure that all 
low-income children have access to coverage under SCHIP as we 
move through the reauthorization process.
    I want to thank our witnesses, today, Mr. Chairman. We have 
a great panel, a number of panels, and particularly the first 
panel, and with that I will yield back my time.
    Mr. Pallone. Thank you, Mr. Green.
    I recognize the gentleman from Arizona, Mr. Shadegg.

OPENING STATEMENT OF HON. JOHN B. SHADEGG, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF ARIZONA

    Mr. Shadegg. Thank you, Mr. Chairman, and thank you for 
holding this hearing.
    I worked on health care reform my entire tenure in the 
United States Congress. Indeed, I dropped my first bill to 
address the issue of the uninsured in 1998, just 2 years after 
entering this body. I believe this is a serious problem 
confronting our Nation but I believe it is one that is deeply 
misunderstood. I think indeed it can be broken down into a 
simple matrix. Do we put patients in charge of their health 
care or do we leave third parties in charge of their health 
care? The last 50 years, we as a Nation have pursued a policy 
that said we are not going to empower patients, we are going to 
empower third parties, namely employers, and so the decisions 
about health care made for virtually all Americans today are 
not made by the patients themselves, we decided we cannot trust 
them to make health care decisions. We have put the power to 
make the decisions about their health care in the hands of some 
third party. Who is that third party under the current scheme? 
That third party under the current scheme is a corporate 
manager, someone who does not consume the service, someone who 
largely does not know the individual to whom the service is 
being rendered, someone who markets and takes products and bids 
from insurance companies, from doctors and from hospitals 
without even knowing who they are going to provide the service 
to, and now we are shocked that that system doesn't work.
    In 1998, I introduced the Patients' Health Care Choice Act, 
now called the Patients Health Care Reform Act, to put patients 
back in charge of health care, and we certainly can do that and 
it is time that we should do that. We trust Americans to make 
their own decisions about their auto insurance, about their 
homeowner's insurance, about their life insurance, about 
thousands of decisions in their lives. We give them choices in 
every grocery store of hundreds of products to pick from but 
when it comes to health insurance, we tell them you are not 
bright enough to make this decision, that right now your 
employer will make those decisions for you, and some in this 
room will advocate we should have the Government make that 
decision. If you want to know what is wrong with socialized 
medicine, which is what is being advocated as the next step, 
you don't have to go to England, you don't have to go to Canada 
to see the failures of either of those programs, go to Walter 
Reed. You will discover a campus of people enrolled in a 
Government health care program and the Government couldn't even 
keep track of them with them living on the campus. Those 
soldiers did not have choice in health care. They could not 
pick their doctor, they could not pick the facility where they 
were treated. They were trapped and they were lost and 
Government failed them. I understand that those who advocate 
socialized medicine believe it is a better answer and are 
sincere but I suggest they are sincerely wrong.
    What we can do is empower patients to make their own 
choice. How do you do that? The bill I introduced would give 
every single American a tax credit to buy health insurance. We 
decided as a Nation long ago that no one should go without 
basic health care in this country and yet we don't provide them 
the mechanisms to do that. My bill not only gives a tax credit 
to every American to buy health insurance and to make their own 
choices, it is a refundable bill. That is to say, for every 
American and the 44 million we are now currently worried about 
who are uninsured, it would actually give them cash to go buy a 
health insurance policy that meets their needs. This is not a 
complicated debate. It is a simple debate. Do we want to move 
from one third-party payer, corporate America that is not 
making the right decisions and is wasting lots of money and 
running up the cost, to another third-party payer, the 
Government, or do we want to empower patients to make choices 
for themselves and allow them to keep any money they save and 
invest it and the tax save mechanism to pay for future health 
care bills?
    Mr. Chairman, I am glad you are holding this hearing. I 
hope that we will bring some rationality to this debate.
    Mr. Pallone. Thank you.
    Next is the gentle woman from Colorado, Ms. DeGette.

 OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF COLORADO

    Ms. DeGette. Thank you very much, Mr. Chairman. I am 
pleased we are having this hearing during the ``Cover the 
Uninsured Week.''
    Throughout the world, United States health care is 
considered to be the best. We have the most advanced medical 
technology, the most highly trained medical professionals and 
institutes and centers dedicated to finding cures for countless 
diseases. But at the same time, as you mentioned, Mr. Chairman, 
the United States has about 47 million uninsured including 9 
million children. Each day throughout our country, emergency 
departments are overwhelmed as they serve both those with 
critical needs and those who simply have no place else to turn 
for basic medical care. In the wealthiest country in the world, 
we have children who are unable to get the basic care they need 
to grow up to be productive and healthy. This is simply not 
acceptable.
    In addition to the medical problems resulting from the 
large number of uninsured, our country also faces financial 
challenges. Our inability to create a sustainable health care 
model in this country is dramatically impeding our ability to 
compete in the global marketplace. Over $1,700 of every car 
built by General Motors goes to providing health insurance to 
employees, retirees and their dependents, and just today it was 
announced that Toyota, who pays a fraction of the cost of GM, 
just took over as the No. 1 car manufacturer in the world. If 
we are going to continue to be an economic leader, we have to 
have a health care system that doesn't hamstring our 
businesses, particularly our small employers. We really need to 
have real health care reform.
    To that end, I think that the first step towards covering 
the uninsured is to provide health care access for all 
children. The fact of the matter is, children by and large are 
the easiest and cheapest people to provide adequate health care 
for. Unlike older Americans, who have a number of health 
conditions, most children only need well-child visits and basic 
dental care to deal with common maladies. However, if those 
minor problems like an ear infection go untreated, they can 
develop into something much more serious and result in a 
hospital stay or worse. When we work on reauthorizing SCHIP, I 
think we have to meet three goals. Number one, we have to have 
sufficient resources so all children can be enrolled. Second, 
we need to have outreach to allow the States to enroll the 6 
million kids who are eligible for SCHIP but not enrolled. And 
finally, we need to make sure that it is appropriately designed 
for all of the kids who are eligible. If we achieve these 
goals, Mr. Chairman, children will go to their doctor for an 
ear infection, not to the emergency room with pneumonia.
    I look forward to working with you on reauthorization of 
this important bill and all of the health care challenges we 
have facing us in this committee.
    Thank you.
    Mr. Pallone. Thank you.
    Dr. Burgess, 3 minutes.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. Thank you, Mr. Chairman, and I will try to go 
fast.
    Once again, we are having a hearing where I am a little 
mystified. We don't have an insurance company or a doctor on 
the panel but I do appreciate the panelists who are here today. 
We seem to be preoccupied with the details of health insurance 
rather than the access to care. Mr. Green is quite right. There 
are a large number of uninsured in Texas but I also know that 
many of the uninsured get top-notch care. They did certainly 
during my residency at Parkland Hospital and during my over two 
decades in private practice, sometimes as frequently as every 
other night. Never less frequent than once a week I would 
provide care to unassigned patients who came to my hospital.
    A little history. During World War II, the country imposed 
wage and price controls in order to deal with shortages and 
prevent inflation. Companies began offering health insurance in 
order to recruit employees and the courts ruled that health 
insurance did not have to be taxable. The economic boom 
following the war led to widespread adoption of this practice 
and we became entrenched with a system that is largely 
employer-based. By not taxing health insurance as income, the 
Federal Government has encouraged it, in fact subsidized it. 
Europe's monolithic system grew out of the battlefields where 
they were largely vanquished or even victorious, their 
economies were in tatters. In order to avert a humanitarian 
crisis, a monolithic system needed to be stood up quickly in 
order to provide care in that environment.
    But a lot has changed since the 1940's. According to the 
Bureau of Labor Statistics, the average American holds 10 jobs 
between ages 18 and 40. While employer-based health care has 
provided excellent care for the majority of Americans for many 
years, it doesn't travel well. It does not provide the health 
security that Americans need and want in an increasingly mobile 
society. For those who suggest more Government regulation, even 
to the point of a single-payer system, this is troubling. One 
of our witnesses today will talk about the problems that he has 
had. It seems that in 1993 the State of New York imposed 
community rating and guaranteed-issue laws on the individual 
market. Insurance prices jumped between 20 and 60 percent. How 
in the world was that individual supposed to find health 
insurance when the Government, in a misguided attempt, had 
driven prices up like that? Chairman Pallone would describe 
that as immoral. The President has proposed that we give people 
who are trying to buy health insurance on their own the same 
tax advantage. It is actually a relatively small change. The 
average family pays insurance worth about $11,000 per year. By 
making private health insurance affordable and easily 
available, we can create a system that is flexible and 
personalized in ways that a government-run system never could 
be.
    The American health system in general has no shortage of 
critics home and abroad but it is the American system that 
stands at the forefront of innovation and new technology, 
precisely the types of system-wide changes that are going to be 
necessary to efficiently and effectively provide care for 
America's seniors in the future. Tyler Cohen, writing in the 
New York Times last October, ``When it comes to medical 
innovation, the United States is the world leader. In the past 
10 years, 12 Nobel Prizes in medicine have gone to American-
born scientists working in the United States, three to foreign-
born scientists working in the United States, and just seven 
have gone to researchers out of the country.'' He goes on to 
point out that five of the six most important medical 
innovations in the past 25 years have been developed within and 
because of the American system. The fact is, the United States 
is not Europe. American patients are accustomed to wide choices 
when it comes to hospitals, physicians and pharmaceuticals. 
Because our experience is unique and different from other 
countries, the difference should be acknowledged and embraced 
when reforming either the public or private health insurance 
programs.
    I certainly look forward to hearing from our witnesses 
today and I yield back the balance of my time, Mr. Chairman.
    Mr. Pallone. Thank you.
    I now recognize the chairman of our full committee, Mr. 
Dingell.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Chairman Dingell. Thank you, Mr. Chairman. I commend you, 
Mr. Chairman, for holding this hearing and thank you for the 
good work that you are doing here on behalf of the people. Mr. 
Chairman, we have before us a great opportunity, an opportunity 
to move forward with legislation to address concerns that every 
American has.
    I want to express my thanks to all of the witnesses for 
joining us today. We have a distinguished panel of witnesses as 
we observe the annual week of the uninsured, some 46 or 47 
million of them. Unfortunately, during the past decade this 
conversation has not prodded the Congress to act on even 
incremental solutions but beyond that, as a Nation it seems we 
haven't come to a consensus on the need for universal coverage 
in this country, something which curiously not only American 
labor but American business and ordinary American citizens seem 
to understand is desperately needed.
    I want to express my personal thanks to our former 
colleague and dear friend, Mr. Daschle, for being here this 
morning. He is a valuable leader on all kinds of important 
issues and we are grateful to him for not only his presence but 
for what he does, and I want to express my personal welcome and 
gratitude to my dear friend, Mr. Gerald McEntee, for being here 
this morning. He has been a great leader for not only labor but 
for all Americans and not only in health care but in all kinds 
of important concerns.
    Eighty percent of Americans who are not covered by health 
insurance come from working families. It is interesting to note 
that a prodigious erosion of employer-sponsored coverage 
threatens more coverage of Americans every day. Total annual 
health insurance programs now exceed the annual salary for a 
full-time minimum-wage worker. Medical debt is the cause of 
more than 50 percent of bankruptcy each year in this country, 
and worst of all, 18,000 annual debts are attributable to the 
lack of health insurance and failure to provide adequate access 
to care. We live in a country that spends $1.9 trillion a year 
on health care. This is 16 percent of our American gross 
domestic product. We have some of the best medical 
institutions, finest doctors and the best practices in the 
world but we rank 22d in average life expectancy and 25th in 
infant mortality. To be uninsured means getting fewer and less 
appropriate medical services, to not get treatment when needed 
and to not be able to have access to preventive care at a time 
when it could save lives or make lives much better for the 
people, and it means huge risks for people, especially 
children. It means health care providers do not have a reliable 
source of reimbursement for their services and those who treat 
high numbers of uncompensated-care patients are at risk of 
closing, leaving communities with a threadbare safety net to 
care for these uninsured people. The uninsured weaken a 
productive workforce and cost those with employer-sponsored 
health insurance an average of $922 more each year.
    My dear old dad introduced legislation that would provide 
national universal health insurance to all Americans during his 
years in Congress, and I have kept the commitment to the 
uninsured, introducing H.R. 15 each Congress as well. In 
addition, today I will be reintroducing the Medicare for All 
Act with my good friend, Senator Kennedy. This bill brings the 
promise of a quality, affordable health insurance program to 
all Americans.
    This year I note is the 10th anniversary of the State 
Children's Health Insurance Program. It is also the end of that 
program unless we in the Congress authorize the Act again. 
Before us are two important tasks that will ensure that health 
care is adequate and available to all Americans. It is time for 
action, and I look forward to today's hearing on this important 
subject, and I look forward to seeing to it that your 
leadership on this matter, Mr. Chairman, moves us forward 
towards a desperately important national goal.
    Thank you.
    Mr. Pallone. Thank you, Chairman Dingell.
    I next recognize the gentleman from Pennsylvania, Mr. 
Pitts.
    Mr. Pitts. Mr. Chairman, I waive.
    Mr. Pallone. And then we go to the gentle woman from New 
Mexico, Mrs. Wilson.

 OPENING STATEMENT OF HON. HEATHER WILSON, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF NEW MEXICO

    Mrs. Wilson. Thank you, Mr. Chairman. I appreciate your 
holding this hearing and I thank the witnesses who come here 
today.
    New Mexico faces a huge challenge with respect to the 
uninsured, and in New Mexico 21 percent of our population and 
18 percent of our children are uninsured, making us rank 49th 
in the country. Only Texas has more uninsured citizens than New 
Mexico does. A lack of insurance no doubt has an impact on the 
lives of the uninsured, and I am sure several of our witnesses 
today are going to testify to that fact, that there is a delay 
in access to care, that health outcomes are worse and generally 
those who do not have insurance are not in as good of health as 
those who do have insurance.
    But there are also impacts on our health care system. In 
New Mexico, the fact that we have so many folks who are 
uninsured puts a burden on the health care system for others. 
One of the things that we have the most difficult time with in 
New Mexico is attracting and keeping health professionals in 
the State, particularly oncologists and neurologists and trauma 
surgeons. Part of it is that we come from a rural State but 
there is also clearly the opportunity to make more elsewhere 
where the rates of insurance are higher. The uninsured have 
higher rates of using emergency rooms, of uncompensated care, 
of driving up costs in the health care system elsewhere for 
those who do have insurance and hence making health insurance 
less affordable for those who still have it.
    I believe very strongly that we have to start with the 
children and reauthorize the SCHIP program this year. That will 
give us an opportunity to relook at this program, how well it 
has worked, because in States like New Mexico, frankly, it has 
not worked very well. New Mexico, with a very high rate of 
uninsured children, has year after year had to turn money back 
to the Federal Government because this program was not set up 
in a way that New Mexico can take advantage of it. We need to 
fix that so that States that do have a high percentage of 
children who are uninsured have the flexibility to use those 
Federal funds.
    We have a report coming out just this week in New Mexico 
that is going to make some recommendations to our State 
government on an approach to covering the uninsured and in many 
cases States have taken the lead and been the laboratories for 
innovation and ideas. I don't believe that we will have a 
single point Federal solution for health insurance and for the 
uninsured, nor should we. I think one of the strengths of our 
system in America is that we have a variety of options. We can 
all agree that covering the uninsured and access to effective 
care is a priority. We may have disagreements on how best to 
accomplish that goal.
    I have supported a variety of things: tax credits for the 
uninsured, association health plans, health savings accounts, 
the SCHIP program and a strong supporter of Medicaid, but we 
need to make sure that these funding mechanisms also put the 
priority on improving the health of the people who depend upon 
it, and too often we have a system that pays for episodes of 
illness rather than focusing on improving the health status of 
low-income Americans who depend upon it. I look forward to 
hearing new ideas today, sharing those ideas and bringing those 
ideas to reality.
    Thank you, Mr. Chairman.
    Mr. Pallone. Thank you.
    Next is Mrs. Capps.

   OPENING STATEMENT OF HON. LOIS CAPPS, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mrs. Capps. Yes, this is Cover the Uninsured Week and I 
thank you, Chairman Pallone, for holding this very important 
hearing.
    As we are going to hear over and over again today, the 46 
million Americans that are currently uninsured is resonating 
across this Nation. My constituents understand that this Nation 
pays more for health care than any other nation in the world 
and yet its outcomes are among the least of the developed 
nations. This translates into their lives personally, and 
taxpayers have the right to be asking why this happened. We 
know the lack of access to affordable health coverage means 
delaying or even avoiding important medical care.
    As a nurse I have a responsibility to provide the best 
possible care I can to my patients. As a Member of Congress, I 
translate this into a responsibility to find ways for all of my 
constituents and really all Americans to access the best 
possible care. This administration has ignored our Nation's 
uninsured. Instead of supporting initiatives that would expand 
coverage, we find the White House promoting risky health 
savings accounts and association health plans. These would pave 
the way to diminish, not improve, health coverage for 
Americans. Congress must act now to expand access to health 
coverage. We must do it in a way that promotes primary and 
preventive health care. I am proud to be a cosponsor of the 
Health Partnership Through Creative Federalism Act introduced 
by our colleague, Tammy Baldwin. Unfortunately, our country has 
dug itself in a hole so deep that I am afraid there isn't one 
simple solution to the puzzle of covering the uninsured. 
However, it has been encouraging to watch as individual States 
begin to take their own initiatives to improve health coverage 
for their residents and I think we need to be creative just as 
the bill proposes because there are multiple ways in which the 
Federal Government can partner with States to devise programs 
that are best fitted for different populations.
    As a Federal representative, I pledge myself to improving 
health access for all citizens but I think it is important for 
us to look more closely at the models being talked about and 
even implemented in different States. In California, State 
Senator Sheila Kuehl has introduced a bill to provide coverage 
for all of our State's residents through a State health 
insurance plan. What I especially like about it is that it 
relies upon regional directors who can tailor this program to 
meet local population's needs. So again, I think it is really 
so important that we continue this conversation here and really 
take the proactive steps to encourage engagement by Congress 
with the State and local governments to improve health care 
access for all.
    I look forward to the testimony of our witnesses, and I 
yield back the balance of my time.
    Mr. Pallone. Thank you.
    The gentle woman from Tennessee.

OPENING STATEMENT OF HON. MARSHA BLACKBURN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mrs. Blackburn. Thank you, Mr. Chairman. I appreciate that 
and I appreciate our witnesses taking the time to be here and 
to talk about the uninsured and what we can do about the 
situation, and I hope we are going to, Mr. Chairman, look at 
things from both the private sector and the public sector and 
the solutions that are out there because one of the things that 
we have learned is that there is a right way and a wrong way to 
go about approaching this issue.
    Now, in my home State of Tennessee, we have a program 
called Tenn Care, and I think everybody knows right now and has 
learned through the past many years, the past decade, this came 
about because they needed a place to test Hillary Clinton's 
health care, so a deal was struck. It came to Tennessee. Well, 
let me tell you something. Tenn Care at this point in time is 
over 30 percent of the State's budget. It is making it very 
difficult for the State to have ends meet. They have had to go 
in under a Democrat Governor now and restructure the program 
because guess what? They cannot afford it. So when I grew up in 
my little hometown, there was a used car dealer. He had a sign 
up at this dealership that said ``We tote the note.'' When I 
was a kid, I used to ask my dad what does that sign, ``we tote 
the note'' mean, and my dad said somebody has to help you pay 
for this. Well, that same lesson applies to health care when we 
look at health care and health care programs. Somebody is going 
to pay, so I hope, Mr. Chairman, that today we will talk a 
little bit about how we make the system fair, how do we make it 
fair for American taxpayers, how do we make it fair for the 
uninsured. I would also like for us to talk about how we 
encourage people to make health care a personal priority and 
see them take the responsibility that is necessary when they 
have access to a program to be a good steward of that 
opportunity. That has been one of our big problems in 
Tennessee, is making certain that everyone that has that 
wonderful opportunity was a good steward of that opportunity, 
and how do we make certain that this is affordable for all of 
our citizens because our goals should be preserving access to 
affordable health care. In Tennessee, that is my goal. I hope 
that we as a nation will say how do we work together to make 
certain that everyone has access to affordable health care.
    Thank you, and I yield the balance of my time.
    Mr. Pallone. Thank you.
    The gentleman from Maine, Mr. Allen.

   OPENING STATEMENT OF HON. TOM ALLEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF MAINE

    Mr. Allen. Mr. Chairman, thank you for convening this 
hearing today on the growing number of the uninsured in 
America.
    The erosion of employer-sponsored health care is 
contributing to the growing ranks of the uninsured. Employer-
sponsored health insurance provides coverage for 160 million 
Americans including nearly three of every five of the non-
elderly. However, the percentage of firms offering health 
benefits to their employees has fallen significantly from 69 
percent to 60 percent just in the last 5 years. Small 
businesses in particular are struggling to provide health 
insurance for their workers. According to a recent Kaiser 
Family Foundation survey, the smallest firms are the least 
likely to offer health insurance. Only 48 percent of firms with 
3 to 9 workers offer coverage compared to 73 percent of firms 
with 10 to 24 workers and 87 percent of firms with 25 to 49 
workers. In stark contrast, over 90 percent of firms with 50 or 
more employees offer health insurance coverage. Small 
businesses have higher administrative costs, fewer people over 
whom to spread the risk of catastrophic costs, and they lack 
the purchasing power of large firms to negotiate with insurers. 
Because health care coverage is especially costly for small 
businesses, their employees make up a large proportion of the 
Nation's uninsured individuals.
    Tomorrow I am introducing my Small Business Health Plans 
Act, which would establish a health benefits program for 
businesses with up to 50 employees. Under the bill, small 
businesses, their workers and the self-employed would be 
provided a choice of at least two health plans that are 
comparable to the insurance coverage currently available to 
Federal employees. Premium assistance would be available for 
smaller businesses and lower-wage workers. Insurance companies 
would be eligible for Federal reinsurance coverage up to 75 
percent of costs for catastrophic cases. My bill would improve 
the integrity of the health insurance market and protect 
individuals and families facing unexpected medical expenses. It 
would lower costs and improve quality by encouraging 
integration of health information technology tools, better 
management of chronic illness, a focus on disease prevention, 
and reliance on evidence-based medicine. These policies would 
provide guaranteed quality coverage at affordable rates to 
small businesses and their workers without preempting State 
requirements. I invite my colleagues to join me in cosponsoring 
this legislation.
    I do want to welcome Senator Daschle and all the panelists 
today. I look forward to hearing your testimony, and I yield 
back the balance of my time.
    Mr. Pallone. Thank you.
    Next is the ranking member of the full committee, Mr. 
Barton.
    Mr. Barton. Mr. Chairman, I will submit my opening 
statement for the record and reserve my time for questions. I 
want to welcome the panel but also especially the former 
majority leader, who I think was in the House before he went to 
the Senate. So it is good to have you back and I appreciate the 
many courtesies that you have extended to me when you were the 
majority leader in the United States Senate. It is good to have 
you in the House.
    [The prepared statement of Mr. Barton follows:]

  Prepared Statement of Hon. Joe Barton, a Representative in Congress 
                        from the State of Texas

    Thank you Mr. Chairman,
     I commend you for holding this hearing on the important 
topic of the uninsured. I know there have been several 
proposals to help address this issue including the President's 
recent proposal. The President has proposed a standard 
deduction for health insurance as a reform of the Tax Code to 
make private health insurance more affordable and to level the 
playing field so those who buy health insurance on their own 
get the same tax advantage as those who get health insurance 
through their jobs. For those who still can't afford coverage, 
the President's Affordable Choices Initiative will help 
eligible States assist their low-income and hard-to-insure 
citizens in purchasing private health insurance. I'm sorry to 
read in the news that the Democratic majority already has 
declared these proposals dead on arrival without even 
conducting a hearing.
     Many of us think it is important to look to ideas that go 
beyond bureaucracy and employ consumer choice, competition, and 
accountability for value. Socialized medicine is notoriously 
bad at determining the right price for services. Socialized 
medicine doesn't innovate and it doesn't explain itself to 
either patients or payers. Those types of Government systems 
lead to mediocrity in health care and create a burden on 
private sector systems. Not every disease requires another 
program run by a centralized bureaucracy with pricing by 
politics.
     Our two big programs--Medicare and Medicaid--have enormous 
budget problems. They've dominated the health discussions in 
Washington for decades, and it's a good bet that people will be 
still sitting in these hearing rooms, still trying to get it 
right long after all of us are gone.
     We also need to realize that every Government increases 
the cost of health care and along with it, the cost of 
insurance. Each new, confusing regulatory regime that 
politicians in Washington load on the backs of employers, 
workers, insurers and doctors is one more reason for companies 
to throw up their hands and stop providing health insurance.
     As we continue to look at the uninsured, it is obvious to 
most people that the right solution will give people the 
ability to choose what's right for them in the ever-changing 
landscape of medical treatments and preventive services. Will 
80-year-olds opt for pregnancy coverage? Only if the Government 
is involved.
     If we can't get it right, Federal policy will continue to 
stifle innovation, reduce private sector coverage, and reduce 
the incentives for quality care while increasing costs and the 
bureaucracy.
     On Monday, the Medicare Board of Trustees released their 
annual report on the financial status of the program. The 
overarching theme is that entitlement spending is still growing 
so fast that it is outrunning growth in the U.S. economy. The 
good news in the Medicare report is the cost estimates for the 
Part D program continue to decline, and that's thanks to 
consumer empowerment and competition.
     As we examine options to increase the affordability of 
health care coverage we should not be in a race to see how many 
people we can lure into government programs. That is literally 
a race to the bottom, and we cannot afford either the rising 
cost or the declining quality. Instead we should look for ways 
to increase competition, provide more choices and flexibility 
in obtaining coverage, and ensure that consumers are aware of 
the health care they consume.
     I look forward to hearing from today's witnesses to get 
their perspectives and ideas on this important topic.
                              ----------                              

    Mr. Pallone. Thank you.
    The gentle woman from Illinois.
    Ms. Schakowsky. Thank you, Mr. Chairman. Because I am 
anxious to hear the witnesses, and I too want to welcome our 
former colleague, Senator Daschle, and one of the great leaders 
for working Americans, Gerald McEntee of AFSCME.
    I just want to say that this is perhaps the most important 
issue on the minds of the American people. If we can grapple 
with how are we going to be able to reform our system that is 
completely disintegrating and not working for employers or 
employees, for older Americans for children, it is simply 
broken, and I look forward to working with this wonderful 
committee under your leadership and that of Mr. Dingell to 
solve the problem.
    I yield back.
    Mr. Pallone. Thank you.
    I recognize the gentleman from Michigan, Mr. Rogers.
    Mr. Rogers. I pass at this time, Mr. Chairman.
    Mr. Pallone. And then the gentle woman from California, Ms. 
Eshoo.

 OPENING STATEMENT OF HON. ANNA G. ESHOO, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Eshoo. Thank you. Mr. Chairman, I am going to place in 
the record my full opening statement.
    I didn't think I was going to say anything, but I can't 
resist. I have been in the Congress now, this is my 15th year, 
and when I first came here in 1993, at the top of my list was 
to address health care in the country. There are some that 
rejoiced that the attempt failed but I think gauging all the 
years that have gone by and where we are now, it is not a cause 
for celebration. The issue of health care is front and center 
to America's competitiveness. It makes all the difference 
between life and death for too many people in the country. 
There are children that have dropped through the cracks. There 
are parents that can't get what they need for their children. 
There are small businesses that can't afford to insure their 
workforce, and with all due respect to whomever said something 
about a tax credit, I have yet to meet someone at a town hall 
meeting that has come begging for a tax credit to resolve their 
day-to-day problems, the health care that they face with their 
small business or with their family. It is very easy for 
Members of Congress to throw stones. We have got one hell of a 
good health care policy and the United States Government pays 
for part of it.
    So I am really looking forward to the ideas and the 
statements of the people that are here today. Perhaps it is 
going to take a national election and the details might be 
hammered out by this committee, and I hope I am here for that. 
But when I look over America's history, it was a struggle for 
Medicare to be enacted, for Social Security to be the law of 
the land, and that generations now have benefited from that and 
we keep building on that system. I think it is going to take a 
national election, a new President, a reinvigorated Congress to 
do this, but if we get to it before that, I look forward to 
being up at home plate to help knock the ball out of the park. 
This is serious business, and I have to tell you at this point, 
I am tired of the incrementalism.
    So I look forward to hearing from the very distinguished 
former majority leader. Thank you for coming to us, to Mr. 
McEntee, to talk about where the grass roots are that are going 
to help lift this country, get us going in a better direction, 
and thank you, Mr. Chairman, for always caring about this issue 
and having the hearing, yet another hearing on it. Thank you.
    [The prepared statement of Ms. Eshoo follows:]

Prepared Statement of Hon. Anna G. Eshoo, a Representative in Congress 
                      from the State of California

    Mr. Chairman, thank you for holding this important hearing 
on the crisis of the uninsured.
    This truly is a crisis that is nearing critical levels, 
with roughly 47 million uninsured individuals in the U.S. 
today. Approximately 6.5 million uninsured people live in my 
home State of California.
    We all agree that the high cost of health care is the 
biggest obstacle to care. Due to annual double-digit premium 
increases, private health insurance is not an affordable option 
for many families and individuals. Small businesses are 
increasingly unable to offer health insurance benefits, and 
many companies that are able to provide benefits find it 
necessary to pass more and more of the costs on to their 
employees.
    With respect to low-income families and individuals, many 
are simply unaware that they or their children may qualify for 
State or Federal insurance programs.
    When we look at the patchwork of public services that are 
available to the most vulnerable populations, we see different 
categories of people eligible for services from State to State. 
This creates gaps in eligibility that particularly children 
fall through. That's why we need to make sure that eligibility 
requirements are reasonable and consistent, and that eligible 
children are actually enrolled in plans.
    I believe first and foremost we should immediately address 
the 9 million uninsured children in our country. I'm proud to 
be an original cosponsor of the Children's Health First Act, 
which makes improvements to the successful Medicaid and State 
Children's Health Insurance Program (SCHIP) to help these 
public programs work better at finding and enrolling eligible 
children.
    We also have our work cut out for us to address the 40.5 
million uninsured adults in America. I think there are several 
ways we can extend health insurance options to more Americans, 
including:

     Allowing broader access to insurance plans 
available to Federal employees and Members of Congress under 
the Federal Employees Health Benefits Plan;
     Improving and expanding State programs (including 
Medicaid and SCHIP) to cover young adults, pregnant women and 
very low-income single adults; and
     Establishing State and national multi-insurer 
pools to provide comprehensive and affordable health insurance 
choices to small employers and the self-employed.

    It's encouraging that so many groups and States are working 
to tackle the problem of the uninsured. In my congressional 
district (CA-14) the county of San Mateo is working to put 
together a program for insuring all its residents. California 
Governor Schwarzenegger released a proposal to cover all 
uninsured adults and children, and in his State of the Union 
address, President Bush outlined a proposal for addressing the 
crisis of the uninsured. We should debate the merits of each 
proposal and I hope that today's hearing will be instructive to 
us.
    We cannot continue to ignore a problem as large as 46 
million uninsured people and certainly not the 9 million 
uninsured children.
    Thank you, Mr. Chairman, and I look forward to working with 
you in addressing this important issue.
                              ----------                              

    Mr. Pallone. Thank you, and I think that concludes our 
opening statements. Other statements for the record will be 
accepted at this time.
    [The prepared statements of Ms. Baldwin and Ms. Solis 
follow:]

Prepared Statement of Hon. Tammy Baldwin, a Representative in Congress 
                      from the State of Wisconsin

    Thank you, Mr. Chairman, and thank you to the witnesses who 
are joining us for this very important discussion.
    Mr. Chairman, I commend you for holding this hearing, 
highlighting America's uninsured crisis. When I first came to 
Congress in 1999, I came with a clear goal of reforming 
America's crumbling health care system and making sure that 
every American has access to affordable, comprehensive health 
care.
    While there are many Members of Congress who share this 
goal, such as yourself Mr. Chairman, I was shocked and 
disappointed at how many Members were content sit back and 
watch as the number of uninsured Americans grew year after 
year. For far too long, no hearings were held on the uninsured 
and our former majority simply recycled tired, ineffective 
proposals which they claimed would reduce the uninsured but 
which did not.
    So I am delighted that now, just 4 months after retaking 
the majority, that you, Mr. Chairman, have worked with Chairman 
Dingell to draw attention to this vitally important matter.
    I think that many in this room know that it was Chairman 
Dingell's father, John Dingell Sr., who first proposed 
legislation calling for national health care. That bill was 
H.R. 2861 and the year was 1943. And we're still talking about 
the need for this legislation over 60 years later.
    Last night, I led a special order hour on the House floor, 
highlighting the issue of the uninsured. We all know the 
numbers:

     46 million Americans do not have access to needed 
health care
     That's 15 percent of our population.
     Millions more are underinsured.

    But what I highlighted last night is that there's a face, 
and a story, and a family behind every single one of these 46 
million Americans. They are mothers, fathers, sons, daughters, 
workers, and above all Americans. I believe that health care is 
a right, not a privilege for some.
    I look forward to today's discussion and again, thank you 
Mr. Chairman for drawing attention to this hugely important 
issue during ``Cover the Uninsured Week.''
                              ----------                              


Prepared Statement of Hon. Hilda L. Solis, a Representative in Congress 
                      from the State of California

    Today's hearing is extremely timely, because this week 
marks the fifth anniversary of ``Cover the Uninsured Week''. 
This past Monday, I led a Special Orders hour with my 
colleagues from the Congressional Black Caucus and 
Congressional Asian and Pacific American Caucus in honor of 
National Minority Health Month. Chairman Pallone also joined us 
in talking about the health disparities that communities of 
color still face.
    Although preventive medicine and advances in medical 
technology have improved life expectancy and overall health for 
a large number of Americans, not all Americans are benefiting 
equally. Not everyone has the means to access our health care 
system. Communities of color continue to suffer from 
significant disparities in the overall rates of disease 
incidence, prevalence, and mortality in the population as 
compared to the health status of the general population. 
Disparities continue to persist, and we must eliminate health 
disparities by identifying significant opportunities to improve 
health.
    The reauthorization of SCHIP is one such opportunity, 
especially since the number of uninsured people affects us all. 
It is a national problem that needs a national solution. 
Reducing disparities in children's access to health care is 
extremely important because minority children are less likely 
to see a doctor when they are uninsured. For example, uninsured 
Latino and African American children are more likely to forgo 
needed medical care than other uninsured children. Public 
insurance programs are vital to communities of color; more than 
half of insured Latino children are covered by Medicaid and 
SCHIP.
    I believe that SCHIP reauthorization should support 
community health workers and should allow States to provide 
health coverage to legal immigrants. Community health workers 
have been proven effective in enrolling children in public 
insurance programs. As a Member of Congress who is committed to 
providing health coverage for children, reducing health 
disparities, and increasing the enrollment of low-income 
children in SCHIP and Medicaid, I strongly believe that we must 
redress the arbitrary exclusion of lawfully residing immigrants 
from these programs by including the Immigrant Children's 
Health Improvement Act in SCHIP.
    I applaud the States' efforts to provide coverage for their 
residents, and I also believe that the Federal Government has a 
responsibility to make sure that everyone has access to health 
insurance. The cost of private health insurance continues to 
rise astronomically, and very few affordable options are left. 
I talk about health disparities, because members of racial and 
ethnic minority groups make up a disproportionate share of the 
uninsured population. The uninsured rate for Latinos was 33 
percent in 2005. In a country that prides itself on equality, 
it is evident that our health care system is broken when people 
suffer from a lack of access to health insurance. We must make 
access to affordable, quality, linguistically and culturally 
appropriate health care for all Americans a national priority.
                              ----------                              

    Mr. Pallone. We will now turn to our witnesses, and I would 
ask our first panel to come forward and take their seats behind 
your nametags there.
    Thank you, and I want to welcome our distinguished first 
panel. Let me start from left to right and introduce the 
witnesses that are here. First is Senator Tom Daschle, who of 
course has been mentioned was the majority leader. He is now a 
distinguished senior fellow at the Center for American 
Progress, and I would just say by way of introduction that a 
day does not go by without your being mentioned in the context 
of health care. Yesterday I spoke at a minority health care 
event and they were talking about your Health Care Disparities 
Act, which you took the lead on, and now today right as we 
speak, the resources committee is marking up the Indian Health 
Care Improvement Act, which you were another lead sponsor of, 
so thank you for being here today.
    Next is Mr. Michael Smith, who is the secretary of the 
Agency of Administration from the State of Vermont, and then we 
have Gerald McEntee, who is the international president of the 
American Federation of State, County and Municipal Employees. 
Several members have already mentioned him and his and AFSCME's 
contribution to this health care debate, which has been really 
crucial. Thank you for being here. And then we have Ms. Grace-
Marie Turner, who is president of the Galen Institute in 
Alexandria. Next is Mr. Rotzler. Mr. Gary Rotzler is from 
Utica, NY, and he is here testifying on behalf of the American 
Cancer Society. And then next is Mr. Tony Montville, who is 
president and CEO of Healthtek Solutions Inc. from Norfolk, and 
then last is Ms. Colburn, Susan Colburn, who is vice president 
of benefits for AT&T Services from San Antonio. I also want to 
give you a particular welcome because you have a lot of people 
that work for AT&T that live in my district.
    Let me just mention, we are going to have 5-minute opening 
statements from each witness. Those statements will be made 
part of the hearing record. Each witness may in the discretion 
of the committee submit additional brief and pertinent 
statements in writing for inclusion in the record. I will start 
with Senator Daschle.

   STATEMENT OF HON. THOMAS A. DASCHLE, DISTINGUISHED SENIOR 
              FELLOW, CENTER FOR AMERICAN PROGRESS

    Mr. Daschle. Thank you very much, Mr. Chairman and members 
of the committee. I am very grateful for the opportunity to 
testify and I am especially thankful to each of you who 
mentioned me. It is so good to see so many of my former 
colleagues again. I am also honored to appear on such a 
distinguished panel.
    Clearly America has so many challenges, but I can't think 
of one that is any greater than health care. You all have 
mentioned the extraordinary problems we face with the uninsured 
and we mark the week of the uninsured this week, and note that 
there are 45 million Americans who don't have health insurance 
today but that is just the beginning of the problem. Costs, as 
several of you have mentioned, have gone up exponentially, 80 
percent in just the last 6 years alone. As a result of costs, 
as a result of the lack of access, we see the denial of care, 
the delay of care and in many cases premature death. So like 
some of you, I wonder why this has not obtained the kind of 
priority in this country that it so richly deserves, and I 
think in part we failed to address it successfully because we 
have lived under a certain set of myths, and those myths have 
acted in some ways like a minefield, destroying this 
opportunity to move ahead on meaningful health care over and 
over again, and that minefield has been devastating as we have 
attempted to address this issue in the past.
    Time doesn't really allow the opportunity to talk about all 
the myths but I want to talk just about three. One is that we 
have the best health care system in the world. It is a myth. 
Far from it. We rank 28th in infant mortality, 35th in life 
expectancy today. We have already mentioned the number of 
uninsured. We are told that about 100,000 people a year die 
because of medical mistakes. And I would ask, with 28th and 
35th, where would we be if that is where we came out in the 
Olympics? How long would it take us to come up with an Olympic 
champion? We have the Mayo Clinics and the Cleveland Clinics 
and other wonderful institutions around the country but I refer 
to them as islands of excellence in a sea of mediocrity. So we 
don't have the best health care system in the world.
    The second is that universal care somehow is going to cost 
more money. Every other country in the world that has had 
universal care has brought down costs, now added to the costs, 
and as so many of you said, we have actually seen dramatic 
increases in the cost over the course of the last several 
years, in part because we can't contain those costs as a result 
of universal coverage. We have cost shifting that goes on in 
our system that causes the average taxpayer to pay about $900 
in additional costs out of the $6,700 per capita that we all 
pay as Americans in taxes, premiums and out-of-pocket expenses. 
Businesses now cite health costs as their single biggest 
challenge. We spend more on health care at Starbucks than we do 
on coffee, more on health care at General Motors than we do on 
steel, and now we are going to see next health costs in 
business in the Fortune 500 exceed the amount of profit that 
that Fortune 500 group will make. Costs are a problem and 
universal coverage is one way to address it.
    The final myth we live under is that somehow reform means 
rationing. Well, we ration today in the most unfair and 
egregious way. We do it on the ability to pay. I can't think of 
a more egregious way, to do it and in the United States today 
30 percent of Americans are all we have today that actually get 
first-day coverage when they need health care, one of the 
lowest of all the industrialized countries.
    So Mr. Chairman, we have grappled in part with the effort 
to deal with climate change living under these myths, and while 
we have failed in the past to address comprehensive health 
care, we have attempted to deal with it incrementally, as some 
of you have mentioned. And while we have succeeded in working 
around the edges, even in the most recent years we have fallen 
short in our efforts to address the problem even on an 
incremental basis. This year we have the opportunity to deal 
around the edges in a very important way, with the SCHIP 
program, and what a disappointment and a disaster it would be 
if we didn't actually extend through reauthorization the SCHIP 
program. We need to pass mental health parity. We need to 
ensure that we pass genetic discrimination prohibition. Those 
are incremental steps we can take this year but even if we do 
all of that, I have to tell you, we are not going to solve the 
problem.
    The only way we are going to solve the problem is to deal 
with it in a comprehensive way, and there are three things that 
have to be done. First, we need leadership, political, business 
and organization. As part of the Center for American Progress, 
I have been very, very pleased to see the coalition of business 
leaders and labor leaders come together for the first time to 
say now we must pass comprehensive reform; we can't delay. We 
also have to think out of the box. We have to use paradigms 
that work in other forms in our society, and I am one who 
believes the Federal Reserve System would work very well in our 
health care system too. We need a private system and a public 
infrastructure. We need a decision-making board that is 
partially insulated from the day-to-day political pressures 
that otherwise Members of Congress feel. The Federal Reserve 
System applied to health care could do that. Finally, we have 
to realize that even if we create the best framework, unless we 
deal with one other issue, we will never solve the problem, and 
that is, our change in lifestyle. A recognition that we have to 
address meaningful wellness and preventative-care efforts. We 
have to do for obesity in this country what we have done with 
safety belts and with helmets and with tobacco. If we can apply 
the same approach, that same ability to encourage wellness and 
health promotion, I think we can solve this problem.
    Teddy Roosevelt once said that the greatest joy in life is 
to work hard at work worth doing. I can't think of a job more 
worth doing than this.
    Thank you very much.
    [The prepared statement of Mr. Daschle follows:]

                  Testimony of Hon. Thomas A. Daschle

    Health Reform is the Most Important Domestic Policy Issue

      It affects our health, security, and global 
competitiveness

    One of the Obstacles to Reforms is Myths

      Myth one: We have the ``best'' system, when in 
reality there are islands of excellence in a sea of mediocrity
      Myth two : We cannot afford reform, when the 
reality is we can't afford the status quo
      Myth three: We don't ``ration'' care, when we 
have the worst kind of rationing: by income and illness, by age 
and disability

    Recent Efforts Have Focused on Incremental Reform

      There have been a number of major pushes for 
comprehensive reform in the United States.
      Since the last one, energy has been spent on 
incremental reform
      What has been done, and should be done this 
year--SCHIP, mental health parity, genetic non-discrimination, 
for example--are critical and meaningful
      But such policies are plugging the holes in a 
failing system

    Comprehensive Reform of the Health System and Beyond Is 
Needed

      New leadership is needed, including businesses, 
with the goal being an accessible, affordable, and quality-
based health system for all by 2012
      A new framework is needed, which allows for 
private delivery in a public system
      Health reform is necessary but not sufficient to 
deal with the 21st century health challenges--in particular 
that of obesity and chronic disease

    Good morning, Chairman Pallone, Ranking Member Deal, and 
distinguished members of the Committee. It is good to be with 
you this morning, in the midst of Cover the Uninsured Week, to 
discuss this critical topic.
    This Congress, and this country, faces numerous challenges, 
at home and abroad. Few, in my opinion, are as critical as 
those facing our health system. About 45 million Americans lack 
coverage altogether. Being uninsured means delayed care, denied 
care, preventable disease, and premature death. Millions more 
who are insured remain at risk of bankruptcy due to health 
bills. These bills add up. At $2 trillion per year, we outspend 
the next most expensive Nation by 50 percent. American 
businesses pay about $500 billion of this. This cost has 
crowded out wage increases, business investments, and hurt our 
global competitiveness. And we pay more for less, not always 
getting quality worthy of our spending. Stated simply, health 
reform is the most important domestic policy issue.

                      Myths Blocking Health Reform

    Despite these clear problem, health reform has not made it 
to the top of the political agenda. One reason is myths about 
our current system and reform. These myths are like 
``landmines'' that have derailed past efforts to create a 
universal, value-oriented health system.
    The first myth is that the United States has the best 
health care system in the world. There's no doubt that some 
Americans have access to the best care anywhere. Any real 
solution needs to maintain our leadership at the cutting edge 
of medicine. But we need to be honest with ourselves. Not all 
our care is excellent.
    Thousands of people die from medical errors every year. 
Americans are more likely to experience medical, medication or 
lab errors than people in countries like Germany and the United 
Kingdom.
    Plus, few American realize that we are far behind and 
falling relative to comparable nations in the basic measures of 
health. Can we say we have the best system when our life 
expectancy is 35th in the world, lower than Cyprus and 
Singapore? And, can we say we have the best system when our 
infant mortality rate is 41st in the world and rising? A story 
over the weekend documented a spike in infant deaths in 
Mississippi and the South. There is simply no excuse for such 
deaths that might have been avoided with better health care 
policy.
    The second myth we need to debunk is that the U.S. cannot 
afford to do any better. In point of fact, we cannot afford to 
continue this current system. We spend 16 percent of our 
economy--or $2 trillion--each year on health care. We spend 
nearly $6,700 per person, which is roughly 50 percent more than 
the number two country, Switzerland. GM pays more for health 
benefits than steel. Starbucks pays more for health benefits 
than coffee. If trends persist, health benefit costs will 
eclipse profits in the Fortune 500 companies by 2008. As a 
matter of health policy and economic policy, we need to act to 
rein in the Nation's health spending.
    The third myth is that universal coverage will inevitably 
lead to rationing. This ignores the fact that we ration now. 
Health care is delayed or denied to the uninsured and under-
insured. Cancer can mean bankruptcy and asthma can consume 
college funds. Being older or sicker, or even having a family 
history, can make a person uninsurable--doomed to spend years 
worrying about the next illness's financial rather than health 
implications.
    Even on the traditional measures of ``rationing'', we fare 
worse. Thirty percent of sick Americans have access to same-day 
care, compared to 45 percent in the United Kingdom. Americans 
find it three times harder to get care at night and on weekends 
without going to emergency rooms compared to those in New 
Zealand. And we are more likely to have to wait to see a 
specialist than sick people in Germany. It's ironic that the 
U.S., compared to its competitor nations, offers fewer people 
less accessible care.

                           Incremental Reform

    I know that you, and many other lawmakers, recognize the 
truth of our health system crisis, and have tried to act on it. 
Several presidents, and even more Congresses, have attempted 
but failed to enact health reform. I, myself, have some scars 
to show for it.
    The response has been to focus on incremental reform. In 
the late 1990's, a number of policies were enacted and 
implemented that make coverage better and more accessible for 
millions of Americans. This year, you may be able to take 
additional strides in improving the system. For example, you 
have the opportunity to extend insurance parity for mental 
illness and protect Americans from genetic discrimination. 
Perhaps most importantly, the State Children's Health Insurance 
Program is up for reauthorization. Improving and extending this 
successful program that has served millions of low-income 
children is not just an option but a necessity.
    But it would be a mistake to believe that these policies 
are more than fingers in the dam. They cannot solve the health 
system's problems. There is no pathway of incremental steps 
that will improve and expand health coverage for all. The only 
solution is comprehensive reform.

                          Comprehensive Reform

    So, what will it take to finally pass comprehensive reform? 
First, we need to have to have leadership. There has to be a 
President and a Congress that both say, ``The time has come for 
us to deal with real health reform.'' Success will demand that 
everyone check ideology at the door--and that everyone focus 
not on what ideology dictates should work, but on what 
experience shows will work.
    To get to that point, there needs to be business 
leadership. Businesses are a major payer of health care and 
player in the political system. At the Center for American 
Progress, we helped form Better Health Care Together, a 
business-labor coalition with the goal of comprehensive reform 
by 2012. I am optimistic that the CEOs of companies like AT&T, 
WalMart, and CostCo will force the debate in the halls of 
Congress.
    Second, we need to think outside the box. One idea that 
I've been working on is to run our health care system in a way 
similar to our Federal Reserve system. Our Federal Reserve 
system works, in large measure, through the private sector but 
is governed by decisions made within a Federal Governmental 
infrastructure. Just as the Federal Reserve System protects 
difficult decisions on monetary from political pressure, I 
would like to see a framework that insulates health care 
decision-making about cost and financing. If we could fix our 
financing system, I think we could fix a lot of the other 
problems involved with our health care system today.
    Lastly, health reform is absolutely necessary to improving 
our Nation's health. There is no excuse in the wealthiest 
nation in the world for a person to suffer or die needlessly 
due to financial barriers to care. We can and must end 
uninsurance. But this will not be sufficient to improve health. 
A growing tide of chronic illness, in part induced by obesity, 
will strain our health system and Nation. It could mean that 
the next generation of children may have shorter life 
expectancies than that of their parents for the first time in 
this Nation's history. As we consider how to make critical 
health policy changes, we should consider broad-based 
interventions beyond the health system, in schools, workplaces, 
and communities. This would give the Nation, at long last, the 
health it deserves.
                              ----------                              

    Mr. Pallone. Thank you so much, and I forgot to mention on 
the prevention side your being a runner and you are always 
promoting that as well. That is very important. Thank you, 
Senator.
    Next is Mr. Smith.

      STATEMENT OF MICHAEL K. SMITH, SECRETARY, AGENCY OF 
                ADMINISTRATION, STATE OF VERMONT

    Mr. Smith. Thank you, Mr. Chairman, and thank you for the 
opportunity to testify before your committee on health care. As 
you are aware, this is one of the most significant and 
challenging issues we face as a Nation and as individual 
States. We simply cannot afford to continue the status quo of 
high insurance costs, high health care costs and inadequate 
quality in our health care system.
    Ten months ago, Governor Douglas, a Republican, and the 
Democratic-controlled legislation in Vermont, reached consensus 
on a groundbreaking health care reform package in our State. 
This reform is comprehensive in that it has over 35 different 
initiatives to cover our uninsured, improve our health care 
quality and curb the growth in health care costs. It is being 
hailed by many experts as the most comprehensive legislation to 
provide universal access while at the same time lowering health 
care costs and improving quality.
    I am going to focus today on just two of these initiatives 
in my testimony, but in the written material supplied to the 
committee we provided a full description of our reforms.
    The first initiative is called the Catamount Health Plan, a 
product available on the private market in October 2007 that 
will be available for the uninsured Vermonter. Catamount Health 
is mandated in statute to be comprehensive in benefits, and 
affordable. The benefits will be subsidized by the State of 
Vermont, depending on your income, up to 300 percent Federal 
poverty level, and if you have employer-sponsored insurance and 
cannot afford it, your premiums for that insurance will be 
subsidized depending on income. If it is less expensive for the 
State to do so, you can make a choice on which plan you want to 
be on, depending on which is less expensive for the State. The 
only requirement is that the employer-sponsored insurance plan 
be substantially similar to the Catamount Health Plan in terms 
of benefits and deductible costs. In Vermont, many employers 
have such plans. The goal is to reach an insured level of 96 
percent by 2010. The plan is financed by increases in the 
tobacco tax, premiums, Federal Medicaid match, and an 
assessment on those employers not now offering health 
insurance. The plan has been carefully crafted to conform with 
ERISA requirements.
    The second major component of our health care reform is 
called the Blueprint for Health, which is our statewide 
initiative to provide all Vermonters who have chronic 
conditions and those at risk of developing them with the 
information, tools and support they need to successfully manage 
their health. Over 50 percent of all adult Vermonters have one 
or more chronic conditions and caring for people with chronic 
conditions consume 70 percent of the $3.5 billion spent in 
Vermont in 2005 on health care. National data indicates that 
only 55 percent of people with chronic conditions get the right 
care at the right time. We must do better to improve the 
outcomes and bring down health care costs.
    Launched by Governor Douglas in 2003 and endorsed by the 
Vermont General Assembly in 2006, the Blueprint for Health is 
not the typical disease management program. Instead, the 
Blueprint is proactive and holistic and is designed to change 
our health care system to focus on chronic care equally with 
that of acute health care. To accomplish this, the Blueprint 
creates public policies that support healthy lifestyles and 
effective health care. It provides community-centered programs 
and activities to encourage and maintain healthier lifestyles. 
It provides self-management tools for individual participation 
and empowerment. It develops new electronic health systems for 
physicians' offices and other health care settings statewide. 
It coordinates reimbursement and care coordination approaches 
across all payers including insurers, State government and 
nonprofit health care organizations. Our goal is to have this 
new health care delivery approach in place statewide by 2011.
    In conclusion, in order for health care reform to be 
successful, it needs enormous buy-in from a variety of 
organizations and people. We found that out in Vermont. 
Governor Douglas was just one of 10 people awarded an Impact 
Award by AARP for his work in health care. The first line of 
the write-up of the award said, ``Sometimes politicians can 
rise above politics.'' I urge you to remember this line as you 
move forward with your deliberations regarding health care 
reform. We need to put aside party affiliations and act on 
behalf of all our country's citizens and businesses who are 
struggling every day with these issues.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Smith follows:]

                     Statement of Michael K. Smith

     Thank you for the opportunity to testify before your 
committee on health care reform. As you are aware, this is one 
of the most significant and challenging issues we face as a 
nation and as individual States. We simply cannot afford to 
continue with the status quo of high insurance costs, high 
health care costs and inadequate quality in our health care 
systems.
     Ten months ago, Governor Douglas, a Republican, and the 
Democratically-controlled legislature reached consensus on a 
groundbreaking health care reform package for our State. This 
reform is comprehensive, in that it has over 35 different 
initiatives to simultaneously cover our uninsured, improve 
health care quality and curb the growth in health care costs. 
It is being hailed by many experts as the most comprehensive 
legislation to provide near universal coverage, while at the 
same time lowering health care costs and improving quality.
     I am going to focus on just two of these initiatives in my 
testimony today, but in the written material supplied to the 
committee, we have provided a fuller description of our 
reforms.
     The first initiative is the Catamount Health Plan, a new 
product available on the individual private market in October, 
2007 that will be available for uninsured Vermonters. Catamount 
Health is mandated in statute to be comprehensive in benefits, 
and affordable. The premiums will be subsidized depending on 
income, up to 300 percent FPL, and if you have employer 
sponsored insurance and cannot afford it, your premiums for 
that insurance will be subsidized, depending on income, if it 
is less expensive for the State to do so. The only requirement 
is that the employer sponsored insurance plan be substantially 
similar to the Catamount Health plan in terms of benefits. In 
Vermont, many employers have such plans.
     The goal is to reach an insured level of 96 percent by 
2010. The plan is financed by increases in the tobacco tax, 
premiums, Federal Medicaid match (assuming Federal approval of 
an amendment to our 1115 waiver), and an assessment of those 
employers who do not offer health insurance. The plan was 
carefully crafted to conform with ERISA requirements.
     The second major component of our health care reform is 
the Blueprint for Health, which is our statewide initiative to 
provide all Vermonters who have chronic conditions, and those 
at risk of developing them, with the information, tools, and 
support they need to successfully manage their health.
     Over 50 percent of all adult Vermonters have one or more 
chronic conditions, and caring for people with chronic 
conditions consumes 70 percent of the $3.5 billion spent in 
Vermont each year on health care. National data indicate that 
only 55 percent of people with chronic conditions get the right 
care at the right time. We must do better to improve outcomes 
and bring down health care costs.
     Launched by Governor Douglas in 2003 and endorsed by the 
Vermont General Assembly in 2006, the Blueprint for Health is 
not the typical disease management program. Instead, the 
Blueprint is proactive and holistic, and is designed to change 
our health care system to focus on chronic care equally with 
acute health care. To accomplish this, the Blueprint 
simultaneously:

     creates public policies that support healthy 
lifestyles and effective health care;
     provides community-centered programs and 
activities to encourage and maintain healthier lifestyles;
     provides self-management tools for individual 
participation and empowerment;
     develops new electronic health systems for 
physicians' offices and other health care settings statewide; 
and
     coordinates reimbursement and care coordination 
approaches across all payers, including insurers, State 
government and non-profit health care organizations.

    Our goal is to have this new health care delivery approach 
in place statewide by 2011.
     In conclusion, in order for health care reform to be 
successful, it needs enormous buy-in from a variety of 
organizations and people. Governor Douglas was just one of 10 
people awarded an ``Impact Award'' by AARP for his work in 
health care.-- The first line of the write up for the award 
said, ``Sometimes politicians can rise above politics.'' I urge 
you to remember this line as you move forward with your 
deliberations regarding health care reform. We need you to put 
down your party affiliations and act on behalf of all our 
country's citizens and businesses who are struggling every day 
with these issues.
                              ----------                              

    Mr. Pallone. Thank you, Mr. Smith.
    Mr. McEntee.

   STATEMENT OF GERALD W. MCENTEE, INTERNATIONAL PRESIDENT, 
 AMERICAN FEDERATION OF STATE, COUNTY, AND MUNICIPAL EMPLOYEES

    Mr. McEntee. Thank you, Mr. Chairman and members of the 
committee.
    We have a health care crisis of unprecedented proportions. 
Cost of coverage is exploding. It threatens the economic 
security of working families. It strains State budgets. It 
overwhelms safety net providers, it reduces the competitiveness 
of American businesses, and 45 million people live with the 
fear that they or a loved one will need care for which they 
cannot pay.
    One such person is Joann Baumer of Fort Madison, Iowa. 
Joann is a homecare attendant who works full time providing 
services to the elderly and the disabled. Joann has no health 
coverage. After having necessary surgery, it took Joann and her 
husband 5 years to pay off her hospital bill. Now she and her 
husband spend $400 per month for prescription medication.
    Joann Baumer's story is far from unique. The crisis of the 
uninsured is a problem for everyone in America and that 
includes the 1.4 million members of our union, AFSCME. A 
significant share of the premium paid by AFSCME members and 
their employers goes to offset the cost of uncompensated care. 
There are scores of proposals to address this crisis and so we 
have developed principles to evaluate them. But ultimately this 
is not a matter solely of policy or resources. It has been said 
earlier today, it is a matter of political will. America's 
working families demand relief from this crisis and they expect 
their national leaders to have the vision and political resolve 
to forge a bold solution. The starting point for health care 
reform must begin with a commitment to cover every man, woman 
and child in America. This is both a moral and economic 
imperative.
    Let me give you our vision of what health care reform 
should look like. First, everyone should have affordable, 
comprehensive coverage. Second, while the market has an 
important role to play, our Government must play the central 
role in regulating, financing and providing health care. Third, 
financing should be fair and shared by all. Fourth, frontline 
health care workers must have an active voice in improving the 
quality of our health care system. Who else knows more about 
it? And finally, as we approach reform, we must be mindful to 
do no harm. This means that until we have a comprehensive 
reform, changes in the health care system must not undermine 
existing coverage.
    Unfortunately, the health care plan proposed by the 
President in his budget this year does exactly that because his 
plan makes fundamental changes in the tax treatment of 
coverage. It would actually encourage employers to drop health 
benefits for their workers. Ultimately, the President's plan 
would make those who have adequate coverage pay more for it 
without achieving universal coverage. We oppose his proposal 
and other plans that would break up risk groups and send 
families into the individual market where costs are higher and 
coverage is also denied. We must also realize that the absence 
of action at the Federal level has forced States to pursue 
their own reform initiatives. We are concerned about the 
direction of some of these reforms. For example, the 
Massachusetts model attempts to achieve near-universal coverage 
through the use of individual mandates. The most recent cost 
estimates for coverage of a Massachusetts family with an income 
of $50,000 would include a $7,000 premium and a $2,000 
deductible. Health care costs that approach 20 percent of total 
income are unaffordable and unacceptable to working families.
    It is our hope that the State efforts prompt action at the 
Federal level. Ultimately, only the Federal Government has the 
resources and the legal authority to implement the changes that 
are needed. Among the health reform initiatives under 
discussion in this Congress, two deserve particular mention. 
Chairman Dingell's Medicare for All plan offers a viable path 
to attaining universal coverage, provides the security of 
extending the trusted Medicare plan to everyone under age 65 
but also includes choice for families. We are also supportive 
of the Americare plan introduced by Representative Stark and 
cosponsored by a number of committee members including 
Representatives Waxman and Schakowsky. This bill would also 
leverage the administrative efficiencies of Medicare.
    In closing, I would like to add a note about the importance 
of quickly reauthorizing the State Children's Health Insurance 
Program, a top priority for our union and all unions. It is 
crucial that the Congress build on the success of this program 
by allowing States to expand coverage to the millions of 
children who remain uninsured. In particular, we urge you to 
remove the prohibition that excludes the children of low-wage 
State workers from SCHIP and we also urge that you address the 
funding inequity of the Commonwealth of Puerto Rico.
    I appreciate the opportunity to testify and will be happy 
to answer any questions you may have. Thank you, Mr. Chairman.
    [The prepared statement of Mr. McEntee follows:]

                     Testimony of Gerald W. McEntee

     America's health care system is in crisis. The cost of 
coverage is exploding. It threatens the economic security of 
working families, it strains State budgets, it overwhelms the 
capacity of safety net institutions and it reduces the 
competitiveness of American businesses. And shamefully, 45 
million people live with the fear that they or a family member 
will need care for which they cannot pay. Those fortunate 
enough to have coverage too often receive poor quality care.
     The crisis of the uninsured is a problem for everyone in 
America, and that includes the 1.4 million members of my union, 
the American Federation of State, County and Municipal 
Employees.
     The United States is a great nation--we can, and must, do 
better.
     Unlike European health care systems to which it is 
frequently contrasted, the American health care system is not a 
monolithic, unified system. Rather, it is a complex system of 
many inter-related parts, all of which must function 
efficiently to keep the system in optimal order.
     Like the links in a chain, if one link exhibits stress or 
cracks, it puts more strain on the other links. The uninsured 
represent a broken link in our system, putting enormous 
pressure on both employer-sponsored health plans and public 
programs. Moreover, this broken link is a moral failure for our 
Nation. Much of the massive growth in the uninsured is 
attributable to individuals losing coverage through their jobs. 
The erosion of employer-sponsored health coverage is a 
particularly troubling trend for America's labor unions, and it 
should be of primary importance to every American because of 
the damage it represents to our overall health care system.
     In the year 2000, 69 percent of Americans under age 65 had 
employer-sponsored health coverage. By last year, that figure 
had dwindled to 60 percent.
     Clearly, many employers are dropping insurance for their 
workers, because of its cost and the growing complexity of 
administering benefits. However, other large, profitable 
companies never provided health insurance to the majority of 
their workers in the first place, instead directing them to 
public programs at taxpayer expense. And an increasing number 
of workers who have employer-sponsored coverage are paying more 
in out-of-pocket costs for scaled-down benefit plans.
     For those workers still fortunate enough to have health 
insurance, the specter of underinsurance is all too prevalent. 
Far too many American working families are just one serious 
illness away from bankruptcy. In fact, medical debt is now the 
second leading cause of bankruptcy in our Nation, and 29 
percent of low-to-middle income families report that medical 
debt contributes to their chronic credit card debt. The lack of 
adequate health care coverage is making the American Dream more 
and more of an illusive target, rather than an attainable goal, 
for working families.
     Sometimes, when I talk about the crisis of the uninsured, 
members of the media or the public ask me, ``Why does your 
union care about the uninsured? Union members have good health 
benefits. This doesn't affect them.''
     First of all, most of our members have good health 
insurance coverage, but not all of them. Some of the workers in 
new sectors that we are organizing, including those who perform 
home health care/personal service attendant work and those who 
provide in-home child care, do not receive health benefits as 
part of their job. I think most Americans would agree with me 
that it is a travesty when those on the frontlines of providing 
care to our children, our elderly and our disabled do not have 
health coverage themselves. We are working hard to find ways 
for these often low-wage workers to get access to health 
coverage, but it has been a difficult and complicated task.
     But the full answer to that question about union members 
and health coverage is that, yes, most AFSCME members do have 
good health insurance coverage. In many cases, we have had to 
fight long and hard to develop these health benefit plans. But 
just because union members have good health benefits does not 
mean that we are not impacted by those without coverage.
     It cannot be overstated that the crisis of the uninsured 
is everyone's problem, including those of us who have 
insurance. The elaborate shell game of cost-shifting that is 
built into our insurance rates to pay for uncompensated care 
means that each time the number of uninsured rises, so do our 
premiums. In one recent analysis of uncompensated care, it was 
estimated that two-thirds of uncompensated care is being 
absorbed by private payers and passed along in the form of 
higher insurance premiums. In 2005, this cost added over $900 
to the average annual premium for family coverage.
     The number of uninsured would be doubled without the 
safety net provided by the Medicaid program. As a union that 
represents many workers throughout the Medicaid program in 
States across the Nation, we are proud of how effective this 
system has been at providing vital health services for low-
income families and individuals. But the Medicaid system has 
been strained to the breaking point by absorbing more and more 
individuals who have either lost employer-sponsored coverage or 
who cannot afford to pay sky-rocketing premiums.
     The effect of rising Medicaid costs has been devastating 
to State budgets. Although States have admirably tried to keep 
their Medicaid costs under control, the growing strain of the 
newly uninsured represents huge opportunity costs in the public 
sector. States cannot adequately invest in their education 
system or their public infrastructure in general because of the 
growing budget share assumed by Medicaid. This inability to 
invest will leave a harsh legacy on future generations who will 
be ill-prepared to compete globally, or even to contribute 
fully to our society. To date, the Administration has failed to 
respond to the gravity of the challenges presented by Medicaid 
cost growth. Instead, it only offers States greater flexibility 
and block grants. Neither approach can adequately address the 
needs of a safety net health care system that is straining to 
assist a larger and sicker population.
     The problem that the growing number of uninsured 
represents for both the employer-sponsored system of health 
coverage and the public system of coverage makes it the number 
one policy priority for AFSCME and the entire labor movement. 
The question of health coverage has been the primary point of 
contention in every major contract our union has bargained over 
the past several years. For years now, our members have 
foregone wage increases to maintain their valued health 
benefits. Yet, even this imperfect trade-off is becoming 
unsustainable as soaring health care costs far outpace wage 
increases nationally, and American workers fall further and 
further behind.
     America's working families demand relief from this crisis. 
And they expect their national leaders to have the vision and 
the political resolve to forge a bold solution to this problem. 
Many proposals have been put forth to address this crisis. But 
ultimately, this is not simply a matter of policy or resources, 
it is a matter of political will.
     To help evaluate these plans, my union has worked with the 
AFL-CIO to create a set of guidelines for what comprehensive 
health care reform should include. This is what we think 
effective health care would look like:
       Everyone should have health care coverage, 
without exclusions or penalties.
       While the market has an important role to play, 
our government--as the voice of all of us--must play the 
central role in regulating, financing and providing health 
care.
       Coverage should be accessible through the 
largest possible groups that pool risk to ensure coverage 
regardless of gender, age, health status or other factors.
       Coverage should be affordable and comprehensive.
       Unions and employers should continue to play a 
role and retain the ability to supplement coverage.
       Individuals must retain the ability to select 
their own health care providers.
       Financing should be achieved through shared 
responsibility, which means that risk should be shared broadly 
to ensure fair treatment and equitable rates, and everyone 
should share responsibility for contributing to the system 
through progressive financing.
       Reform efforts must include effective mechanisms 
for controlling costs, requiring information on provider 
performance and enhancing efficiency.
       Frontline health care workers must have an 
active voice in improving the quality of our health care system 
and making it more efficient.
     As the debate over reform proceeds, we must be mindful to 
do no harm. This means that until we have a comprehensive 
alternative for everyone, reform efforts should not undermine 
existing coverage or put people at risk of unmet health care 
needs.
     And finally, it is our firm belief that only the Federal 
Government has the resources and legal authority to implement 
the systemic reforms necessary to create comprehensive change. 
Therefore, the ultimate responsibility for health care reform 
lies with the Federal Government.
     Now, I want to comment briefly on how current reform plans 
line up with our guidelines and which we think will be 
effective in achieving lasting reform.
     As the crisis of the uninsured has expanded, the 
administration's response has been inadequate at best. In his 
latest budget request, President Bush put forward an initiative 
based on tax credits. In its analysis of the President's 
proposal, the Commonwealth Fund estimates it would cover an 
additional nine million individuals at most. Because of the 
fact that his proposal treats employer-sponsored health 
coverage differently under the Federal tax code, it would 
actually encourage employers who currently offer coverage to 
drop health benefits for their workers. Ultimately, the 
President's plan would fail to achieve universal coverage while 
forcing those who have adequate coverage to pay more for it.
     The underlying philosophy of this plan is that employers, 
and our Nation as a whole, should abandon collective 
responsibility for health coverage, along with the shared risk 
associated with it. Instead, according to this view, each 
individual must take responsibility for his or her own health 
coverage, through high-risk schemes like high deductible health 
plans and health savings accounts (HSAs), even if this coverage 
requires increased out-of-pocket costs and eventually causes 
the individual to lose coverage altogether.
     We oppose his proposal and other plans that would break up 
risk groups and leave families on their own to purchase 
coverage in the individual insurance market.
     The absence of action on health care reform at the Federal 
level has forced States to pursue their own reform initiatives, 
largely out of desperation. Although systemic reform requires 
Federal action, we commend States for attempting to address the 
issue comprehensively. However, we are concerned with the 
direction reform efforts have taken in some States.
     For example, the Massachusetts reform model attempts to 
achieve near-universal coverage through the use of individual 
mandates that require those without access to coverage through 
their jobs to buy coverage in the individual market. Although 
there are subsidies to help low-income families, many working 
families will be forced to pay much higher prices for coverage. 
The most recent estimates for coverage under this initiative 
for a family with an income of $50,000 would include a $7,000 
premium and a $2,000 deductible. Health care costs that 
approach 20 percent of total family income are unaffordable and 
unacceptable to working families and they will ultimately doom 
this plan to failure.
     Among the new health reform initiatives being discussed in 
this Congress, two deserve particular mention. The Medicare for 
All plan, proposed by Chairman Dingell, offers a viable path to 
attaining universal coverage. It offers the security of 
extending the trusted Medicare plan to everyone under age 65, 
but it also features attributes of choice by allowing enrollees 
to select any one of the health plans offered to members of 
Congress.
     We are also favorably impressed by the AmeriCare plan 
introduced by Rep. Stark. This plan would build on our existing 
employer-sponsored system of coverage, but would also leverage 
the administrative efficiencies contained in Medicare to create 
a new system of universal coverage.
     Both of these initiatives meet our guidelines of covering 
everyone, offering comprehensive benefits, exerting effective 
cost controls and employing equitable finance mechanisms.
     In closing, we would like to add a note about the 
importance of Congress expeditiously reauthorizing the State 
Children's Health Insurance Program. It is crucial that the 
Congress build on the success of this program by allowing 
States to expand coverage to the millions of children who 
remain uninsured. In particular, we urge you to remove the 
prohibition from coverage that excludes the children of low-
wage State employees and also many local government employees. 
A janitor who cleans a State building or a local school should 
not be treated differently than a janitor who cleans the bank 
building down the street. For many low-wage workers, the 
employee premium for family coverage is simply unaffordable. 
The children of these workers should not be denied coverage, 
just as the children of workers in the private sector and in 
the Federal sector are not denied coverage.
     We also urge you to address the funding inequity for the 
Commonwealth of Puerto Rico. This program is quite modest, 
covering only children up to 100 percent of poverty. We believe 
that the Federal Government needs to be a full partner in that 
program.
     The health care crisis poses a serious threat to the 
future of our Nation. We have a moral and economic imperative 
to solve this problem, and the starting point is to provide 
coverage for every man, woman and child in America.
                              ----------                              

    Mr. Pallone. Thank you.
    Ms. Turner.

  STATEMENT OF GRACE-MARIE TURNER, PRESIDENT, GALEN INSTITUTE

    Ms. Turner. Chairman Pallone, Mr. Deal, distinguished 
members of the committee, thank you very much for the 
opportunity to testify during Cover the Uninsured Week, which 
interestingly coincides with Small Business Week. I think that 
is an interesting convergence that shows the added attention we 
need to bring to small business in America.
    Our core focus at the Galen Institute is finding ways to 
increase access to health insurance for Americans, particularly 
private insurance. In expanding access to coverage, it seems 
wise to focus on who is most likely to lack coverage and why. 
As several members have mentioned, 160 million Americans have 
access to coverage through the workplace, but this system is 
not meeting the needs of an increasingly mobile workforce. 
Young people, minorities, workers for small businesses and 
lower-income workers are most likely to be uninsured. With so 
many competing demands for taxpayer dollars, it seems wise to 
look at the opportunities to build on this source of private 
coverage and take advantage of not only these efficiencies but 
also of the resources that are already on the table.
    There have been suggestions this morning about expanding 
access to public coverage but I would like to offer two 
thoughts and present some research that I think may help to 
consider Hippocrates' warning to first do no harm to the system 
as those programs are considered. Researcher Jonathan Gruber 
from MIT has said that, and this is a quote, ``Despite an 
enormous expansion of public health programs over the past 20 
years, the number of insured continues to grow.'' His estimate 
suggests that expansion of public insurance is crowding out 
private insurance at the rate of about 60 percent. He finds 
that this crowd-out is most likely to affect those in higher 
income categories who are eligible for these programs and who 
are the main target populations for SCHIP expansion.
    Further, I believe it is incredibly important that we not 
make it more difficult for businesses and especially small 
businesses to provide and to afford coverage. Milliman and 
Company actuary Mark Litow has said that expanding Government 
programs is putting added pressure on private health insurance 
and that is because public programs pay sometimes only 30 cents 
on the dollar of hospital and doctor's fees, and if those 
businesses are to stay afloat, they have to find someplace else 
to go to recoup the resources, and that is forcing up the 
premiums for private health insurance. People wonder why are 
these costs going up, and as public programs expand, it forces 
more of those costs onto private insurers, which pay an average 
of about 67 percent of costs.
    If we were to think about how can we fit our health care 
system into one that is a 21st century system that recognizes 
we have a mobile workforce, four in ten workers change jobs 
every year, allow health insurance to be more portable, take 
advantage of the opportunities for private coverage that are 
out there, I think there are some policy initiatives that could 
help support that goal. First of all, making the tax break 
equal so you can get the same tax break whether you purchase 
your health insurance through the workplace or on your own 
through new kinds of groups. For a lot of people, that is not 
going to be nearly enough and I have heard a lot of talk about 
some kind of added cash support whether it is refundable tax 
credits, health certificates, vouchers, whatever kind of credit 
to help people, especially those who are left out of the 
current system to provide coverage and purchase coverage. 
Further, there are a lot of people who are eligible for public 
programs, eligible for Medicaid, eligible for SCHIP. Many of 
them may have jobs that may take up the private coverage at 
work if they had a little more help, allowing premium support 
for SCHIP dollars and Medicaid dollars to give them that extra 
boost to be able to purchase private health insurance at work, 
and then also to create new opportunities for people to 
purchase group health insurance. Representative Shadegg's bill 
to allow cross-state purchasing of health insurance I think 
would also really liberate the market and force new 
efficiencies in the market.
    Building of private coverage, in conclusion, I think would 
be both more economical for taxpayers and also give workers 
eligible for public subsides the dignities of private insurance 
coverage with its broader access to private physicians and 
medical facilities.
    Thank you, Mr. Chairman. I look forward to your questions.
    [The prepared statement of Ms. Turner follows:]

                    Statement of Grace-Marie Turner

    With the increasing ability of the medical profession to 
save and improve our lives, Americans value the security of 
health insurance to cover their health costs. For public policy 
solutions to be effective in reducing the number of those who 
do not have the security of health insurance, we must look 
beneath the numbers to see who is uninsured, why, and what 
solutions are likely to work to expand coverage.
    Analyses show those who are most likely to be uninsured are 
young adults, those working for small businesses and their 
dependents, lower-income workers, and minorities. Either we can 
dramatically expand public programs to cover this population or 
we can find new ways to help them access private coverage. I 
would suggest that, with so many competing priorities for 
taxpayer dollars, we find ways to strengthen access to private 
health insurance.
    Research by Jonathan Gruber of MIT shows that despite an 
enormous expansion in public health programs over the last 20 
years, the number of uninsured continues to grow. Gruber's 
research suggests that most of the rise in public insurance 
comes from a fall in private insurance. He finds that crowd-out 
is most likely to take place with those in upper income 
categories--the target category for SCHIP expansion--because 
they are more likely to have options for private coverage.
    Further, it is essential that legislative changes not make 
it more difficult for employers to provide coverage by 
inadvertently driving up their premiums. Milliman Actuary Mark 
Litow argues that expanding government programs puts added 
pressure on the cost of private health insurance. Public payers 
pay less to doctors and hospitals, and as these public programs 
expand, private plans must pay more. Their costs rise, driving 
up premiums and causing more people, especially individuals and 
small businesses, to drop out of the market, thereby swelling 
the ranks of the uninsured.
    Changes are needed to our health care system to meet the 
challenges of a changing workforce and 21st century economy. 
America can lead the way by putting in place new policies that 
combine a general tax deduction or credit with additional 
financial assistance for lower-income people, and flexibility 
to turn SCHIP and Medicaid benefits into defined contributions, 
thereby retargeting existing funds to increase access to 
private health insurance. Building on this base of private 
coverage would both be more economical for taxpayers and also 
would give workers eligible for public subsidies the dignity of 
private insurance coverage, with its broader access to private 
physicians and medical facilities.
    Chairman Pallone and distinguished members of the 
committee, thank you for the opportunity to speak with you 
today during this week of national attention on ``Covering the 
Uninsured.'' To introduce myself, I am Grace-Marie Turner, 
president of the Galen Institute, a non-profit public policy 
research organization that I founded in 1995 to focus on 
market-based policy solutions to the problems in our health 
sector.
    Our core focus at the Galen Institute is offering solutions 
to expand private health insurance to the tens of millions of 
people in this country who are without coverage.
    With the increasing ability of the medical profession to 
save and improve our lives, Americans value the security of 
health insurance to cover their health costs. When we look at 
the trend lines for health insurance coverage in the U.S., it 
is clear that we must chart a new course.
    The number of people without health insurance is steadily 
rising, now 44.8 million, according to recent revised Census 
Bureau estimates, \1\ and the number of people with coverage 
through the workplace is falling, from 69 percent in 2000 to 61 
percent in 2006. \2\
    If public policy solutions are to be effective in reducing 
the number of uninsured, it is important to look beneath these 
numbers to see who is uninsured, why, and what solutions are 
likely to work to expand coverage.
    Analyses show those who are most likely to be uninsured are 
young adults, those working for small businesses and their 
dependents, lower-income workers, and minorities. I would like 
to offer suggestions for new strategies to increase coverage 
for those who are most likely to be without insurance.
    A profile of the uninsured
    About 80 percent of the uninsured are workers or their 
dependents. These are people who make too much to qualify for 
public programs, such as Medicaid and the State Children's 
Health Insurance Program, but don't have the good, higher-
paying jobs that come with health insurance. These are the 
people that are in what we call the ``Galen Gap.'' Our logo is 
a conceptual depiction of this group that represents our 
largest public policy challenge. \3\
    We have two choices: Either we can dramatically expand 
public programs to cover this population or we can find new 
ways to help them access private coverage. I will describe 
research by Jonathan Gruber of MIT which suggests that the 
former may not be the best strategy and suggest ways that 
existing public funds could be used to expand access to private 
coverage for this target population.
    Who is most likely to be uninsured?

     Young adults: Among young adults aged 19-24, 38.2 
percent do not have health insurance.\4\ For this population of 
people who are overwhelmingly healthy and believe in their 
invulnerability, the cost of insurance is the biggest issue.
     Employees of small businesses: Only 60 percent of 
small firms offered coverage in 2006. And the smallest firms 
are least likely to provide coverage: Only 48 percent of firms 
with 3 to 9 workers offer health insurance to their workers. 
The drop in employment-based health insurance has been 
primarily among small companies employing 3 to 199 workers. In 
contrast, 98 percent of large firms with 200 or more workers 
offered health insurance in 2006. \5\
    The reason firms cite for not offering health insurance is 
the high cost of coverage, with 74 percent saying that the high 
price of premiums is a ``very important'' reason they don't 
offer health insurance. \6\ And some firms are just too small 
to manage their businesses as well as the complexities of 
health insurance. The National Restaurant Association says, for 
example, that some employees may only work for a restaurant for 
a few days, making it almost impossible to enroll these workers 
in health plans and for their job to be a stable source of 
coverage.
     Lower-income Americans: In 2005, 37 percent of 
non-elderly people with incomes under 100 percent of Federal 
poverty were uninsured compared to just 7 percent of those with 
incomes of 300 percent of poverty or above. \7\ Lower-income 
workers need targeted subsidies to help them afford insurance.
     Minorities: An estimated 32.3 percent of Hispanics 
are uninsured, compared to 10.7 percent of whites and 19 
percent of blacks. \8\ This suggests that outreach to the 
Hispanic community with new options and information about those 
options would be an important component of an effort to 
increase enrollment in health insurance.
    And even though a profile of the uninsured captures these 
primary categories, the actual faces in this group without 
coverage are ever-changing. According to the Congressional 
Budget Office, the uninsured population is constantly shifting 
as people gain and lose coverage. Furthermore, the length of 
time that people remain uninsured varies greatly. Some people 
are uninsured for long periods of time, but more are uninsured 
for shorter periods. About 45 percent are uninsured for four 
months or less. \9\ This is primarily a phenomenon of our 
system of job-based health insurance where people lose their 
health insurance when they lose their job and have periods of 
uninsurance while they wait to get covered again.
    And many of the uninsured are eligible for public programs. 
Twenty-five percent of the uninsured are eligible but not 
enrolled in public programs. Another 20 percent have incomes 
high enough to afford coverage, defined as 300 percent of 
poverty or above, according to a report published in Health 
Affairs. \10\
    The CBO says that 16 percent are continually uninsured for 
more than two years, and they tend to be people with less 
education, those with low incomes, and Hispanics. These longer-
term uninsured would seem to be an important group for 
Congress'' attention as they clearly have fewer opportunities 
for private coverage.
    Crowd out
    As Congress focuses on the problem of the uninsured, it 
would be helpful to look at the success of past strategies in 
expanding access to public coverage, especially through 
Medicaid expansions and the creation of the State Children's 
Health Insurance Program.
    Over the past two decades, the number of people without 
health insurance and the number of people with publicly-
supported health insurance both have risen. \11\ According to 
Jonathan Gruber of MIT, from 1984 through 2004, the share of 
the non-elderly population in the U.S. that is uninsured rose 
from 13.7 percent to 17.8 percent. At the same time, the share 
of the non-elderly U.S. population that is publicly insured 
rose from 13.3 percent to 17.5 percent. In other words, Gruber 
shows that despite an enormous expansion in public health 
programs, the number of uninsured continues to grow.
    Gruber's research suggests that most of the rise in public 
insurance comes from a fall in private insurance. His data show 
that, between 1984 and 2004, the share of the U.S. non-elderly 
population with private health insurance fell from 70.1 percent 
to 62.4 percent. His estimates suggest that expansions of 
public insurance are crowding out private insurance at the rate 
of 60 percent. That means, in general, that private insurance 
coverage is reduced by 60 percent as much as public insurance 
rises.
    Because there is a great deal of attention to expanding the 
State Children's Health Insurance Program, it is important to 
look at these findings to make sure that a program expansion 
wouldn't simply be replacing private insurance with taxpayer-
supported coverage. Gruber finds that crowd-out is most likely 
to take place with those in upper income categories--the target 
category for SCHIP expansion--because they are more likely to 
have options for private coverage.
    It is only logical that people would opt for public 
coverage if it were offered because taxpayer-supported 
insurance is almost always less expensive for recipients than 
private insurance. But it may be worth rethinking this strategy 
if the goal of the added spending on SCHIP is to reduce the 
number of uninsured. Gruber's research suggests that expanding 
SCHIP could add more children to public rolls but not have a 
significant effect on reducing the number of uninsured 
children.
    According to the Kaiser Commission on Medicaid and the 
Uninsured, a surprising percentage of poor and near-poor 
adults--those earning 200 percent of poverty or below--have 
employment-based or other private health insurance. \12\ The 
Kaiser study shows that 45 percent of non-elderly people who 
earn between 100 percent and 199 percent of poverty (up to 
$20,420 in 2007) have private health insurance, either coverage 
they get through work (39 percent) or individual policies (6 
percent). About a third of lower-income adults are uninsured 
and one-quarter have public coverage, primarily through 
Medicaid or SCHIP.
    Clearly it would be a mistake, with so many competing 
priorities for taxpayer dollars, to replace private coverage 
for those who have it with expanded public health programs.

                Making Private Insurance More Expensive

    It also would be helpful to examine the consequences of a 
major expansion of SCHIP or other public programs on the market 
for private insurance.
    Expansion of government health programs drives up the cost 
of private health insurance, according to health actuary Mark 
Litow of Milliman Consultants and Actuaries. Here's why: He 
estimates that private health plans pay about 64 percent of the 
full charges of doctors, hospitals, labs, etc. Medicare pays 
about 37 percent of these ``undiscounted'' charges. And 
Medicaid pays only about 30 percent. \13\
    It's only logical that the more of the market that is taken 
up by programs paying only 30 percent of a provider's charges, 
it is going to put more pressure on others to make up at least 
some of the difference. Litow argues that expanding government 
programs puts added pressure on the cost of private health 
insurance. As public programs expand, private plans must pay 
more. Their costs rise, driving up premiums and causing more 
people, especially individuals and small businesses, to drop 
out of the market, thereby swelling the ranks of the uninsured.
    With 160 million Americans receiving their health coverage 
through the workplace, it is essential that legislative changes 
not make it more difficult for employers to provide coverage by 
inadvertently driving up their premiums through expansion of 
public programs.
    Hippocrates' dictate to ``First, do no harm'' would seem 
useful guidance.

                  Alternative Ideas to Expand Coverage

    Changes are needed to our health care system to meet the 
challenges of a changing workforce and 21st century economy.
    Tying health insurance to the workplace is not meeting the 
needs of a workforce that is increasingly independent and 
mobile. The Labor Department reports that four in ten Americans 
leave their jobs every year, with virtually all of them moving 
on to a new job. \14\ With this kind of job mobility, it is 
extremely difficult to tie health insurance to the workplace 
and expect people to have continuity of coverage. We need a 
system that allows people to have health insurance that is 
portable, insurance that they can own and control, and 
insurance that fits the needs of families and their budgets.
    Portability of health insurance would help not only those 
who are uninsured, but also those who are worried they could 
lose their coverage. It would give new security to millions of 
workers who are worried that if they lose their jobs, they will 
lose their health insurance. With the cost of health insurance 
and health care rising every year, they fear they would not be 
able to afford coverage on their own. The middle class is 
increasingly afraid that they are one premium payment away from 
joining the ranks of the uninsured.
    America can lead the way in creating a health care system 
that fits with our 21st century economy by putting in place new 
policies that respond to consumer demands for more affordable, 
portable health insurance.
     The first step would be giving favorable tax 
treatment of health insurance to people whether they buy 
coverage on their own or get it at work, as President Bush has 
proposed.
     Congress also could offer refundable tax credits 
for those in lower-income categories who need additional help 
in purchasing policies.
     Further, Congress could allow those eligible for 
public programs to apply the value of the subsidies for which 
they are eligible toward the purchase of private health 
insurance. This would mean that citizens could take the value 
of their Medicaid benefit and apply it toward employer-offered 
coverage. Or they could take the value of their SCHIP subsidy 
to add their children to their policies at work.
     And legislators could create new opportunities for 
people to purchase group health insurance through organizations 
that may be more stable forces in their lives than their jobs, 
such as churches, labor unions, and professional and trade 
associations.
    This combination of a general tax deduction or credit, with 
additional financial assistance for lower-income people, and 
flexibility to turn SCHIP and Medicaid benefits into defined 
contributions would retarget existing funds to increase access 
to private health insurance.
    Building on this base of private coverage would both be 
more economical for taxpayers and also would give workers 
eligible for public subsidies the dignity of private insurance 
coverage, with its broader access to private physicians and 
medical facilities.
    Consumers, not just in the United States but in all 
developed countries, are demanding a much greater role in 
decisions involving their health care. Women, especially, 
believe that they, rather than a corporate human resources 
director, could make better decisions involving health coverage 
for their families if only they were given the chance. \15\
    Giving people more power and control over their health care 
and health insurance creates new incentives for people to be 
more engaged in managing their health.-- Many companies realize 
this and are instituting new programs to give employees 
incentives to better manage their health spending. A number of 
studies have shown that if people are given the tools, the 
information, and the incentive to manage their care, outcomes 
can be dramatically improved. And we could transform our health 
care system into one that responds to the changes of a 21st 
century workforce and meets the needs of a diverse population 
of health care consumers.
    Thank you for the opportunity to talk with you today about 
these important issues. I would be happy to answer any 
questions you might have or to provide additional information.

     Endnotes
    \1\ ``Census Bureau revised 2004 and 2005 health insurance 
coverage estimates,'' U.S. Census Bureau, March 23, 2007. 
``http://www.census.gov/Press-Release/www/releases/archives/
health--care--insurance/009789.html''
    \2\ ``Health benefits offer rates,'' Employer Health 
Benefits 2006 Annual Survey, Kaiser Family Foundation, 
Washington, D.C. September 26, 2006. ``http://www.kff.org/
insurance/7527/''
     \3\ The Galen Institute logo is a conceptual depiction of 
a central problem in the health sector that affects Americans 
under age 65 without health coverage. The horizontal axis 
represents a given individual's income. The vertical axis 
represents the likelihood that individual is eligible for 
health coverage and the value of taxpayer subsidies for the 
coverage.
    People on the left side of the scale with the very lowest 
incomes are most likely to qualify for taxpayer-supported 
health programs, especially Medicaid, although in some States, 
even the poorest residents may remain uninsured if they don 't 
meet certain qualifications.
    As an individual moves up the income scale, the likelihood 
of qualifying for government health programs declines. Those on 
the right side of the scale with higher incomes are much more 
likely to have job-based health coverage, which is generously 
subsidized through the tax code.
    Working Americans with modest incomes are most likely to be 
uninsured and are caught in the trough, which we call the Galen 
Gap. They earn too much to qualify for public programs but are 
unlikely to have the good jobs that provide health insurance as 
a tax-free benefit.
    \4\ ``The uninsured in America, first half of 2005: 
Estimates of the U.S. civilian noninstitutionalized population 
under age 65,'' Statistical Brief #129. June 2006. Jeffrey A. 
Rhoades, PhD. Agency for Healthcare Research and Quality, 
Rockville, MD. ``http://www.meps.ahrq.gov/papers/st129/
stat129.pdf''
     \5\ ``Health benefits offer rates,'' Employer Health 
Benefits 2006 Annual Survey, Kaiser Family Foundation, 
Washington, DC, September 26, 2006. ``http://www.kff.org/
insurance/7527/''
    \6\ ``Health benefits offer rates,'' Employer Health 
Benefits 2006 Annual Survey, Kaiser Family Foundation, 
Washington, DC September 26, 2006. ``http://www.kff.org/
insurance/7527/'' http://www.kff.org/insurance/7527/
    \7\ ``The uninsured: A primer. Key facts about Americans 
without health insurance,'' Kaiser Commission on Medicaid and 
the Uninsured, Washington, D.C. October 2006.``http://
www.kff.org/uninsured/7451.cfm''
    \8\ ``Revised estimates of persons without health 
insurance: 2005,'' U.S. Census Bureau.``http://www.census.gov/
hhes/www/hlthins/hlthins.html''
    \9\ ``The Uninsured and Rising Health Insurance Premiums,'' 
testimony by CBO Director Douglas Holtz-Eakin before the 
Subcommittee on Health, Committee on Ways and Means, U.S. House 
of Representatives, March 9, 2004. http://www.cbo.gov/
showdoc.cfm?index=5152&sequence=0
     \10\ ``The uninsured and the affordability of health 
insurance coverage,'' Lisa Dubay, John Holahan and Allison 
Cook. Health Affairs. Nov. 30, 2006. ``http://
content.healthaffairs.org/cgi/content/abstract/hlthaff.26.1.w2
    \11\ ``Crowd-out ten years later: Have recent public 
insurance expansions crowded out private health insurance?'' 
Jonathan Gruber and Kosali Simon. National Bureau of Economic 
Research Working Paper 12858, January 2007. ``http://
www.nber.org/papers/w12858''
     \12\ ``The uninsured: A primer. Key facts about Americans 
without health insurance,'' Kaiser Commission on Medicaid and 
the Uninsured, Washington, D.C. October 2006. ``http://
www.kff.org/uninsured/7451.cfm''
    \13\ Release of data pending by Milliman Consultants and 
Actuaries, Mark Litow, Principal and consulting actuary. 
Information from private e-mail exchange April 20, 2007. 
``http://www.milliman.com''
    \14\ ``Job openings and labor turnover: November 2006,'' 
Bureau of Labor Statistics, United States Department of Labor, 
January 10, 2007. ``http://www.bls.gov/news.release/archives/
jolts--01102007.pdf''
    \15\ ``In America. Focus on women,'' Bob Herbert, The New 
York Times, September 28, 2000.
                              ----------                              

    Mr. Pallone. Thank you, Ms. Turner.
    Mr. Rotzler.

STATEMENT OF GARY ROTZLER, UTICA, NY, ON BEHALF OF THE AMERICAN 
                         CANCER SOCIETY

    Mr. Rotzler. Good morning, Mr. Chairman, members of the 
committee. I very much appreciate the opportunity to testify 
here today. My name is Gary Rotzler and I am a private citizen 
speaking on behalf of the American Cancer Society. I am also 
speaking for millions of American families who cannot afford or 
do not have access to meaningful health insurance. As a result, 
they have little access to preventative care and preventing 
sickness and death.
    I speak with authority on this matter because my wife, 
Elizabeth Jean Harvey, died of breast cancer. Had we had 
insurance and had she had timely care, the treatment that might 
have arrived, she might be alive today and certainly would have 
had more time. I married Betsy in 1978 and I will never regret 
it.
    In 1979, I took a job with Bendix, an aerospace 
manufacturing company. One of the most pressing questions on my 
mind during the interview, besides the wages, of course, was 
``tell me about your health coverage,'' and it was good 
coverage. By 1989 I had worked with Bendix, then known as 
Amphenol, still known as Amphenol, for 10 years but the economy 
in upstate New York had undergone some profound 
transformations. Manufacturing jobs had been lost. While 
putting together company functions like Unity Day, management 
was secretly negotiating buyouts. It was one in a long line of 
buyouts and takeovers that affected a lot of Americans. The 
business ended up being owned by a finance company, LPL, and 
later KKR, who major interest was downsizing. Seeing the 
handwriting on the wall, I got lucky and took a job with 
ShopVAC. They had been offered some financial incentives to 
open a plant in a nearby town.
    A few years later, the plant closed. Although I found 
temporary work in construction, sometimes 7 days a week, and 
Betsy was doing daycare, we found ourselves for the first time 
and only time without health insurance. In the meantime I 
continued to look for engineering positions in the area. In the 
fall of 1994, I began to wonder how we were going to make it 
through the winter. Then I received what in retrospect turned 
out to be good news and bad news. The good news was, my old 
aerospace company, Amphenol, was in the process of qualifying 
electrical connectors for the International Space Station and 
had a temporary job for me. The bad news was, they offered no 
benefits. I took the temporary job with the hopes of turning it 
into a full-time position so that I might obtain health 
insurance for my family. In the meantime, I checked into health 
insurance through the temp agency but the cost was way beyond 
my budget. Some of the other coworkers that I worked with were 
in similar situations
    By the summer of 1996, I was still no closer to getting a 
full-time job and by September of that year Betsy indicated 
that she had some trouble. She had always been energetic and 
strong and dynamic but she began to lose energy and feel 
fatigued and complained of back pain. She didn't want to go to 
the doctor's because it was too expensive and we really thought 
we needed to save the money for more real medical emergencies 
like my daughter Amanda, who had injured a leg the year before 
and it ended up costing $600. Neither of us realized how dire 
Betsy's medical condition was. She had gone 2 years without 
medical exams and lived with the pain, hiding it from us. And 
once she leveled with me, we got her to a free clinic, and the 
diagnosis was breast cancer, which was confirmed at a local 
hospital through an MRI. Once we knew how sick she was, I was 
able to get her to a specialist at Memorial Sloan Kettering 
Cancer Center. Betsy died 4 days later, leaving me and my three 
children alone, 17, 13 and 9. Betsy was 36.
    In retrospect, we may have been able to do more but we had 
no idea how truly sick she was. You can't imagine going to a 
doctor's office and confessing you have no insurance. There is 
an instant reaction. You become a second-class citizen and 
questions of payment supersede questions of treatment. The fact 
is, we had no health insurance because I couldn't afford it. 
Other Americans have insurance that turns out to be inadequate 
for their needs. Others find the system so complicated and 
confusing, they don't know which way to turn. Yes, when you 
find yourself with cancer, you figure out the system, but by 
that time it is too late.
    Numerous studies including one that has come out from the 
American Cancer Society demonstrate that people who lack 
insurance delay going to the doctor until they are sick and 
their outcome is worse for that.
    For those that would like to know more about my testimony 
and my story, you could refer to a book that just came out, 
``Sick'' by Jonathan Kahn.
    Mr. Chairman, the American Cancer Society has developed a 
statement of four essential principles that define meaningful 
health insurance. They call these the four A's. In its most 
basic form, meaningful insurance must be adequate, available, 
affordable and administratively simple. It sounds good to me 
and I would ask that the American Cancer Society's Statement of 
Principles be included in your hearing records.
    Thank you, Mr. Chairman, and members of the commitment, for 
this opportunity to speak to you today.
    [The prepared statement of Mr. Rotzler follows:]

                    Testimony of Gary Donald Rotzler

    Good morning, Mr. Chairman, and members of the committee. I 
very much appreciate the opportunity to testify today. My name 
is Gary Rotzler, and I am a private citizen speaking on behalf 
of the American Cancer Society. I am also speaking for the 
millions of American families who cannot afford, or do not have 
access to, meaningful health insurance. As a result they have 
little access to preventive care that prevents sickness and 
death.
    I speak with authority on this matter because that is what 
happened to my wife Betsy Jane Harvey. She died of breast 
cancer. Had we had insurance, and had she had timely care and 
treatment, she might be alive today--we certainly could have 
given her more time than she had.
    I married Betsy in 1978, and I will never regret it.
    In 1979, I took a job at Bendix, an aerospace manufacturer 
and one of the most pressing questions I asked during the 
interviews was ``tell me about your health coverage.'' It was 
good coverage.
    By 1989, I had been working for the same company for 10 
years but times had changed. The economy of upstate New York 
where I live was undergoing a profound transformation. 
Manufacturing jobs were being lost. While we were asked to pull 
together in company functions like ``Unity Day,'' management 
was secretly negotiating a buy-out. It was one of a long line 
of buy outs and takeovers that affected a lot of Americans.
    The business ended up being owned by a financial company 
(LPL and later KKR) whose major interest was downsizing. Seeing 
the handwriting on the wall, I got lucky and took a job with 
ShopVAC, a commercial vacuum cleaner manufacturer that had been 
offered financial incentives to open a plant in a nearby town.
    A few years later the plant closed down.
    Although I found temporary work in construction seven days 
a week and Betsy was doing daycare, we found ourselves, for the 
first time, without health insurance. In the meantime, I 
continued to apply for engineering positions.
    It gets cold in upstate New York and in 1994 I began to 
wonder how we would make it through the winter. Then I received 
what in retrospect turned out to be good news and bad news. The 
good news was that my old aerospace company was in the process 
of qualifying products for the International Space Station and 
had a temporary job for me. The bad news was that they offered 
no benefits.
    I took the temporary job with the hope of turning it into a 
full time position so that I might obtain health insurance for 
my family. In the meantime, I checked into health insurance 
through the temp agency, but the cost was way beyond our 
budget. My other coworkers were in a similar situation.
    By the summer of 1996 I was still no closer to getting a 
full time job. By September of that year, Betsy gave me the 
first indication at what we might have in front of us. I knew 
it wasn't good, that she was in danger.
    She had always been incredibly strong and energetic--it was 
her dynamic energy that kept the five of us together. She began 
to lose energy, feel fatigued, and complain of a chronic pain 
in her back. She didn't want to go to the doctor because she 
said it was too expensive. We needed to save our money for what 
we thought were real medical emergencies--like my daughter 
Amanda's leg injury the year before, which ended up costing 
$600. Neither of us realized how dire Betsy's medical situation 
really was.
    She had gone two years without a medical exam and was 
living with her pain--hiding it from us really. But finally it 
got so bad she leveled with me. We took her to a free clinic, 
where the doctor examined her for just a few minutes, and 
delivered the news--she probably had breast cancer.
     We took her for an MRI at the local hospital where her 
cancer was confirmed.
    Once it was clear how sick she really was, we were able to 
get her into Memorial Sloan Kettering Cancer Center, but it was 
too late. Betsy passed away in my arms four day later leaving 
me and our three children aged 17, 13, and 9.
    In retrospect, we may have been able to do more for her--
but we had no idea how truly sick she was. And you can't 
imagine what it is like going into a doctor's office and 
confessing that you have no insurance. There is an instant 
reaction--you become a second class citizen--questions of 
payment supersede questions of treatment.
    The fact is, we had no health insurance because I could not 
afford it. Other Americans have insurance that turns out to be 
inadequate to their needs. Others find the system so 
impenetrable and confusing that they don't know where to turn.
    Yes, when you find out you have cancer, you figure out the 
system. But by then it's often too late.
    Numerous studies, including ones that have come out of the 
American Cancer Society, demonstrate that people who lack 
insurance delay going to the doctor until they are sick and 
then they have worse outcomes.
    Mr. Chairman, the American Cancer Society has developed a 
statement of four essential principals that define meaningful 
health insurance. They call these ``the four A's.'' In its most 
basic form, meaningful insurance must be adequate, available, 
affordable, and administratively simply. It sounds right to me, 
and I would ask that the American Cancer Society's Statement of 
Principles be included in your hearing record.
    Thank you, Mr. Chairman and members of the committee for 
the opportunity to speak to you today.
                              ----------                              

    Mr. Pallone. Thank you, Mr. Rotzler. Without objection, we 
will put that document into the record, but I just want to 
thank you for coming here and telling us personally your 
account with your wife, and it had to be very difficult but it 
is really helpful to us, and that is why it is important you be 
here. Thank you.
    Mr. Pallone. Mr. Montville.

   STATEMENT OF TONY MONTVILLE, PRESIDENT AND CEO, HEALTHTEK 
                        SOLUTIONS, INC.

    Mr. Montville. Chairman Pallone, Ranking Member Deal and 
members of the Health Subcommittee, thank you for the 
opportunity to be here with you today. I am Tony Montville, 
founder and CEO of Healthtek Solutions. For the past 18 years 
my company has provided IT software and consulting services to 
hospitals in the United States and Canada. I am also here on 
behalf of the U.S. Chamber of Commerce. I am an active member 
of the Small Business Council.
    I have had a unique perspective watching the evolution of 
our health care industry over the last two decades. The 
majority of our work has been on business office systems and 
hospitals. That means every time there were regulatory changes 
that impacted patient information, we were the company that was 
called in to modify the hospital systems to comply.
    I am also a small business owner and have to deal with the 
same trials and tribulations that all small business owners 
deal with which include offering my highly skilled employees 
health care benefits in order to retain their talents. To that 
end, I made it my goal to offer health insurance to my 
employees and pay 100 percent of their premiums. Unlike many 
companies my size, I have a geographically diverse workforce 
with employees living and traveling all over the country. I 
need to have a health plan with a national network of 
physicians and reasonable out-of-network fee schedule. Because 
I have fewer than 50 employees, there are only eight companies 
currently offering a national plan that meets my needs and only 
three that will underwrite a policy for my company because less 
than 50 percent of my employees reside in Virginia.
    Several years ago I was taught a very hard lesson about the 
business of insurance. About 2 months after renewing my health 
insurance policy, one of my employees, a 24-year-old human 
resources assistant, was diagnosed with a very curable form of 
cancer. Within 1 month of that diagnosis, my insurance was 
canceled without notification for clerical issues and within a 
few weeks my employees started to get claims denied, saying we 
no longer had insurance. When I contacted my insurance carrier, 
I was informed that they had every right to cancel my policy 
and they had no intention of reinstating it, however, they 
would be more than happy to write a new policy with 
significantly higher premiums. I had to scramble at the 11th 
hour to avoid problems with preexisting conditions for my 
employees and selected the most cost-effective competitor. Even 
with a new carrier, my premium was doubled. The following plan 
year, my HR assistant left Healthtek, and when my insurance 
came up for renewal, my rate dropped back down by 35 percent.
    I have since migrated to a plan with a high deductible 
pairing with the option of choosing a health reimbursement 
account or health savings account. Most of my employees chose 
the HRA option, which I fund at 75 percent of their deductible. 
By offering this type of plan, we can put some accountability 
for health care spending habits in the hands of my employees 
and have them become more cognizant of how they spend their 
health care dollars. This plan sponsors a wellness program that 
focuses on prevention and lifestyle. The spotlight on 
prevention includes ensuring my employees get annual physicals 
that include blood pressure, cholesterol, mammogram and 
prostate screening among other necessary routine care. The 
focus on lifestyle offers employees perks and recognition for 
hitting various levels of participation and goals. I would 
designate a wellness coach, who communicates the success of my 
employees. We share who is taking a karate class, yoga, 
Pilates, walking their dog after work or trying to quit 
smoking. I am encouraged by the efforts and changes that my 
employees are making and I believe that prevention and wellness 
is a vital factor in long-term cost reduction in health care.
    A small business should not be penalized for its lack of 
size or diversity of its workforce. We want to offer 
affordable, dependable health insurance to our employees and 
the type of flexibility that will keep us competitive in our 
respective marketplaces. To ensure this, we call upon Congress 
to help. Congress should examine legislative proposals that can 
help drive down costs and increase flexibility and employer 
options in our health system such as promoting widespread 
adoption of health information technology and by reforming our 
medical liability system.
    I have also been a longtime supporter of small business 
health plans. This type of national plan would be beneficial to 
my employees who live and work all over the country. I am also 
supportive of legislation that would amend the Tax Code to 
allow small businesses to set up simple cafeteria plans and 
flexible spending accounts for their employees.
    Lastly, I encourage Congress to take note of the success 
that many employers and employees are experiencing by changing 
our focus from a sick care system to a health care system 
through preventative care. The Chamber shares my dedication to 
prevention, wellness and overall health management and 
believes, like I do, that this is the only way we will see true 
savings in our health system. Proposals that would offer tax 
credits to employers who provide comprehensive wellness 
programs for their employees would be a great help in promoting 
these efforts.
    Thank you for the opportunity to join you today. I look 
forward to working with you to find health care solutions and I 
am happy to answer any of your questions.
    [The prepared statement of Mr. Montville follows:]
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    Mr. Pallone. Thank you.
    Ms. Colburn.

  STATEMENT OF SUSAN COLBURN, VICE PRESIDENT, BENEFITS, AT&T 
                         SERVICES, INC.

    Ms. Colburn. Mr. Chairman and members of the subcommittee, 
AT&T is pleased to have this opportunity to discuss the state 
of health care today and why every American needs health care 
coverage.
    First, I need to start and say that AT&T would like to 
thank Chairman Dingell for his leadership in this area. We 
applaud the fact that he has introduced health care legislation 
every session since he became a Member of Congress in 1955 and 
for his efforts to reduce the cost burden of health care in 
America.
    Today there is a lot of debate about what to do. AT&T 
believes every person in America should have access to quality, 
affordable health insurance coverage. We also believe business, 
government, individuals must work together and share 
responsibility in this endeavor.
    I would like to discuss with the subcommittee what AT&T is 
facing as a company and with regard to health care some of the 
actions we have taken to address this growing concern.
    AT&T is one of the largest private healthcare providers in 
the Nation. We cover more than 1.2 million lives. We spend more 
than $5.5 billion annually. This includes over 175,000 union 
members, about 125,000 management employees, over 300,000 
retirees and the dependents of all of those groups.
    AT&T has continued to provide its employees and retirees 
with affordable health care coverage at a time when many 
companies are cutting back significantly or eliminating 
coverage entirely. We are very proud of the fact that AT&T 
continues to provide these benefits to our employees and 
retirees and their dependents. We view employer-provided 
medical benefits a competitive differentiator and an important 
tool in building a quality workforce but the financial 
commitment is large and it is getting larger.
    While it is our desire to continue providing these benefits 
to our employees and retirees, we find ourselves in an industry 
where competitive pressures may threaten our ability to do 
that. Our competitors typically do not provide this same 
comprehensive benefits coverage that is almost entirely 
subsidized by their employer to their active employees and even 
less likely to provide health care coverage to their retirees. 
This puts AT&T at a distinct cost disadvantage at a time where 
speed and efficiency is critical to the Nation's broadband 
development.
    At the same time, we face the realities of the global 
marketplace. We compete with firms from around the world which 
do not have the same health care costs and health care costs 
are one of the factors which affect a company's decision 
regarding location of its employees.
    Given this backdrop, the natural question is, what can be 
done to address these problems. AT&T has worked diligently to 
control its own health care costs but we believe no single 
employer can solve the problem on its own. It will take a 
concerted effort on behalf of employers, individuals and the 
health care industry to tackle these very difficult issues.
    Employers should provide tools and education to employees 
in order for them to properly utilize their plan. Employers 
need to stress the importance of wellness to the participants 
in their health care plans. Regular physicals and screenings 
should be a part of every health care plan in order for 
individuals to detect issues before they become problematic.
    It is critical that accurate quality and cost data be 
available to consumers so that they are able to make informed 
decisions, and to that end, AT&T was an early supporter of 
Secretary Leavitt's Four Cornerstones of Value-Driven Health 
Care, which include a call for transparency of provider data 
including cost and quality data. Another cornerstone addresses 
increasing the use of technology in the health care sector. 
AT&T believes the use of technology is absolutely critical in 
order to introduce more efficiency into an inefficient and 
fragmented health care industry. AT&T is in direct discussions 
with our service providers on how technology can be better 
utilized by their contracted physicians and facilities.
    Finally, as plan sponsors, we should incorporate efficient 
and effective design and concept into our plans in an attempt 
to mitigate costs. But one of the other key components of this 
equation is the individual patient. The time is critical for 
individuals to be responsible for their own health. This 
responsibility includes lifestyle changes that improves their 
health such as engaging in weight management and smoking 
cessation programs and following treatment protocols prescribed 
by their physician, particularly adherence to drug therapies.
    Another issue is the uninsured. Large numbers of uninsured 
increase the cost of coverage for the population that actually 
provides insurance. The cost of caring for the uninsured, 
particularly by hospitals, is partially subsidized by providers 
adding their unreimbursed costs to the price they charge 
patients with insurance. This cost shift is a problem for 
companies like AT&T that are trying to do right by their 
employees. In addition, as you know, the lack of insurance 
directly affects the type and amount of health care services 
the uninsured receive.
    In terms of the health care industry, it must step up and 
adopt technology that improves efficiency in operations at a 
faster rate than they are today. In addition, the industry can 
do more in the way of reporting both quality and cost data for 
individuals to make informed decisions.
    Regarding the Government, it must continue to support 
employer-based systems by not eroding the protections provided 
under ERISA. Having a common set of rules for a national 
employer like ourselves to follow increases the efficient 
provision of health care coverage across the Nation.
    Mr. Pallone. Ms. Colburn, you are over a minute so if you 
could summarize.
    Ms. Colburn. Certainly. To summarize then, any legislation 
should proceed only after assessment of the effects of reform 
on numerous considerations and these have to include the effect 
on quality, efficiency and cost of health care, preservation of 
patient choice, reduction and elimination of systemic costs 
driven by health care, nondiscriminatory impact on American 
corporations, and the elimination of the drag on global 
competitiveness.
    Thank you for the opportunity to speak today.
    [The prepared statement of Ms. Colburn follows:]

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    Mr. Pallone. Thank you. That concludes our statements by 
the witnesses, and I am just going to recognize myself for 5 
minutes to ask some questions.
    I wanted to start out with Senator Daschle, and I know you 
have addressed why to some extent why you think that the crisis 
of the uninsured really is a crisis and why it impacts us, but 
I know that every time we do polling we see that people care 
more about health climate change and the crisis in health care 
than any issue, but if you could tell us why having so many 
uninsured really is a threat to our country, and I know there 
are a lot of competing ideas about what to do about it but what 
specifically do you think we should do about it?
    Mr. Daschle. Well, Mr. Chairman, I think that is such a 
good question and I would just give three parts to the answer. 
I think you just heard from one of our witnesses whose wife had 
an extraordinary demonstration for all of us as to what happens 
when we don't have insurance, the tragedies that are multiplied 
by the millions around the country. That in and of itself is 
one huge reason why I think we as a country need to be 
concerned. The lack of productivity that is resulting from it 
in addition to the tragedy is something we certainly need to 
recognize. The second part of it is that, as I said earlier, 
the cost shifting that occurs is really something we need to be 
very concerned about. You look at all costs in health care in 
my view as balloon and there are three components. There are 
taxes, out-of-pocket expenses and premiums. We can squeeze down 
the premiums by providing more tax credits but somebody is 
going to pay for that balloon. That $2 trillion is still going 
to be paid for. The cost shifting we are told by many studies 
that have been put out now is about $900 of the $6,700 per 
person that we pay. So we are all paying more as a result of 
the cost shifting that goes on. Finally, I think it is just the 
humanitarian thing to do. We are the only industrialized 
society that doesn't have health care and I can't imagine what 
we want to say about society, what we want to say about our 
children and grandchildren in the future if we say that somehow 
we are willing to accept the reality that 45 million today, 
perhaps 55 million in 20 years, won't have insurance, not to 
mention all the underinsured besides.
    Mr. Pallone. Thanks. I appreciate that.
    President McEntee, I wanted to ask you about the employer-
sponsored system, a couple questions. If employers that you 
negotiate with were to drop the health coverage they provide, 
what kind of alternatives would the employees have? Is it 
really possible for them to go out in the individual market? 
That is No. 1. And second, I know you have seen workers laid 
off and as a result losing their health coverage, what do you 
think about the employer-sponsored system? I know we talked 
about public systems versus employer-sponsored. Obviously you 
still think that the employer-sponsored system is critical.
    Mr. McEntee. Yes, we do. We think that an employer mandated 
part of this system is critical to us. Our people, we have 
1,400,000 members and I would say that a good guess would be 
that they are all public workers or at least 95 percent, they 
average probably about $25,000 to $30,000 a year in terms of 
salary. If they would lose their health care coverage, have to 
go through the individual market, which is much more expensive 
than group coverage, these individuals themselves would 
actually be denied coverage in the individual market for minor 
health issues and it wouldn't be affordable to them in the 
private market to get health care coverage. That is why we 
believe that an employer pool is mandated in this particular 
case. Our people just couldn't afford it. There is no question 
about that, and we have had the opportunity to see this because 
we have thousands and thousands and thousands of people in the 
population who are childcare workers and home health care 
workers who have no health care through the employer. We are 
trying to negotiate it for them as we organize these workers. 
But what they end up is through the private sector and through 
the private system with no health care at all, and as a 
result----
    Mr. Pallone. I wanted to ask in the same vein because my 
time is running out, what about what the President has proposed 
in this regard? He is talking about a tax on employer coverage 
and that would help people if they want to go in the individual 
market. Do you want to comment on that in the context of this?
    Mr. McEntee. Well, we just think that it is misdirected, 
that it would encourage employers to drop their health plans 
when over time in the beginning some but then over time 
probably all and that they would drop their health plans 
because they lose this tax rebate that they now receive and 
that the President would take away. It would force in our 
judgment our people we represent, workers in general, to pay 
more for what in fact would be skimpier coverage in the 
individual market. It would not help low-income families who 
already have little or no tax liability. The tax benefit for 
them will not pay for health care insurance policy at all.
    Mr. Pallone. Thank you. I appreciate it.
    I recognize Mr. Deal.
    Mr. Deal. Thank you, Mr. Chairman.
    I am going to ask questions that hopefully we can get 
everybody to respond to. The first question is, we have heard 
reference to the Tax Code treating people fairly. Is there 
anybody on the panel that would be opposed to the concept that 
the Tax Code should treat everybody fairly when it comes to 
paying for the cost of health care whether it be a small 
business versus large business, individual, et cetera? Should 
we equalize or at least try to equalize as much as possible the 
Tax Code treatment of the cost of health care? Anybody disagree 
with that proposition? I see no response.
     If we have public programs such as Medicare, Medicaid, 
SCHIP, should we allow a portion of those benefits if the 
individual chooses to do so or the State, as it may be, should 
we allow them to use a portion of those benefits to buy into an 
existing employer-offered health policy if the individual has 
that option? Would anybody agree that we should not afford that 
option in these programs? I don't see anybody. Yes, Ms. Turner.
    Ms. Turner. I believe that is a very good idea so I think 
if the question is a yes or no, that yes, we do agree.
    Mr. Deal. OK. I think everybody seems to agree to that. It 
is getting a little tougher as we go down my list. Does anybody 
disagree with the proposition that small businesses ought to be 
treated the same as large businesses in particular as it comes 
to the association health plans to allow them to pool together 
to be able to purchase at a lower rate by pooling their people 
together? Does anybody oppose those, and if so, why.
    Mr. Daschle. I want to address both of your last two 
questions, if I could for just a second.
    Mr. Deal. OK.
    Mr. Daschle. First of all, on the SCHIP question, I think 
obviously we want to provide as much flexibility as possible to 
those who are in need of insurance. I worry a lot about the 
inefficiency and the complications that would come from 
something like that. Vouchers sometimes work, sometimes don't. 
I don't know that I have seen any record with regard to 
vouchers where we have seen that they have worked all that 
well, but that would be the one concern I have is whether we 
further complicate it. Obviously we don't have enough money 
right now to provide SCHIP funding for the universe of children 
that are in need of it. We are about 9 million children short 
today and we are still struggling with how we are going to find 
ways to provide the funding for SCHIP. Under the current 
circumstances, I think this would probably add to the 
complications.
    Mr. Deal. But we know, Senator, that many of those SCHIP 
children, their parents work for companies that do provide 
health insurance benefits, they just do not participate 
sometimes because they don't feel they can afford the extra 
premium. I think we would have to have a standard, in other 
words, it would have to meet the same equivalent as good or 
better than the SCHIP program that the State offers, otherwise 
they wouldn't choose that option anyway. I guess that was my 
point.
    Mr. Daschle. With regard to the associated health plans, as 
long as they aren't allowed to get out from under the ERISA 
needs that are there across the country. That has always been 
the issue is, there are real serious problems as the attorneys 
general have all noted that we would have to address with 
regard to ensuring that the benefits and the viability of the 
associated health plan can be maintained. Oftentimes they can't 
because they get out from under ERISA requirements which as our 
witness from AT&T noted is really one of the most problematic 
parts of dealing with the associated health plans as they are 
currently proposed.
    Mr. Deal. Let me go to another area.
    Mr. McEntee. Could I make a comment on those AHPs? We are 
willing to look at it. We are all here willing I think to look 
at everything because the problem is so dire. But at least 
preliminarily in what we have looked at, that there is a 
possibility that with these small business flexibilities that 
you would give, it could possibly override the regulations in 
terms of States that presently give better benefits and may end 
up costing the small businesses more and may end up giving less 
benefit to the worker, but we are willing to look at anything 
and everything----
    Mr. Deal. Well, I think you should since none of your 
members apparently are going to be affected by it, and ERISA 
does override those small restraints already.
    Mr. McEntee. Of course, ERISA is a problem for every State 
in terms of trying to put into effect their own particular 
State benefit and plan.
    Mr. Deal. Unfortunately, my time is out.
    Mr. Pallone. Ms. Eshoo.
    Ms. Eshoo. Thank you, Mr. Chairman. Thank you to all the 
witnesses. I could just keep listening and listening and 
listening.
    Senator Daschle, thank you for trying to separate fact from 
fiction with the myths in our system. I have the privilege of 
representing one of these islands of excellence, Stanford 
Medical Center and everything that is attached to it, but I 
have a community that may be about a mile and a half east of 
that medical center, East Palo Alto, not Palo Alto but East 
Palo Alto. It is the poorest community in the area. Most people 
don't think that there is anything poorer in Silicon Valley. So 
I agree with what you said.
    Mr. Rotzler, thank you for being here today. I think to 
honor you and all those that you are speaking on behalf of that 
we really do something meaningful, that we really get something 
done. All these different moving parts, what I think are the 
smaller things. I think it would be a big step for the 
committee to take it, but in the context of health care in our 
country, we should insure all kids in this country. Imagine the 
United States of America struggling to come up with something 
to insure something. They are the cheapest to insure. Whatever 
the bugs are in the plan that we have now, we should debug it 
and insure them all. That would be one heck of a down payment 
and a confidence builder in the American people that we can get 
something done. Health information technology, Mr. Rogers and I 
are working on that. I like all those things. I try working on 
them to make a difference. But I think what we need to examine, 
and I am fascinated about what is going on in my own State of 
California. We have a Republican Governor that is trying to 
negotiate with the legislature really a universal plan where it 
is mandatory that every Californian be in it and be insured. 
The Democrats are kind of hedging. They are saying they are 
doing the same thing but it is really not the same thing. It is 
a model worth watching. I appreciate, Ms. Colburn, what your 
company is doing. I don't agree with your telecommunications 
policies here in the Congress but I salute you for what you are 
doing with your employees.
    Now, what I would like to ask is, because our country's 
health care insurance has really been employer-based in our 
country, that has been the nub, that has been the heart of it, 
now these legacy costs, the costs relative to competition are 
killing businesses. We hear it, we know it, we experience it in 
our own communities. Major corporations come in here and tell 
us that. What can you tell us from AFSCME's point of view? You 
are talking to major employers.
    Senator Daschle, you are a smart man. You have your pulse 
on the larger things and the movements that are taking place in 
the country. Is there a possibility in your view that major 
businesses will come around to universal care? Now, this term 
scares the hell out of the Republicans but I have to tell you 
that I think if major corporations came here and said it is 
time to revise this system, I think that there may be some 
converts, and if we can speak to at the same time about 
lowering the costs, you mentioned, Senator Daschle, the three 
things that balloon, so universal coverage but also with 
universal coverage comes a reduction in costs. Boy, would we 
have a deal. Do you see any glimmer of hope relative to 
American businesses and what they are experiencing driving 
this? See, I think that is where the answer is going to come 
from and that is what is going to put some spine in the 
Congress, I think, because when businesses come around, it kind 
of sanctifies things. They drive all of this too. Can you 
comment on it? Do you have any stories you can share with us or 
some kind of movement in that arena?
    Mr. Daschle. A couple of thoughts, first of all, the fact 
that AT&T is at the table I think is a real exciting 
development and you are seeing more and more business, whether 
it is Dupont or GE or so many of the companies that have gotten 
involved now in coalition building with labor and with other 
organizations like AARP. I think that is an extremely positive 
thing and it goes to the point I was making earlier. We have 
got to have the commitment of business and leadership in 
business to be able to move this forward. On the flip side, one 
of the sad things I just experienced a couple months ago was 
talking to the chairman of a large corporate entity who decided 
to move to another country because they didn't want to pay the 
health costs in the United States, and I worry about our global 
competitiveness if we are not more effective in dealing with 
cost containment than we have today, and the only way you can 
truly deal with cost containment is to look at it in a 
universal context. You can't simply say we are going to take a 
piece of it and contain that cost because it affects all the 
other pieces.
    Ms. Eshoo. It is like punching a pillow. You put a dent in 
it and something else pops up.
    Mr. Daschle. Exactly, and so we really have to look at it 
in a comprehensive way.
    Ms. Eshoo. Thank you.
    Mr. McEntee. Yes, I would just mention back with that 
Clinton health care plan, there was a point in time that in 
discussions with the labor movement and big business in this 
country, because they were getting hammered then in terms of 
health care costs and globalization but then it finally didn't 
work out in part. I know that former leader Gephardt is now 
holding discussions with big business and big labor, 
particularly the industrial unions, whether it is the 
machinists or whether it is steel, whether it is auto, who are 
genuinely affected by this, as well as their employers to look 
at some kind of move, some kind of plan. I know they are 
looking seriously at Medicare for all. I know that. What will 
come of it, I don't know, but at least it is a try and a step 
in the right direction.
    Mr. Pallone. Thank you.
    Ms. Eshoo. Thank you, Mr. Chairman, and thank you to all 
the witnesses. I think you have really been outstanding.
    Mr. Pallone. Thank you, Ms. Eshoo.
    Dr. Burgess.
    Mr. Burgess. Thank you, Mr. Chairman. Since Ms. Eshoo 
brought up the issue of universal health care, let us just go 
down the table and ask the question. If our goal is universal 
health care, Ms. Colburn, should that be an employer mandate, 
an individual mandate or just back off and let the Government 
do it all?
    Ms. Colburn. Well, I think what we would say is that we are 
not really prepared today to say that we are totally locked in 
on any one idea nor have we alienated any idea and I think to 
your point we have got to be open to work with Government, with 
the unions, with other large business. There has obviously not 
been the answer that has surfaced----
    Mr. Burgess. So you would like flexibility. All right.
    Ms. Colburn. But we are looking at everything.
    Mr. Burgess. Mr. Montville, the same question. Employer 
mandate, individual mandate or let the Government do it all?
    Mr. Montville. I am all about options. I am a small 
businessman and----
    Mr. Burgess. So you like flexibility also?
    Mr. Montville. I really like flexibility, yes.
    Mr. Burgess. Mr. Rotzler, do you have a thought on that?
    Mr. Rotzler. I will defer at this point. I don't have any 
comment on policy.
    Mr. Burgess. Ms. Turner?
    Ms. Turner. I think we need to get the market working 
properly and find out how many people would buy health 
insurance on their own if it were more affordable, more 
flexible and people had more options than they do now. We need 
a truly competitive market for insurance. Then I think we can 
see what do we need to do to get to universal coverage. But I 
think we need to start first by fixing the market.
    Mr. Burgess. President McEntee?
    Mr. McEntee. We think it is well worth looking at a 
combination of all but we think a major pillar has to be an 
employer mandate but we are willing to look at a combination of 
all.
    Mr. Burgess. Well, a combination of all would include 
letting the Government do it all would then be mutually 
exclusive, but I appreciate your point and so the employer 
mandate would be part of what you would----
    Mr. McEntee. Yes, that would be a main pillar of it, of 
course.
    Mr. Burgess. Mr. Smith?
    Mr. Smith. Sure. We incorporated the private market with 
Government assistance in terms of making sure that we did get 
the uninsured insured. We steered away from the individual 
mandate until 2010 to give our outreach programs a chance to 
succeed. We found that we have mandated insurance for car 
insurance in the State of Vermont yet we still have 10 percent 
of people who are uninsured for car insurance. We wanted to 
take this other approach first. The product that we offer with 
the cost we think will be enough so that we don't need an 
employer mandate as we move forward.
    Mr. Burgess. And Senator Daschle?
    Mr. Daschle. I believe we ought to have a private system in 
a public framework. One way to accomplish that is an individual 
mandate with employer responsibility. We ought to get the 
employers out of health management but I do believe that the 
employers have a responsibility to be part of the larger effort 
to finance our health care system.
    Mr. Burgess. The issue always comes up, if we were going to 
make the Medicaid system today, say we didn't have it and we 
were going to start it from scratch, surely we wouldn't design 
a system that requires 2,700 waivers in order to work. Would 
what you envision be your Federal Reserve Board type of 
structure?
    Mr. Daschle. Well, there always is going to be a need for a 
Federal role just as we have in our banking system. There is a 
specific role that only government seems to be able to function 
within our economy and our society and I think that is 
certainly going to be true in health care in the future. But 
you are right, I think the Medicaid/Medicare system was 
primarily a product of compromise all the way through beginning 
all the way back in 1965. You could design a lot more efficient 
system. You could design a lot more effective coverage. But 
nonetheless, I think we are always going to have to have some 
option for those who can't afford to pay for themselves.
    Mr. Burgess. I need to get back to the Medicare issue but 
Ms. Turner, I wanted to come back to you and the concept of 
getting the market more involved and we have actually heard it 
approached from several ways. Mr. Montville talked about his 
experience. Mr. Rotzler, I guess I would be interested to know 
when you found yourself between jobs and without insurance, was 
there an option in the private market for you to go to and it 
was simply unaffordable or was there no product available?
    Mr. Rotzler. It was unaffordable at the time, and I was 
working and figured that it would be a full-time job and had no 
reason to believe that my family was in any kind of danger.
    Mr. Burgess. It is nowhere near the tragedy you sustained 
but I had an adult child at that same year and tried to buy an 
individual policy for her because she was unemployed, and I 
just simply couldn't find one. No one really wanted to talk to 
me. I was willing to write a big check but no one was willing 
to do that. I do like what Mr. Montville talks about, his 
health reimbursement accounts with the health savings account. 
I think that would be my vision of a first-class system. I had 
a medical savings account when I was in medical practice after 
you guys allowed them in 1997 but fast forward from 1994 to 
2004, 2005, and a young person today can go on the Internet and 
buy, albeit a high-deductible policy but they have got some 
coverage if the catastrophe strikes. They are going to pay for 
their routine care sure enough out of pocket because the 
deductible is so high and for some people that will be a 
barrier. They won't get their routine care done. But I guess 
when someone said we have done nothing, that is not exactly 
true and there are options that were not available there as 
short as 10 years ago and I know because I did try to buy that 
policy in 1994 and it just was unavailable to me for an 
individual purchasing it for an individual.
    I have gone over time, Mr. Chairman. I appreciate your 
indulgence.
    Mr. Pallone. Thank you, Doctor.
    Next is the gentleman from Texas, Mr. Green.
    Mr. Green. Thank you, Mr. Chairman, and I appreciate our 
panel and their patience.
    Senator Daschle, I want to thank you for being here today 
and your wealth of experience on the subject. Yesterday our 
Oversight and Investigation Subcommittee heard from a family 
whose child now needs a kidney transplant as a result of her 
eating spinach contaminated with E. coli. The family indicated 
they can no longer pursue any advancement in their careers that 
would lead to a change in employers because the child's access 
to health care is dependent on their employer-sponsored health 
insurance. They fear that a future employer would either not 
cover the child or they would be faced with unaffordable 
premiums due to the child's preexisting condition, maybe even 
for the year period of time that is traditional. Can you speak 
to that situation that specifically affects how many Americans 
who want to advance their careers and improve their 
productivity and are making these kind of decisions and also 
would a public system free the family from this situation?
    Mr. Daschle. Well, this is just another example. Dr. 
Burgess was just talking about one of his own children having 
lack of access to health insurance because of a preexisting 
condition. I know of people in South Dakota, Congressman Green, 
that drive 50 miles in one direction not because they want the 
job but because they want the health care. It is affecting 
lifestyle in South Dakota as it is in virtually every State in 
the country. Health care is becoming one of the largest 
motivation in seeking employment today because in large measure 
there are so many people either with preexisting conditions or 
the inability to afford the health insurance they can buy 
without a preexisting condition. It shouldn't be that way in a 
country. How many times are we making decisions on jobs that 
have nothing to do with the value of the job or the 
productivity that one might consider in a job more well suited 
for that individual but is not taking that job simply because 
they don't have access to health care. So I think your question 
is a very appropriate one and it is one of the many policy 
implications here that we have got to address.
    Mr. Green. Mr. McEntee, we recently had a case in our 
district of a woman who had a brain aneurysm, and I am not one 
to pick on certain companies, but she had health insurance 
through her employer at Wal-Mart and she was originally 
misclassified as a part-time employee that had a $25,000 cap on 
the coverage. We were lucky enough, we had Memorial Hospital in 
Houston who agreed to assist the lady. In hindsight, Wal-Mart 
found out she was misclassified and she was a full-time 
employee and had been there for more than a year and so she did 
have hospital coverage. In my view, we have enough pressure on 
our charity systems, because that is what Memorial Hospital did 
to a person who was working full time and individuals with 
health insurance shouldn't be part of that program. Can you or 
any of the panelists speak about how many employers may have 
these limited maximum policies because when you have a brain 
aneurysm that is $100,000 and you have a $25,000 cap on your 
insurance?
    Mr. McEntee. Well, we do have a number of them that have a 
cap but it is getting tougher and tougher and tougher out 
there. Our people in the public sector, not all but many, have 
pretty decent health care plans that they gave up wages, 
vacation days, sick time in order to get these health care 
plans. Number on their minds all across this country no matter 
who the employer is, whether it is the State of Pennsylvania or 
it is the State of California or whomever, in our negotiations 
today the first thing that is mentioned is, you have got a 
halfway decent health care plan but we have to change it, it is 
too costly, we have to change it and as a result if we keep it 
the way it is, there will be no wage increase. Now, once again 
I said our people average about $25,000 to $30,000 a year. So 
at every negotiation we go in today, that is the primary topic 
between the employer and the people that we represent. Every 
poll that we take, every meeting that we go to, the first thing 
that is mentioned is how about health care, what is the 
Congress going to do, what is the Government going to do, what 
are they going to do about universality, what are they going to 
do about these co-pays, what are they going to do about these 
kinds of things. It has been mentioned here, we are the 
strongest, wealthiest country in the world. We still don't 
insure all of our kids. And now instead of going in the 
direction where we are going to have better insurance, we are 
going in the direction at least as we see it where we are going 
to have less.
    Mr. Green. Mr. Chairman, I know my time is out but I want 
to thank Ms. Colburn from AT&T, and just for the record, I have 
had the CEOs of a lot of companies sit down with me, and I will 
quote Shell Oil particularly, because of the high price of 
natural gas in our country and the high price of health care, 
they are transferring production to the Netherlands, and North 
Sea gas is cheaper than what we can get in Texas even for our 
natural gas but the health care costs, and so following my 
colleague from California, we have a problem and whether it is 
a CEO or a blue-collar worker, we know it and we need to deal 
with it in Congress and hopefully it will be at the suggestion 
of both sides of the bargaining table that we can deal with it, 
so thank you.
    Mr. Pallone. Thank you.
    The gentle woman from New Mexico.
    Mrs. Wilson. Thank you, Mr. Chairman.
    Ms. Turner, I had a couple of questions I wanted to direct 
to you. As I understand it, the current SCHIP program allows 
States to provide premium assistance for eligible children to 
purchase employer-provided health care but there hasn't been a 
lot of participation in this approach. I wonder if you could 
talk about any impediments that States have encountered in 
setting up these programs and offer any suggestions about how 
we might be able to address these impediments.
    Ms. Turner. Thank you, Mrs. Wilson. I do think a lot could 
be done to allow SCHIP dollars to be used to help people add 
their children to their employment-based coverage, but right 
now the rules and regulations make it incredibly cumbersome for 
States to actually comply with the rules governing this part of 
SCHIP. We have actually done some research on this, and there 
are only a few States that have gone through multiple hoops to 
try to comply. They have to qualify the employer's insurance as 
consistent with SCHIP insurance. They must continue to 
regularly monitor the business to see if that employee is still 
working for that company. It is cumbersome for employers. It is 
cumbersome for the States and most States just throw up their 
hands and say that is just too difficult. So I think giving 
added flexibility to the States, looking at some of the States 
that have been able to do this and learn from them. We can 
provide you some additional research on what some of those 
States. The General Accounting Office recently did a study 
looking at this particular issue and I do think that added 
flexibility could really allow those dollars to be used more 
efficiently and to allow families to stay together on the same 
policy by allowing an SCHIP allocation to be used to buy into 
employer coverage, but the rules and regulations right now are 
incredibly cumbersome.
    Mrs. Wilson. Are there any particular States that have 
worked out these problems and done well or are there particular 
barriers in the regulations that you would recommend that we 
look at when we reauthorize SCHIP?
    Ms. Turner. There are several States. I have not looked at 
that research recently. I believe Rhode Island is one of them 
that has actually had some success, maybe Connecticut.
    Mrs. Wilson. Without putting you on the spot, perhaps if 
you could----
    Ms. Turner. I will send you that paper, because there are 
some States that have said this is important to us, we will do 
this, and we will provide that information to you, Mrs. Wilson.
    Mrs. Wilson. There is a separate issue, and that has to do 
with health savings accounts and I understand that you were one 
of the proponents of establishing them and in many cases they 
are more affordable for people than regular insurance plans. 
Can you talk about the impact of health savings account on the 
uninsured and particularly how many enrollees in health savings 
accounts have been previously uninsured? Is it expanding 
access?
    Ms. Turner. American's health care plans actually recently 
released a study looking at all of its members that offer 
health savings accounts insurance and they found that a quarter 
of those purchasing insurance, and these are primarily big 
companies, were previously uninsured and they find that one of 
the reasons that they are particularly attractive is that the 
insurance is less expensive. It is a higher deductible policy 
but it protects people against losing their homes, losing their 
cars, losing their life savings if they do have a major medical 
event. So people are buying insurance in sort of the true form 
and then a surprising number of them also are funding the 
accounts but I think that the numbers for some of the smaller 
companies may even be higher. So between a fourth and a third 
of previously uninsured.
    Mrs. Wilson. Do you think that the low-hanging fruit is 
already gone out there for health savings accounts or is there 
more potential for them to expand or reduce the number of 
uninsured?
    Ms. Turner. Absolutely. The Labor Department's figures are 
showing that four in 10 Americans change jobs every year, I 
think there is an ever-growing need actually for people to find 
other options for more affordable health insurance.
    Mrs. Wilson. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Pallone. Thank you.
    Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman.
    Mr. Montville, you talked about moving from an insurance-
led health care product to kind of a consumer-led product, 
HSAs, if you will. You said you saw and witnessed in your 
company a change in lifestyle. Can you talk about that briefly?
    Mr. Montville. Sure. I chose to fund 75 percent of the HRAs 
when I switched to a high-deductible plan and I considered 
funding 100 percent but felt that by there being a level of 
accountability on the part of my employees, they would be more 
responsible with their health care dollars, and I had a lady 
that worked for me that every time her son was sick she would 
run off to the emergency room, but as soon as she realized that 
once the funds were depleted in that health reimbursement 
account, once they were depleted there was money out of her 
pocket before the plan kicked in, people were a lot more 
fiscally responsible with the way they were spending their 
dollars.
    Mr. Rogers. So you saw a change in their behavior because 
they were responsible for their own administration of health 
care? Is that correct?
    Mr. Montville. That is correct.
    Mr. Rogers. And so they did turn into more of a 
preventative consumer, did they not?
    Mr. Montville. Slowly.
    Mr. Rogers. But you did see it?
    Mr. Montville. Yes, I did.
    Mr. Rogers. And as the economics caught up with it, 
certainly their attitude changed, right?
    Mr. Montville. Very much so.
    Mr. Rogers. Ms. Colburn, you mentioned the foreign 
competitors. Do you feel the European Union, would that be 
included in your foreign competitors component when you talked 
about competing globally?
    Ms. Colburn. European Union. Also, even the emerging 
domestic telecommunications market. When we talk about 
competitors it is a whole new ballgame and a lot of those don't 
offer health care.
    Mr. Rogers. Sure, but let me just give you an example with 
the French, 75 percent of those bills are paid for by payroll 
contributions from both employers and employees so that is a 
pretty heavy tax, isn't it, when you start talking about those 
kind of numbers? And then the last 25 percent comes from 
Government, patients and supplemental insurance. That is a 
pretty expensive health care system that is supposed to be 
free, isn't it?
    Ms. Colburn. Well, it certainly sounds like it, yes.
    Mr. Rogers. And in some cases, you said that their health 
care is better, and let me give you another European competitor 
of yours. In Great Britain, you have to wait more than a year 
after being diagnosed to begin chemotherapy. The British 
Government is now spending a small fortune and they are trying 
to correct this by 2010 to get it down to 3 months. Is that a 
better health care system than the United States when you are 
diagnosed with cancer?
    Mr. Colburn. It certainly doesn't sound like it.
    Mr. Rogers. So if you had--God forbid, and I am a cancer 
survivor so I don't make light of this easily, but would you 
rather get sick in France or Canada or where they have these 
waiting periods or would you rather get sick in the United 
States if you had cancer?
    Ms. Colburn. I would really rather not----
    Mr. Rogers. I guess I say that because I had a very big 
manufacturer tell me how great the British system was and he 
was a very senior CEO and I would argue that the AT&T 
executives are well compensated, probably in higher tax 
brackets and rightly so, given your levels of responsibility. 
Fair to say? This particular manufacturer said this is a great 
system, and I said oh, really did you like the waiting periods, 
and he said I didn't go to the waiting periods, I bought my own 
plan. Do you think it is fair that we shove into this is a 
government-run system and then have those who have a little 
more affluence be able to buy out of that system? Is that a 
good system?
    Ms. Colburn. Well, first of all, we haven't espoused any 
government-run system. In fact, if anything, where we are today 
is much more in line with Mr. Montville. We have put in a 
consumer-directed plan for our management and many of our 
management----
    Mr. Rogers. That is a very important distinction, so you 
are not here today saying that the Government ought to run 
health care?
    Ms. Colburn. I'm really saying that we are looking at 
everything and we are really very much willing to work with all 
parties----
    Mr. Rogers. Would you support a government-run health care 
system?
    Ms. Colburn. We haven't espoused to it but we haven't 
alienated it.
    Mr. Rogers. That is interesting.
    Mr. Montville, when you went through this process of 
changing, there are a lot of rules and regulations.
    Mr. Montville. Constantly.
    Mr. Rogers. Lots of rules and regulations.
    Mr. Rogers. Some estimates in America are as high as 30 
percent of it, maybe even more, almost a third, is rules and 
regulation compliance, has nothing to do with x-rays or 
prescriptions or seeing a doctor. In your experience, it was 
pretty heavy, wasn't it, the rules and regulations that you as 
a small business had to kind of wade through to get your 
employees connected to a health care plan?
    Mr. Montville. Yes, it was very extensive.
    Mr. Rogers. And that is expensive, isn't it? You know as a 
small businessperson that rules and regulations and Government 
intervention is expensive.
    Mr. Montville. Yes, it is.
    Mr. Rogers. That is interesting. So I find it interesting 
that the panel today, and I think we all want to get to the 
same place, but what we are calling for is this huge 
intervention in a system that I think is pretty expensive 
because the Government has intervened so heavily already.
    Ms. Turner, you talked about HSAs and getting back to that 
free market. Do you believe that Government rules and 
regulations and a complicated system and 2,700 waivers under 
our Government-run health care system that we have because we 
can't quite get it right is the most efficient way to allow 
somebody to buy health care in the United States of America?
    Ms. Turner. I think that if consumers had more control over 
the dollars, they would say this paperwork is nonsense. People 
are buried in paperwork when they go to the doctor, the 
hospital. They don't understand it. And it is incredibly 
expensive for our system. I think a lot of that inefficiency 
could be wrung out if consumers were to say I am going to buy 
health insurance from a company that doesn't burden me with all 
that paperwork and one of the things that health savings 
accounts do is allow people to access physicians for routine 
care with much less of that paperwork. I think about Jiffy 
Lube, for example. Imagine if our car insurance covered an oil 
change or having the car lubricated. You wouldn't be able to 
see through the Jiffy Lube. It would have a huge back shop 
asking ``what is your insurance company?'' ``Well, you are not 
due yet for your oil change and what is your co-payment? And 
here is your insurance and all this paperwork.'' The oil change 
would cause two or three times what it does. If we can pay for 
some of those routine changes for those who can afford it on 
our own and leave the insurance for the big stuff, I think we 
could bring a lot of people----
    Mr. Rogers. Isn't the great part of HSAs that first $5,000 
in deductible which sometimes the employer matches and 
sometimes not but there is some match program. That is money 
that would normally go to the insurance company, wouldn't it?
    Ms. Turner. Absolutely.
    Mr. Rogers. And that is now going into consumers' pockets 
instead of going to the insurance company, isn't it?
    Ms. Turner. And some employers, it is $1,000 deductible. It 
is not always a $5,000 deductible. You are absolutely right 
that that is money that people get to keep to spend on their 
health care bills rather than sending to the insurance company.
    Mr. Rogers. That is a pretty good bet. If we went after 
things like defensive medicine and we did health information 
technology, there is a way, maybe not one solution but isn't 
there a way that we can line up events that we can do to make 
health care less complicated and confusing and as one witness 
said, more affordable, more accessible without losing the 
quality? Don't you think that if we have the real courage to do 
this, we have to take all of the individual pots and put them 
together?
    Mr. Turner. Absolutely, and I am headed to Las Vegas for 
the Consumer Directed Health Care Congress, and it is 
astonishing to see the Expo Center, the number of private 
companies, entrepreneurial people coming up with solutions to 
make our health sector smarter, faster, better, cheaper by 
using new technologies and engaging some of those technologies.
    Mr. Rogers. And where we have seen the private sector 
intervene in health care markets, costs have either stabilized 
or gone down, have they not? Just a simple yes or no.
    Ms. Turner. Absolutely.
    Mr. Rogers. Last question for Mr. Daschle, if I may, sir. 
Senator, thank you for your service to your country. We 
certainly appreciate it. Thanks for still being involved in 
policy debate. Don't you think we are obligated, given all the 
things that we are trying to do with health savings accounts, 
which isn't going to be for everybody and with health IT and 
defensive medicine and all these artificial costs in the 
system, before we go and blow that up and go to this 
centralized Federal Reserve System or whatever you want to call 
it that has heavy Government regulation and oversight and all 
those things, don't you think we are obligated to try all of 
these other things to get people connected to health care first 
so that we can expand our health care pool?
    Mr. Daschle. I am so glad you asked that, Congressman 
Rogers. I think that we have got to leave ideology at the door 
if we are going to make decisions at all on the left and on the 
right. I think if you look at the Medicare Program, you can say 
that we have done a lot with it in the last 30 years, about 4 
percent administrative costs versus something like 15 to 20 
percent on the private sector. You have got universal access. 
You have got costs on a per capita basis at a much lower level. 
So all things considered, I think one can say that there is 
always going to be a role for Federal programs. There is always 
going to be a role to cover children and cover those who don't 
have the means to purchase insurance, those who like 
Congressman Burgess's son or daughter didn't have the ability 
because of a preexisting condition. We are going to have to 
deal with those and that is going to involve public programs. 
But that isn't to say that public programs alone should be the 
exclusive way with which we provide care. There ought to be a 
choice. There ought to be opportunities if they exist and can 
be provided in an administrative way that ensures universal 
access and quality. I see no reason why private systems don't 
have a role as well but they have to be merged together in a 
way that allows one system rather than the multiplicity of 
systems we have today.
    Mr. Rogers. But you would----
    Mr. Pallone. We are over, Mr. Rogers.
    Mr. Rogers. But we were just getting warmed up, Mr. 
Chairman.
    Mr. Pallone. Yes, but we have to move on. Thank you. And 
let me thank all of you. This was a very good panel and I 
appreciate your responses.
    Mr. Burgess. Mr. Chairman, if I could just make one last 
point if I wasn't clear that 25-year-old in 1994 who could not 
get health insurance in 2004 can go on the Internet to Google 
and type in health savings account and probably find a high-
deductible policy which they can afford, between $55 and $65 a 
month for a 25-year-old nonsmoker in my home State of Texas. So 
the landscape has changed and it has changed largely because 
some of the things you did in 1997 and some of the things we 
did in 2003 with the Medicare Modernization Act.
    Mr. Chairman, I would also like to submit one question in 
writing to the panel----
    Mr. Pallone. Yes. Well, the members can submit additional 
questions. I should mention to you that you may get additional 
questions in writing from the members.
    Mr. Burgess. Several people brought up ERISA and I am just 
not clear on all of the ways that----
    Mr. Pallone. All right. We have to move on here. You may 
get questions in writing within the next 10 days from us, and 
again, thank you so much for participating. This was really 
worthwhile. Thank you.
    I will ask the next panel to come forward, if you will. We 
are going to be changing the name cards and then you can figure 
out where to sit.
    Let me welcome all of you, and I would like to go left to 
right here and introduce each of you. We have two New Jersey 
people here today. First on my left is Reverend Heyward D. 
Wiggins III, who is with the PICO National Network from 
southern New Jersey, and then we have Dr. Robert E. Moffitt, 
who is director of the Center for Health Policy Studies at the 
Heritage Foundation, and then our second New Jersey guy is Dr. 
David Knowlton, president and CEO of the New Jersey Health Care 
Quality Institute in Trenton, and then Dr. Joseph Antos, who is 
the Wilson H. Taylor Scholar in Health Care and Retirement 
Policy at the American Enterprise Institute, and last is Dr. 
Jeanne Lambrew, who is associate professor at George Washington 
University School of Public Health and Health Services here in 
Washington, DC.
    I would ask each of you to give us an opening statement for 
5 minutes, and I will start with Reverend Wiggins.

  STATEMENT OF REVEREND HEYWARD D. WIGGINS III, PICO NATIONAL 
                            NETWORK

    Mr. Wiggins. Thank you, Chairman Pallone. Members of the 
Energy and Commerce Committee, thank you for inviting me to 
speak about the moral imperative to provide health coverage to 
the millions of our Nation who are uninsured, beginning this 
year with our most precious resource, our children.
    I pastor the Camden Bible Tabernacle Church in Camden, New 
Jersey. It is a city where more then one-third of the families 
lack health coverage. I worked over the past decade with the 
Camden Churches Organized for People to revitalize my city. I 
am proud to be here on behalf of the faith-based PICO National 
Network. Since 1973 PICO has brought people of faith together 
to revitalize communities and expand opportunities for families 
in 150 cities and towns across the country.
    A generation ago the faith community led the civil rights 
movement. Today PICO's more than 1,000 congregations and 1 
million families nationwide are a driving force behind the 
movement to expand health coverage in America beginning with 
covering all children. For communities of faith, the force 
behind both movements is the same. God created each of us in 
his image and we have a sacred responsibility to protect the 
dignity and well-being of every person.
    Two weeks ago the New Jersey State Police airlifted 
Governor Jon Corzine to Cooper University Hospital in my city 
of Camden. Cooper is a level-one trauma center that fights as 
hard to save a young person shot on the streets of Camden as it 
does to heal a Governor. Like Jesus, our trauma centers open 
their arms to the poor and the forgotten. The value that our 
hospitals place on every person's life is sacred whether they 
be a poor child, a drug dealer, prostitute or a public 
official. It is a fundamental cornerstone of our society that 
has deep roots in our religious traditions and the teachings of 
Moses, Jesus and Mohammed. None of us in this room would wish 
to live in a nation that did not value every person as a child 
of God.
    Yet when it comes to the uninsured, we have lost our moral 
compass. We have deceived ourselves that a slow death is no 
death. The National Academy of Science estimates that 18,000 
people, adults and children, die prematurely each year because 
they lack health coverage. Hundreds of thousands more face 
unnecessary pain and suffering. Go to the Cooper Hospital 
emergency room. You will see hundreds of people waiting all day 
to see a doctor. They come too late, they wait too long and 
they pray that in the end charity care will cover the cost. Yet 
it is society that ultimately pays the price when we deny 
people the health coverage they need to keep themselves and 
their families healthy.
    When people have reliable health coverage for their 
children and themselves, they have the tools to bring strong, 
healthy families and communities. Access to health care is a 
conduit to a vibrant and productive society. Indeed, we have a 
moral and constitutional obligation that the founders of our 
country thought important enough to include as part of our 
inalienable rights to protect the right to the pursuit of life, 
liberty and happiness. All of us are not able to pursue their 
dreams and their vocations in a society that has no viable way 
to heal all of its people. We join with the prophet Jeremiah 
who asked this question, ``is there no balm in Gilead, is there 
no way for us to get healing in this land?''
    PICO's faith-based federations and congregations have led 
many different efforts to cover the uninsured and improve 
health conditions in our communities. For example, we have 
established mobile health care clinics that visit public 
housing complexes and low-income communities in Orlando, 
Florida. We fought for and won increased funding for safety 
nets and coverage for the uninsured in California, Colorado and 
Virginia.
    For the faith community, it is unacceptable that a nation 
as wealthy as ours would leave 44 million Americans uninsured. 
As we work to find resources to cover the uninsured, which must 
be a high priority for Congress, our Nation needs to invest in 
more prevention. We begin with our young people but we don't 
end with them.
    With your commitment, the movement to cover the uninsured 
beginning with children will not be deterred. Together we will 
make this the healthiest, most successful generation in 
American history. We will see a day when every person has 
access to good health and all of God's children, young and old, 
can travel from coast to coast and not be concerned with having 
an unplanned health crisis and perishing because they cannot 
get treated in the land of the free and the home of the brave. 
The songwriter says, and I end with this, ``My country tis of 
thee, sweet land of liberty, of thee I sing; land where my 
fathers died, land of the pilgrims' pride, from every 
mountainside, let freedom ring.'' We need to cover our children 
and our Nation.
    Thank you so much for listening.
    [The prepared statement of Reverend Wiggins follows:]

                Testimony of Rev. Heyward D. Wiggins III

    Chairman Pallone, members of the Energy and Commerce 
Committee, thank you for inviting me to speak about the moral 
imperative to provide health coverage to the millions in our 
Nation who are uninsured--beginning this year with our most 
precious resource, our children.
    I pastor Camden Bible Tabernacle Church in Camden, New 
Jersey, a city where more than one-third of families lack 
health coverage. I have worked over the past decade with Camden 
Churches Organized for People to revitalize my city. I am proud 
to be here on behalf of the faith-based PICO National Network. 
Since 1973 PICO has brought people of faith together to 
revitalize communities and expand opportunities for families in 
150 cities and towns across the country.
    A generation ago, the faith community led the Civil Rights 
Movement. Today, PICO's more than 1,000 congregations and one 
million families nationwide are a driving force behind the 
movement to expand health coverage in America, beginning with 
covering all children. For communities of faith, the force 
behind both movements is the same. God created each of us in 
his image. We have a sacred responsibility to protect the 
dignity and well being of every person.
    Two weeks ago the New Jersey State Police airlifted 
Governor Jon Corzine to Cooper University Hospital in my city 
of Camden. Cooper is a level-one trauma center that fights as 
hard to save a young person shot on the streets of Camden as it 
does to heal a governor. Like Jesus, our trauma centers open 
their arms to the poor and the forgotten. The value that our 
hospitals place on every person's life as sacred--whether they 
be a poor child, a drug dealer, a prostitute or a public 
official--is a fundamental cornerstone of our society. It has 
deep roots in our religious traditions, in the teachings of 
Moses, Jesus and Mohammed. None of us in this room would wish 
to live in a nation that did not value every person as a child 
of God.
    Yet, when it comes to the uninsured we have lost our moral 
compass. We have deceived ourselves that a slow death is no 
death. The National Academy of Sciences estimates that 18,000 
people, adults and children, die prematurely each year because 
they lack health coverage. Hundreds of thousands more face 
unnecessary pain and suffering. Go to the Cooper Hospital 
Emergency room. You will see hundreds of people waiting all day 
to see a doctor. They come too late, they wait too long and 
they pray that in the end charity care will cover the cost. Yet 
it is society that ultimately pays the price when we deny 
people the health coverage they need to keep themselves and 
their families healthy.
    When people have reliable health coverage for their 
children and themselves they have the tools to build strong 
healthy families and communities. Access to health care is a 
conduit to a vibrant and productive society. Indeed, we have a 
moral and constitutional obligation that the founders of our 
country thought important enough to include as part of our 
inalienable rights, to protect the right to the pursuit of--
life, liberty and happiness.-- Today, the reality is that we 
are not all able to pursue our dreams and our vocations because 
our society does not viable system to heal all its people. We 
join with the prophet Jeremiah who asked, ``Is there no Balm in 
Gilead?'' Is there no way for us to get healing in this land?
    PICO's faith-based federations and congregations have led 
many different efforts to cover the uninsured and improve 
health conditions in our communities. For example,

     We've helped establish mobile health-care clinics 
that visit public housing complexes and low-income communities 
in Orlando, FL and other cities
     We've fought for and won increased funding for 
safety net clinics and coverage for the uninsured in 
California, Colorado, Virginia and other States.
     We've worked to pass Tobacco Tax measures to 
provide care for the uninsured in Missouri and California

    These efforts and other efforts to protect the uninsured 
are important. The health care system is broken and 
increasingly out of reach of too many families. It can only be 
fixed with participation from the faith community, business and 
civic leaders and local and State government. We find hope in 
the creativity of local initiatives on the uninsured. But our 
Nation cannot succeed, cannot live up to our promise, without 
strong and determined health care leadership from Washington.
    For the faith community it is unacceptable that a nation as 
wealthy as ours would leave 44 million Americans uninsured. As 
we work to find resources to cover the uninsured, which must be 
a high priority for Congress, our Nation needs to invest more 
in prevention. We must be good stewards of our resources, so 
that people get early intervention that prevents expensive 
treatment down the line. As Congress works to expand coverage 
for the uninsured we urge you to build on the success of 
existing programs and initiatives. This year PICO and the 
broader faith community have united behind an effort to 
strengthen and expand the State Children's Health Insurance 
Program to help States cover uninsured children.
    We begin with our young people because they are our future 
and because we have a chance this year to get results. No child 
should rely on an emergency room for their treatment or run the 
risk of life-long disability because they lack health 
insurance. With help from SCHIP we have reduced the number of 
uninsured children by one-third; but morally we cannot abide 
with having millions of children without health coverage in the 
United States; we cannot abide with rising infant mortality 
rates; we must start by making certain that every child has 
health coverage and access to high quality medical attention.
    That is why PICO has engaged in the SCHIP reauthorization 
debate since it began, testifying before this committee and 
engaging hundreds of clergy in a united stand on covering 
uninsured children. We continue to urge Congress to move 
quickly to deliver on its commitment of $50 billion in 
additional resources for SCHIP reauthorization. We urge 
Congress to strengthen SCHIP by giving financial incentives and 
support to encourage States to reach and retain all eligible 
children. And we support giving States the option to cover 
pregnant women and documented immigrant children and continue 
to support State efforts to expand eligibility. We will be 
working closely with Congress--and keeping a close eye on 
Congress--over the next three months to ensure passage of a 
good SCHIP bill that strengthens children, strengthens 
families, and strengthens communities.
    While our policy focus this year is on SCHIP 
reauthorization and children's coverage, our faith communities 
will remain engaged in this issue until everyone has access to 
affordable health coverage. After all, we are all children of 
God, regardless of our age.
    With your commitment the movement to cover the uninsured, 
beginning with children, will not be deterred. Together we will 
make this the healthiest, most successful generation in 
American history. We will see a day when every person has 
access to good health, when all of God's children--young and 
old--can travel from coast to coast and not be concerned with 
having an unplanned health crisis and perishing because they 
cannot get treated in the land of the free and the home of the 
brave. The song writer said it this way, My country 'tis of 
thee, sweet land of liberty, of thee I sing; land where my 
fathers died, land of the pilgrims' pride, from every 
mountainside, let freedom ring!
    Thank you all for listening.
                              ----------                              

    Mr. Pallone. Thank you, Reverend.
    Dr. Moffitt.

  STATEMENT OF ROBERT E. MOFFITT, DIRECTOR, CENTER FOR HEALTH 
            POLICY STUDIES, THE HERITAGE FOUNDATION

    Mr. Moffitt. Chairman Pallone, members of the committee, I 
just want to express my deep appreciation for the opportunity 
and the honor and the privilege to testify before your 
committee today on this important issue. The views that I 
express in this testimony are my own as director of the Center 
for Health Policy Studies. They do not necessary represent an 
official position of the Heritage Foundation. I think that 
should be clear.
    Mr. Chairman, given Washington's gridlock on health policy 
over the past few years, it is not surprising that many States 
are starting to take a bold lead in health care reform. It is 
also not surprising that survey research shows that the 
American people are supportive of the States taking the lead in 
health care reform and trying out different options to expand 
coverage for our people. State officials are wrestling with 
rising employer costs on the ground, the increasing access 
problems, especially for low-income working people. Health 
insurance markets in many States are also deeply flawed, 
resulting in less competition, more market concentration and 
oftentimes characterized by excessive Government regulation.
    The professional literature on the uninsured shows that 
this problem is not simply a problem of people having 
difficulty getting access to health insurance. It is also even 
more of a difficulty of people keeping it once they get it. 
Perhaps the best single analysis of this data on the uninsured 
was conducted by Pamela Short and Deborah Graefe of 
Pennsylvania State University and it was recently published in 
Health Affairs, and Mr. Chairman, with your permission I would 
like to submit that Health Affairs article for the record.
    Mr. Pallone. Without objection.
    Mr. Moffitt. In their analysis of the Census Bureau data 
over the period 1996 through 1999, they found that only 12 
percent of the uninsured population was uninsured over the 
entire time. In fact, the overwhelming majority of the 
uninsured are persons who are in and out of coverage, getting 
coverage, losing it, often with a change of employment. So in 
effect, the vast majority of the uninsured Americans are people 
who are transitioning in and out of an unstable health 
insurance market.
    The policy problem then is how to make health insurance 
stick to the person, not simply the job, and that policy 
problem is acute for persons who work for small businesses. 
Small firms that do offer coverage usually offer workers and 
their families no choice of coverage, and if a worker tries to 
buy health insurance on his own, he must pay for it with after-
tax dollars. This was a topic mentioned in your last panel. But 
this could mean on the ground adding between 40 to 50 percent 
to the cost of a policy for the same level of benefits that 
that worker may have gotten through the place of work.
    So the Federal Tax Code is not neutral about where you get 
your health insurance. If one gets health insurance outside of 
the conventional employment-based arrangements, one is punished 
with a very heavy tax penalty.
    Mr. Chairman, my focus is on the State issue and I would 
just like to mention briefly the situation in Massachusetts. 
During the initial stages of the debate in Massachusetts, 
Governor Romney invited me and my colleagues to travel to 
Boston to discuss the health insurance markets in 
Massachusetts. In response to that request, we helped the 
Governor design an entirely new market for health insurance 
which would get around the current limitations of the Federal 
Tax Code which are so problematic in this system which 
undercuts both the choice of health insurance and the 
portability of health insurance coverage, particularly for 
employees in small businesses. The model for this approach was 
the stock market, basically a new market that would operate 
like a consumer-based market for stocks and bonds and equities 
and securities, a single place where an individual would be 
able to buy a product and keep it regardless of one's change in 
life or circumstance or job.
    Mr. Chairman, we have published an article in Health 
Affairs on the Massachusetts plan. I would also like to submit 
that for the record with your permission.
    Mr. Pallone. So ordered without objection.
    Mr. Moffitt. Because employees would be able to designate 
the exchange or, as the Massachusetts legislature called it, 
the connector, as their employer planned for the purpose of the 
Federal Tax Code, all of the premiums for health plans offered 
in that exchange or that connector would be tax-free and 
therefore all the benefits for the employees would also be tax-
free just as they are today under conventional employment-based 
health insurance. So the achievement then is that with an 
exchange or a connector, you would be able to have broad 
employee choice of health plans without compromising the tax-
free status of health insurance coverage. Individuals and 
families would be able to pick the plans of their choice. They 
would have a property right in their health insurance just like 
they do in other types of----
    Mr. Pallone. I am going to ask you to summarize. You are 
over your time.
    Mr. Moffitt. OK. And take it from job to job without a tax 
penalty.
    Mr. Chairman, there are a number of things we could do but 
the first thing I would mention is that we would have to change 
the tax treatment of health insurance and at least establish 
equity in tax policy. A second point is that Congress could 
promote State experimentation and the Health Partnership Act 
that has been sponsored by Congresswoman Tammy Baldwin and 
Congressman Tom Price would go a long way to promoting that 
State experimentation. And finally, I think that States ought 
to look at the opportunity for grants from the administration 
under its affordable choices program. That also offers States a 
great opportunity to advance coverage.
    Thank you very much, Mr. Chairman.
    [The prepared statement of Mr. Moffitt follows:]

                     Testimony of Robert E. Moffit

     Mr. Chairman and Members of the committee, my name is 
Robert E. Moffit. I am director of the Center for Health Policy 
Studies at The Heritage Foundation. The views I express in this 
testimony are my own, and should not be construed as 
representing any official position of The Heritage Foundation.
     Given Washington's gridlock on health care policy over the 
past few years, it is not surprising that many States are 
taking the lead in health care reform. It is also not 
surprising that the American people are supportive of States 
taking the lead role in reform. According to a Dutko Worldwide 
poll conducted in January 2007, 74 percent of voters prefer to 
give more power to State and local government, and 72 percent 
prefer that State and local government experiment with 
strategies for expanding health care.
     The States differ markedly in the range of their problems 
and their internal capacities to cope with them. States vary 
radically in their demographics, their economic profiles, their 
level of employment and poverty, the strength of their 
employment-based health insurance, and the functioning of their 
individual health insurance markets.
     Most States are struggling with a number of common 
problems: Top among them is the problem of Medicaid costs and 
the functioning of the Medicaid program itself. Low 
reimbursement rates discourage doctors from taking new Medicaid 
patients. Meanwhile, Medicaid obligations have been consuming a 
far greater portion of State budgets, squeezing out other 
priorities. The National Governors' Association reports that 
Medicaid has surpassed education spending in many States.
     Beginning this year, States are faced with a new fiscal 
challenge. The Government Accounting Standards Board will 
require States to begin calculating and disclosing the expected 
future costs of their retiree health benefits, just as the 
Financial Accounting Standards Board requires such disclosures 
for private companies. State retiree benefits are often more 
generous than private sector benefits, and that means that many 
States are going to be faced with large unfunded liabilities 
for State and local retiree health benefits. This will impose 
new pressures to raise taxes or to reduce other budget 
categories. Failure of State officials to act will hurt State 
bond ratings.
     Beyond that, State officials are wrestling with rising 
employer costs, and increasing access problems, especially for 
low-income working people. Health insurance markets in many 
States are also deeply flawed, resulting in less competition, 
more market concentration, and excessive government regulation.

                        The Nature of Insurance

     As a practical matter, health insurance problems are 
heavily concentrated in small businesses, where employers often 
cannot afford to offer their employees a policy and where the 
administrative costs and tasks of securing a policy are 
particularly daunting.
     The professional literature on the uninsured shows that 
the problem is not simply a difficulty with people having 
access to affordable coverage; it is more a difficulty of 
people keeping it once they have it. Perhaps the best single 
analysis of the data on the uninsured was conducted by Pamela 
Short and Deborah Graefe of Pennsylvania State University and 
published in Health Affairs (2003). In their analysis of the 
Census Bureau data over the period of 1996 through 1999, they 
found that only 12 percent of the uninsured population was 
uninsured over the entire time. In fact, the overwhelming 
majority of the uninsured were persons in and out of coverage; 
getting coverage, losing it, often with a change of employment. 
So, in effect, the vast majority of uninsured Americans are 
people who are transitioning in and out of an unstable health 
insurance market.
     The policy problem, then, is how to make the insurance 
stick to the person, not the job. That policy problem is acute 
for persons who work for small businesses.
     There is another facet of this problem. Can employees get 
the specific kind of coverage they want or need? Small firms 
that do offer coverage usually offer workers and their families 
no choice of coverage. If a worker tries to buy health 
insurance on his own, he must pay for it with after tax 
dollars. This could end up adding between 40 percent to 50 
percent to the cost of a policy for the same level of benefits 
that the worker might have been able to get through his 
employer.
     The Federal tax code, then, is not neutral about where 
persons get their health insurance. If one gets health coverage 
outside of conventional employment-based arrangements, one is 
punished with a heavy tax penalty.

               The Concept of a Health Insurance Exchange

     In order to tackle these related problems, a number of 
health policy analysts have suggested the creation of health 
insurance exchanges: new markets for health insurance for small 
businesses employees that ease their access to coverage, reduce 
the administrative costs for small businesses owners, and allow 
individuals to own their own health insurance policies.
     In the initial stages of the health care debate in 
Massachusetts, former Governor Mitt Romney invited me and my 
colleagues at Heritage to provide advice and assistance on the 
creation of a health insurance exchange as part of a 
comprehensive reform of the health care system in that State. 
In response to that request, we helped the Governor and his 
staff design an entirely new market for health insurance that 
would get around the current limitations of the Federal tax 
code, which undercuts both the choice and portability of health 
insurance coverage, particularly for employees in small 
businesses.
     The model for this approach was the stock market, and the 
new market was designed to work like a consumer-based market 
for stocks, bonds, equities, and securities: a single place 
where one could buy the product that one wanted and keep it 
regardless of changes in life circumstances and employment. The 
concept of the stock exchange was thus grafted onto the health 
insurance market as an ``insurance market exchange.'' The 
Massachusetts legislature renamed it ``the Connector'' and 
significantly modified its authority beyond what we had 
originally proposed.
     It is vital to understand what the health insurance 
exchange, as proposed by my colleagues at Heritage, is not. It 
is not a regulatory agency; it is not purchasing agent, buying 
health plans on behalf of individuals or businesses; it does 
not negotiate the rates and benefits of health plans like the 
Federal employees program; and it does not enforce a 
comprehensive standardized benefits package for health 
insurance. Its functions are purely administrative: It simply 
processes premium payments, government subsidies for low-income 
persons, and the paperwork for small employers.
     The role of employers would be retained, but changed. 
Instead of the traditional defined benefit approach to 
employees' coverage, the model would encourage defined 
contributions, particularly for smaller firms that do not have 
the financial wherewithal to participate in today's employer-
based health insurance system. So the new market would function 
through defined contributions to the health plans of the 
employees' choice.
     Former Governor Romney added another feature to the 
exchange: If an employer did not want to contribute anything to 
an employee's health insurance, the employer nonetheless would 
be required to offer a flexible spending account, a Section 125 
plan, so that the employee could make tax free premium payments 
and benefit from the generosity of the Federal tax code.
     In the exchange, individuals, not employers, purchase 
health insurance plans. The exchange will ease access to health 
insurance coverage for many workers in non-traditional jobs, 
including part-time and seasonal employees, contractors and 
sole proprietors, and individuals with more than one job. Small 
business employees would be able to pick and choose health 
insurance plans, including health savings account plans.
     Because employers will be able to designate the Connector 
as their employer plan for the purpose of the tax code, all of 
the premiums for health plans offered in the exchange will be 
tax free, and the benefits for the employees will also be tax 
free, just as under conventional employer-based health 
insurance. The achievement, then, is that the Connector will 
provide for broad employee choice of health plans without 
compromising the tax-free status of health insurance coverage. 
Employees would be able to pick health plans of their choice, 
have a property right in their insurance policies, and take 
their coverage from job to job without a tax penalty. Personal 
ownership and control of health insurance policies would thus 
characterize the new market. This is a major structural change 
in health insurance.

                       Helping Low-Income Workers

     For years, health care economists have been debating the 
best way to integrate low-income individuals and families into 
the private health insurance market, as an alternative to 
rising uncompensated care costs or Medicaid expansions. On a 
bipartisan basis, many policymakers have proposed refundable 
tax credits--basically vouchers--to help people buy private 
health insurance.
     Within the $2.2 trillion in national health care spending, 
there is a great deal of cost shifting, including 
reimbursements from both the private sector and the public 
sector for uncompensated care. One thing that States could 
pursue, especially in cooperation with the Federal Government, 
is a policy that would use existing government funding for the 
uninsured to provide them with the means to secure private 
coverage. Once again, in Massachusetts, policymakers pursued 
this approach and redirected, with waivers from the U.S. 
Department of Health and Human Services, hundreds of millions 
of dollars in existing government subsidies to provide coverage 
for the uninsured through a sliding-scale voucher program.
     Massachusetts's taxpayers spent $1.3 billion in 2005 on 
hospitals and other institutions to provide care for the 
uninsured and those who did not pay for it. Federal law, of 
course, requires hospitals to care for persons entering the 
emergency room regardless of their ability to pay.
     The new Massachusetts law transforms these subsidies into 
direct financial help to individuals, in the form of ``premium 
assistance'' for the purchase of private health insurance. 
Subsidies will be available to individuals and families with 
incomes up to 300 percent of the Federal poverty line. 
Eligibility, in other words, broadly tracks an earlier Bush 
Administration proposal for a refundable health care tax credit 
program for low-income families that would phase out at $60,000 
per year. This also is a major change in health care financing.
     The Massachusetts compromise reflects the political 
coloration of Massachusetts. There is plenty of room for 
criticism of the Massachusetts law on strict policy grounds. 
How it will work is another matter. But it is well to remember 
that it is in the early stages of its implementation, which 
will continue for another three years. In any case, it is far 
too early to make definitive evaluations.
     What Massachusetts does prove is that with the political 
will, compromise at the State level is possible. 
Unsurprisingly, other States are looking at this very 
carefully, and they should be.

                       A Supportive Federal Role

     There are a number of steps Congress could take to aid 
State experimentation in health care reform. First, Congress 
could help States cope with the uninsured in one simple step: 
provide tax equity in the purchase of health insurance. There 
are a couple of ways to do this. President Bush has proposed a 
universal standard deduction, which would go a long way toward 
eliminating the current distortions in the tax code and 
providing fairness in the tax treatment of health insurance. 
Others have proposed refundable tax credits. At the very least, 
Congress should provide tax breaks or subsidies to people who 
do not or cannot get health insurance through the place of 
work. A combination of the universal standard deduction and a 
system of refundable tax credits would be the best solution.
     Second, States could aid State experimentation with 
special grants. There are two promising approaches. The first 
is congressional assistance to the States through the enactment 
of broad goals to reduce the uninsured, the provision of policy 
tools to accomplishing this objective, and special grants to 
enable States to achieve coverage expansion using their 
preferred policy approaches. This approach has broad bipartisan 
support and is embodied in the Health Partnership Act 
legislation, sponsored by Representatives Tammy Baldwin (D-WI) 
and Tom Price (R-GA). Similar legislation is sponsored by 
Senators Jeff Bingaman (D-NM) and George Voinovich (R-OH).
     Another approach is being advanced by the Administration. 
The Bush Administration has signaled its intention to provide 
grants to the States--known as the Affordable Choices program--
to help them cover the uninsured. This is an Administration 
priority and a real opportunity for States to enter into an 
agreement with the Federal Government to address this pressing 
policy problem.
     The Founding Fathers designed the Federal system as a way 
of allowing a diversity of options in a very diverse and 
dynamic country, the most revolutionary society in the world. 
We can improve our health care system, and we can do it because 
of the opportunities afforded by our unique Federal 
constitution, the product of the Founders-- peerless political 
wisdom.
     Thank you. I will be happy to answer any questions you may 
have.
                              ----------                              

    Mr. Pallone. Thank you.
    Mr. Knowlton.

 STATEMENT OF DAVID L. KNOWLTON, PRESIDENT AND CEO, NEW JERSEY 
                 HEALTH CARE QUALITY INSTITUTE

    Mr. Knowlton. Thank you, Mr. Chairman, members of the 
committee and invited guests and staff.
    I am president and CEO of the New Jersey Health Care 
Quality Institute. It was founded 10 years ago. It is a 
nonprofit, nonpartisan foundation. Our purpose is to ensure the 
quality, accountability and cost containment are all closely 
linked to the delivery of health care services in New Jersey.
    I want to thank you for giving me the opportunity to give 
you a brief glimpse into the state of health care in our home 
State of New Jersey. As you know, Mr. Chairman, in New Jersey 
we are proud to be at or near the top of a number of 
statistical categories. We have one of the Nation's highest per 
capita incomes. We are home to more high technology, 
pharmaceutical and biotechnology companies per square mile than 
any place in the world. We are home to the University of 
Medicine and Dentistry of New Jersey, the largest freestanding 
public health university in the country. Our college and 
professional sports teams, particularly our women's basketball 
team and varsity football team at Rutgers, compete at a 
championship level.
    Unfortunately, we also rank near the top statistically in 
some categories where we are not quite so proud. According to 
the United States Census, we are home to more than 1.3 million 
uninsured. Almost a quarter-million of those are children. The 
New Jersey Business and Industry Association reported just 
earlier this month that for small businesses, the cost of 
providing coverage has increased 80 percent in the last 5 
years. As a result, businesses in New Jersey providing coverage 
have dropped dramatically in the past 4 years so that now in 
every five small business owners simply cannot afford health 
insurance.
    It is important for us to understand why so many Americans 
and New Jerseyans are uninsured if we are going to be 
successful in forging a solution. Some of the uninsured are 
between jobs. Some are starting new jobs with an insurance 
waiting period. There are those who work for employers who do 
not offer insurance and some lost their insurance when they had 
to stay home or reduce their working hours to care for aging 
parents, sick kids or a disabled spouse. For most uninsured 
Americans, there is no health care system but rather a blotchy, 
frayed patchwork of unreliable and inconsistent programs, 
providers and facilities. The bottom line is that in many cases 
the uninsured live shorter lives than comparable insured 
populations. Their crime is merely being too poor or too 
disabled or underemployed or simply holding down a part-time 
job.
    For all of these reasons, the Quality Institute decided to 
become involved in our home State on the issue of health care 
reform. We knew where to start. We knew that we needed to do 
all we could to enroll all who are eligible for State-sponsored 
coverage and we knew we would have to properly utilize and 
manage the Federal dollars available to us for that purpose. 
Then we knew we would have to make sure that those who have 
health coverage were able to keep it. We simply could not 
afford to lose more ground in this struggle. Beyond that, we 
knew we had to get creative and find solutions that would 
provide affordable and adequate coverage for every man, woman 
and child in our State.
    Last summer New Jersey State Senator Joe Vitale and I 
gathered together stakeholders and experts and we engaged in 
weekly frank and open dialog directed toward finding a lasting 
solution to the tragedy of the uninsured in New Jersey. We 
quickly came to some consensus and established some basic 
elements or pillars for our reform. They included the 
following: Universal health insurance coverage is our goal. 
That health insurance coverage must be affordable and it must 
be portable so individuals can take it with them. In order to 
achieve universal coverage, our plan includes a mandate that 
every individual residing in New Jersey have health insurance. 
Individuals will be responsible to provide proof of health 
insurance when they file their State income tax return. Those 
who do not have coverage will be placed into a new State health 
plan. We intend to implement FamilyCare to the extent permitted 
and to enroll all New Jerseyans who are currently eligible for 
Medicaid and FamilyCare but not presently enrolled. If a New 
Jersey resident presents for care without insurance, their 
provider will place them into the new plan and provide billing 
information.
    Unfortunately, even with comprehensive universal coverage, 
there will be some who will remain uninsured, undocumented 
populations, homeless and others who are hard to reach. For 
those people we created a safety net, a network of care centers 
who will partner with hospitals to provide primary care and 
specialty care to these populations. This will mean better 
quality care and it will contain costs.
    Our plan moves the uninsured into one self-funded plan to 
take advantage of the law of large numbers so that the healthy 
and sick balance each other out and result in more affordable 
health coverage. This new health insurance plan will be a 
commercial-grade product with commercial reimbursement and with 
benefits modeled after the current standard plan in the New 
Jersey employer market.
    Mr. Pallone. I am going to have to ask you to summarize as 
well because you are over the time.
    Mr. Knowlton. Mr. Chairman, we believe the time to act is 
now. The pessimism and gloom which permeated the Nation for 
much of the last decade after we failed to tackle this issue 
has been replaced by new optimism and openness and hope in this 
century. We feel we have a Governor who is very supportive of 
trying to get this universal coverage done and with the 
leadership from Senator Vitale, we think we are going to get it 
done.
    [The prepared statement of Mr. Knowlton follows:]

                      Testimony David L. Knowlton

    Mr. Chairman, members of the committee, invited guests and 
staff.
    My name is David Knowlton and I am president and CEO of the 
New Jersey Health Care Quality Institute. The Quality Institute 
was founded 10 years ago and is a non-profit, non-partisan 
foundation. Our purpose is to ``undertake projects that will 
ensure that quality, accountability and cost containment are 
all closely linked to the delivery of health care services in 
New Jersey.'' We achieve this by fostering collaboration 
amongst all stakeholders in the State's health care delivery 
system so that purchasers and health care consumers more fully 
realize the benefits of the linkage between quality, 
accountability and cost containment.
    The Quality Institute seeks to empower health care 
purchasers and consumers by publishing the results of objective 
research, comparative data on providers, and other pertinent 
educational information so that purchasers and consumers may 
adopt value-based purchasing practices and be able to make 
informed decisions on the merits of various health care 
programs, treatments and services. We were designated as the 
lead agency in New Jersey for the national Leapfrog Group 
effort in 2002.
    I want to thank you for giving me the opportunity, on 
behalf of the group I lead, to give you a brief glimpse into 
the state of healthcare in our home State of New Jersey. More 
importantly, I want to share with you the work we are 
undertaking to come to grips with New Jersey's uninsured 
population.
    As you know Mr. Chairman, in New Jersey, we are proud to be 
at or near the top in a number of statistical categories. We 
have one of the highest per capita incomes. We are home to more 
high technology, pharmaceutical and biotechnology companies per 
square mile than any place in the world. We are home to the 
largest free-standing public health university in the county, 
the University of Medicine and Dentistry of New Jersey. Our 
college and professional sports teams, particularly our women's 
basketball team at Rutgers, consistently compete at a 
championship level.
    Unfortunately, we also rank near the top statistically in 
some categories of healthcare for which we are not particularly 
proud:
    According to the United States Census, we are home to more 
than 1.3 million uninsured, 240,000 of them children.
    Research conducted for New Jersey's outstanding Robert Wood 
Johnson Foundation tell us that one out of every seven children 
in our State received no medical care last year as a result of 
being uninsured.
    The New Jersey Business and Industry Association reported 
earlier this month that for small businesses, the cost of 
providing coverage has increased 80 percent in the last five 
years. As a result, businesses in New Jersey providing coverage 
for their workers has dropped dramatically in just the past 
four years and now, one in every five small business owners 
simply cannot afford health insurance.
    Research conducted for New Jersey's Hall Institute of 
Public Policy by Dr. Sherry Glied and Edward Broughton revealed 
the following:
    The cost of healthcare in our State consumes 11 percent of 
the State's Gross Domestic Product and has been rising rapidly 
since the turn of the last century. In fact, at $6,500 per 
capita healthcare costs are a full 10 percent above the 
national average. Those rapidly rising costs come after a 1998 
benchmark which revealed that New Jersey paid the highest 
premiums for single plans and the third highest for family 
plans of 40 States studied. In fact, research from the Kaiser 
Family Foundation shows that New Jersey pays amonth the highest 
costs in the Nation in both health insurance costs and health 
care costs.
    The Glied-Broughton study further found that the ``high 
cost of health care and health insurance in New Jersey affect 
the State's residents, both as consumers of health care 
services and as taxpayers. High health costs make it harder for 
people to afford coverage, whether purchased in the non-group 
market or through employment. High costs also mean higher taxes 
to support State-financed health programs, including the States 
share of Medicaid and NJFamilyCare and the State employee 
health insurance program.''
    But while New Jersey may be suffering a little more as a 
result of its high costs, its situation is not unique. The 
problem of the uninsured in America is not confined to any 
particular State or region.
    In America, the most powerful economic force mankind has 
ever known, there are amongst us citizens who have seen loved 
ones die because they did not have medical coverage.
    There are Americans who have been forced to declare 
bankruptcy or sell their homes to pay for medical care. There 
are horrendous disparities which reveal that Hispanics and 
African Americans are more likely to be uninsured than white 
Americans, even though white Americans constitute the absolute 
majority of the uninsured. One out of every three young adults 
between the ages of 18 and 24 in the United States lacks health 
care coverage.
    It is important for us to understand why so many Americans 
are uninsured if we are to be successful in forging a solution.
    Some of the uninsured are between jobs. Some are starting 
new jobs with an insurance waiting period. Others work for such 
low salaries that they cannot afford insurance. There are those 
who work for employers who do not offer insurance at all. Some 
of the uninsured work for small businesses with limited cash 
flow. Some are uninsured because of shifting family situations. 
Some lost their insurance when they had to quit work or reduce 
their working hours in order to care for aging parents, sick 
children, or disabled spouses.
    The consequences of being uninsured or underinsured are 
significant. Finding yourself uninsured is not simply an 
inconvenience--it is often life threatening.
    For most uninsured Americans, there is no health care 
``system,'' but rather a blotchy and frayed patchwork of 
unreliable and inconsistent programs, providers, and 
facilities. Most of the uninsured routinely experience delays 
in getting care for a variety of medical problems
    The uninsured rarely if ever go to the doctor for a 
checkup. They rarely receive ongoing supervision of chronic 
problems, and they almost never get treatment until their pain 
becomes unbearable or intractable complications set in.
    The uninsured are left to their own devices to manage their 
health problems. The uninsured learn who is willing to write a 
prescription or give out free drug samples without examining 
them. Some will take only half of a prescribed drug dose so 
that their medicine will last longer. The uninsured will share 
prescriptions with friends and relatives. They will skip doses 
until they can afford a refill. The uninsured play a high-
stakes guessing game when they choose which of their several 
prescriptions they can afford to purchase. They will self-
medicate in ways that would appall trained health care 
providers and they will take large and frequent doses of over-
the-counter pain medications such as ibuprofen and Tylenol in 
order to get through the day or night.
    The Institute of Medicine has concluded that the uninsured 
receive less preventive care and poorer treatment for both 
minor and serious chronic and acute illnesses.
    The bottom line: In many cases, the uninsured live shorter 
lives than comparable insured populations. Their ``crime'' is 
being too poor or too disabled or underemployed or simply 
someone holding down three or four part-time jobs. Their 
sentence is sometimes the death penalty.
    For all of these reasons, the New Jersey Health Care 
Quality Institute has decided to become involved in our home 
State on the issue of health care reform. We understand that 
without access to care, you cannot possibly have quality care.
    We know where to start. First, we must do all we can to 
enroll all who are eligible for State sponsored coverage 
through SCHIP programs. We have to properly utilize and 
maximize the Federal dollars available to us for this purpose. 
We have to make sure that those who have health care coverage 
are able to keep it. We simply cannot lose more ground in this 
struggle.
    Beyond that, we must get creative at the State level and 
find solutions that provide affordable and adequate coverage 
for every man, woman and child in our State. That is the 
journey on which we now find ourselves in New Jersey. Last 
summer New Jersey State Senator Joe Vitale and I gathered 
together stakeholders and experts and engaged in a weekly, 
frank and open dialogue directed toward a lasting solution to 
the tragedy of the uninsured in New Jersey--all of them. Those 
around the table included health care professionals, business 
and labor leaders, public policy makers and many of the State's 
leading opinion leaders.
    We quickly came to some conclusions and established 
``pillars'' for our reform effort:
    Universal health insurance coverage is our goal. Health 
insurance must be affordable, and it must be portable so 
individuals can take it with them as they move in and out of 
employment or from one region of the State to another.
    In order to achieve universal coverage, our plan includes a 
mandate that every individual residing in New Jersey have 
health insurance--an ``individual mandate.'' Under our reform 
individuals will be responsible to provide proof of health 
insurance when they file their State income tax return. If they 
do not provide proof of health insurance, they will be placed 
by the State into the new State health insurance plan.
    We intend to expand FamilyCare to ensure that we are using 
all the Federal dollars we have available to us. We also must 
enroll all New Jerseyans who are currently eligible for 
Medicaid and FamilyCare but who are not yet enrolled.
    If, for whatever reason, a New Jersey resident presents for 
care without insurance, the hospital will place them into the 
new plan and provide billing information to the new plan.
    Unfortunately--even with a comprehensive universal coverage 
plan--there will be some who remain uninsured. They are the 
undocumented populations, homeless, and others who are hard to 
reach. For those people, we must have a safety net. Our plan 
will create a network of Collaborative Care Centers who partner 
with hospitals to provide primary and specialty care to these 
populations, so hospitals are only responsible for their 
emergent care. This means better quality care, and it contains 
cost. The hospitals and centers will be eligible for 
reimbursement for actual care provided to the remaining 
uninsured.
    This new plan will replace the current plans offered in the 
State's individual market. This successor plan will be sold to 
individuals and their families (not employers), and will be 
licensed by our Department of Banking and Insurance and 
administered by our State Health Benefits Plan.
    In the current Individual Health Coverage market, coverage 
is unaffordable because people are spread out among many plans 
and policies, and because of adverse selection (where sick 
individuals buy coverage and the healthy do not). Our plan 
combines all individuals together so we can take advantage of 
the ``law of large numbers,'' so the healthy and the sick 
balance each other out and we are able to provide an affordable 
health insurance product.
    The health insurance plan will include a statewide network 
of providers, and will be designed as one plan with two 
options: A standard HMO and a PPO with an out-of-network 
option. This plan will be a commercial grade product, with 
commercial reimbursements and with benefits modeled after the 
current Standard Plan in the Small Employer Market. We will 
require that where an employee does not have coverage, his or 
her employer must provide them access to a Section 125 
flexible-spending account so the employee can purchase their 
health care coverage with before tax dollars.
    Our plan will be offered to all New Jersey residents, and 
State subsidy will be provided on a sliding scale based on what 
is affordable to the individual or their family based on their 
income level and family size. Our current charity care and 
related hospital subsidies will be redirected over time to 
provide premium assistance in the new plan.
    In New Jersey today, two-thirds of those who have health 
insurance coverage receive it from their employers. We must 
pursue reforms in the current employer-based markets to ensure 
that employers who are providing coverage to their employees 
now can afford to continue to do so.
    Last, we must ensure that quality and cost-containment are 
important elements of our reform. Increased transparency of 
quality and cost data, public reporting of that data, advances 
in the interoperable use of health information technology, 
providing consumers the tools to make the best health care 
decisions, and attention to chronic disease management are all 
part of that solution,
    We still have some details to work out but we believe we 
are on the verge of transformational reform in New Jersey.
    Furthermore, we believe the time to act is now. The 
pessimism and gloom which permeated the Nation for much of the 
last decade after we failed as leaders to tackle this issue has 
been replaced by new optimism and hope in this new century.
    Particularly in New Jersey, the stars are aligned: we have 
a governor who is committed to transformational change. In 
fact, I would suggest to you that Governor Jon Corzine today 
understands the value of quality and accessible health care 
better than any other chief executive in the Nation. We also 
have stakeholders who have decided to roll up their sleeves and 
be part of the solution rather than sit on the sidelines and be 
part of the problem.
    In the coming months legislation will be introduced in both 
houses of our Legislature to establish affordable and 
accessible health care coverage for each and every one of our 
State's citizens. It will be a real plan that can work. More 
importantly, it will make a very real difference--not only in 
the everyday lives of more than a million of our State's 
uninsured citizens--but in how we feel about ourselves and our 
responsibility to those less fortunate.
    I would like to leave you today with the words of the 
Founding Father for whom this city is named. In his Farewell 
Address as George Washington was leaving public service at the 
end of two terms as our President, he warned future leaders 
against ``ungenerously throwing upon posterity the burden which 
we ourselves ought to bear.''
    We believe New Jersey is at a crossroads. We can continue 
to ignore Washington's sage advice; or, we can do something. We 
have made our choice and are ready to lead. We believe this is 
a burden that we ourselves need to bear. We hope others will 
soon follow.
    Thank you for providing this forum for what may very well 
be the Nation's most urgent issue.
                              ----------                              

    Mr. Pallone. Thank you.
    Dr. Antos.

   STATEMENT OF JOSEPH R. ANTOS, WILSON H. TAYLOR SCHOLAR IN 
    HEALTH CARE AND RETIREMENT POLICY, AMERICAN ENTERPRISE 
                           INSTITUTE

    Mr. Antos. Thank you, Mr. Chairman and members of the 
committee. It is a real privilege to appear here today to 
discuss the challenges facing the uninsured.
    We have an opportunity and an obligation to seek solutions 
to the health system problems that have put insurance out of 
the reach of millions of Americans. However, we must also 
recognize the limitations of policies that are narrowly focused 
on increasing the number of newly covered individuals without 
also addressing broader system issues. Those issues have an 
impact on everyone who uses health care in this country whether 
or not they have insurance. Certainly we need to make progress 
for the uninsured but we should also be realistic about what we 
can and cannot achieve by expanding access to health insurance.
    Unfortunately, this is not a panacea. Access to health 
insurance does not guarantee that care will be either 
appropriate or affordable. Access to health care unfortunately 
does not guarantee good health and further, there is no magic 
bullet that will solve the problems facing the uninsured. 
Expanding subsides for health insurance will prove to be 
unsustainable unless we also undertake more fundamental 
reforms. Bluntly, universal coverage will not lower costs, not 
unless we also undertake the reforms that address the drivers 
of health care costs in this country.
    The uninsured are not easily characterized. They come from 
every sector of society. Their reasons for not having coverage 
vary but cost is the dominant concern. Some individuals simply 
cannot afford insurance even though they need it. Others may be 
able to purchase coverage but do not think the value outweighs 
the cost.
    The mismatch between cost and value is at the heart of our 
health system crisis. We spend over $2 trillion annually for 
health care but there is a growing sense that we are not 
getting our money's worth. This crisis is driven principally by 
perverse economic incentives, massive information failures, 
uncompetitive markets and a health system that does not 
adequately meet the needs of high-cost patients.
    However, work is proceeding on many fronts to correct these 
problems and to promote a more efficient and effective health 
system. Many States, most notably Massachusetts, have developed 
innovative solutions through the use of Medicaid waivers. 
Employers, insurers and providers are developing new approaches 
that could reduce unnecessary health spending and enhance the 
quality and effectiveness of health care.
    Congress has numerous opportunities to build on what works 
and improve what doesn't. That includes reforms such as the 
insurance market reforms that people have talked about earlier 
including the proposal by Mr. Shadegg, promotion of information 
transparency--we need more information in the system--and 
support for the kinds of clinical studies and the kinds of 
information development that will help determine what works in 
medicine and what doesn't.
    Congress also has an opportunity to correct a defect in 
Federal tax policy that fuels rising health care costs and 
disadvantages those who most need our help to purchase 
insurance. As you know, premiums paid for employer-sponsored 
health insurance are excluded from taxable income. For the 
average earner, that tax break can reduce the cost of coverage 
by nearly a third. This provision provides greater advantages 
to those with higher incomes and those who have more generous 
health insurance coverage though their employers; in other 
words, people with good jobs. Lower income workers and those 
who do not have access to employer coverage do not get the same 
help.
    President Bush has proposed to replace the open-ended tax 
exclusion of employer-sponsored health insurance premiums with 
a standard tax deduction. The deduction would be available to 
everyone purchasing insurance whether they purchased it through 
their employer or they got it on their own in the individual 
market. Persons buying a lower cost policy would benefit from 
the full deduction. Those buying a more expensive policy would 
not receive additional tax benefits above the standard amount. 
That is a push in the direction of fairness.
    The proposal is not perfect. The most common criticism is 
that the deduction should be augmented with a refundable tax 
credit for low-income individuals. I agree with that. 
Nonetheless, the proposal is bold. It would rein in a massive 
entitlement that promotes inefficient forms of insurance and 
exacerbates the problems of the uninsured. This is a positive 
step. Congress should embrace it.
    The Congress has indicated its intention to expand the 
State Children's Health Insurance Program by $50 billion over 
the next 5 years. Such an expansion could draw substantial 
numbers of children out of private coverage that they already 
have and into the public program. Better targeting of the funds 
and enhanced State flexibility to manage their programs would 
minimize this crowd-out effect and direct our subsidies to 
those who are most in need. That is particularly important when 
budget resources are scarce, as they are this year.
    To conclude, although a great deal of attention will be 
paid to the SCHIP reauthorization and appropriately so, 
Congress should take the opportunity to address broader health 
system problems. The high cost of health care is----
    Mr. Pallone. Dr. Antos, again if you could summarize.
    Mr. Antos. I am almost done. Thank you, Mr. Chairman.
    Mr. Pallone. OK.
    Mr. Antos. Congress has an opportunity to build upon the 
efforts that have already been made in the public and private 
sectors to promote better value for our health care dollars. We 
can and must find ways to slow the growth of health spending, 
improve the effectiveness of care and make health insurance 
more accessible for the uninsured and more affordable for 
everyone.
    Thank you very much.
    [The prepared statement of Mr. Antos follows:]

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    Mr. Pallone. Thank you.
    Dr. Lambrew.

STATEMENT OF JEANNE M. LAMBREW, ASSOCIATE PROFESSOR, THE GEORGE 
   WASHINGTON UNIVERSITY SCHOOL OF PUBLIC HEALTH AND HEALTH 
                            SERVICES

    Ms. Lambrew. Chairman Pallone, Congressman Deal, members of 
the subcommittee, thank you very much for inviting me here to 
testify. I am Jeanne Lambrew, an associate professor at George 
Washington University.
    Comprehensive reform has not been seriously discussed in 
Congress for over a decade, but as the first panel suggests, 
the problems are large and expanding. Stated simply, millions 
are uninsured, millions more are underinsured. We overpay for 
an underperforming system and this poor performance has literal 
life and death consequences.
    Public support for change is growing along with the 
problems. One recent poll found that guaranteeing health 
insurance for all Americans is the top domestic issue, ranking 
higher than cutting taxes. And we have recent proof as we have 
heard that health reform is possible to achieve. Massachusetts 
enacted legislation last year. California is debating how, not 
whether, it should cover all residents and other States like 
New Jersey and Vermont are not far behind.
    These bipartisan successful efforts shatter the prevailing 
wisdom that the status quo is inevitable. They challenge the 
belief that ideological wars will wage on forever, and they 
also shed light on what might be the pathway to get from our 
current system to universal coverage. Romney's plan to a lesser 
degree, Schwarzenegger's plan, some of the presidential 
candidates' plans all resemble a plan similar to one that 
myself and my colleagues put out in 2005. Our plan would 
achieve universal coverage by building on what works in the 
system. Medicaid, SCHIP, possibly Medicare will be expanded to 
become gap-free safety nets. Employer-based coverage would be 
supplemented with a new purchasing pool for group health 
insurance. Assistance would be provided to ensure that people 
who cannot afford it will get that coverage and all Americans 
would share in the responsibility for getting and keeping 
health coverage.
    Covering all Americans is necessary but not sufficient to 
forge a 21st century health system. We need to lay the 
groundwork for improved efficiency and quality. In addition, we 
need to emphasize prevention. We at the Center for American 
Progress would cover prevention out of health insurance and 
create a new wellness trust to pay for it directly in all 
settings like schools and the workplace.
    Laying this infrastructure for ensuring and expanding 
coverage will require an investment. My colleagues and I 
propose to pay for it with a small targeted value-added tax. 
Other ideas exist as well. But irrespective of the financing 
source, Federal spending probably needs to be raised to lower 
national health spending. Lower costs would result from 
insuring all Americans in a simpler, seamless system. We could 
reduce administrative costs which on a per-person basis are 
nearly six times higher than comparable nations. Lower costs 
would also result from emphasizing wellness since nearly 80 
percent of our health costs today result from chronic illness. 
And efficiency policies like harnessing information technology 
could yield tens of billions in system-wide savings. Simply, we 
cannot sustain Medicare or even reduce our structural budget 
deficit if we fail to control health care cost growth.
    A consensus on reform is neither elegant nor ideal but the 
fact that policy leaders on both sides of the aisle are 
beginning to circle around this kind of framework for reform 
suggests that we are within reach of figuring this out. 
Progress is not possible without leadership though. Encouraging 
support for reform among business leaders, political leaders 
and health care leaders is part of the work we do at the Center 
for American Progress. We are making headway. For example, 
AT&T, who we heard from before, Wal-Mart, SEIU are all involved 
in this Better Health Care Together coalition which is 
committed to trying to get to a reform system that has 
everybody in, that is value-oriented by the year 2012.
    But unfortunately, insuring all American does not seem to 
be a priority of the current President. His budget's tax policy 
would likely accelerate the erosion of employer-based coverage 
while providing no viable alternative. High-deductible plans 
and scaled-back Medicaid benefits could replace uninsurance 
with underinsurance. And, his budget would underfund children's 
health, causing a decline in the number of children covered. 
Such policies could make matters worse.
    This Congress does have an opportunity, however, to make 
inroads. This committee could advance health information 
technology, prevention, comparative effectiveness research, 
among others. These would lay the foundation for reform. But 
most importantly, this committee could successfully reauthorize 
the State Children's Health Insurance program. SCHIP has 
covered millions of low-income children through a strong 
Federal-State partnership. Extending and improving it would 
prove that where there is a will, there is a way.
    So in closing, I encourage you to do what you can do this 
year so in 2009 we can come back and have this debate that 
hopefully is on our doorstep.
    Thank you.
    [The prepared statement of Ms. Lambrew follows:]

                     Testimony of Jeanne M. Lambrew

    Reasons Why Health Reform Should Be On the Agenda

     Serious health system problems
     Public opinion support
     Recent proof that reform is possible

    Emerging Consensus On How to Get from Here to Universal 
Coverage

     Build on what works and make sure coverage is 
affordable
     Improve as well as expand coverage
     Recognize that we need to spend up-front to save 
in the long-run

    What Needs to be Done

     Build leadership
     Block policies that go in the wrong direction
     Lay the groundwork for reform (e.g., information 
technology, prevention)
     Successfully reauthorize SCHIP

    Chairman Pallone, Congressman Deal, and members of the 
Committee, I am Jeanne Lambrew, an associate professor at 
George Washington University and senior fellow at the Center 
for American Progress. I thank you for the opportunity to 
testify today. I am particularly encouraged that you are 
focused on the challenge of covering all Americans. 
Comprehensive health reform is daunting. Presidents from Truman 
to Clinton tried and failed to enact legislation, and numerous 
bills to expand and improve coverage have languished in 
Congress. Considerable political capital, legislative skill, 
and will are needed to change a system that affects one-sixth 
of our economy and every single American. But, we are coming to 
the point where the effort it takes to repair the crumbling 
system may be greater than what it will take to build a better 
system.
    Comprehensive health reform has not been seriously 
discussed in Congress for over a decade, but as the first panel 
suggests, the problems are large and expanding. The number of 
uninsured is roughly 45 million and growing. People who lack 
coverage have neither the same access nor the same outcomes as 
those with coverage. \1\ Adding to their ranks are an estimated 
16 million under-insured: people who, despite having coverage, 
are inadequately protected against health costs. \2\ These same 
people who work hard to pay for coverage and care don't always 
get their money's worth. One study found that only 52 percent 
of people received care that clinicians recommend. \3\ And, we 
have the most expensive system in the world by any measure. We 
pay $2 trillion or about 16 percent of our gross domestic 
product on health care--about $700 million more than peer 
nations, adjusted for wealth. \4\ Stated simply, we overpay for 
an underperforming system. And this poor performance has 
literal life and death consequences.
    In addition, public support for change is growing. A March 
New York Times / CBS News poll found that guaranteeing health 
insurance for all Americans is the top domestic policy issue, 
ranking far higher than immigration or cutting taxes. \5\ For 
the last decade, the idea of a Federal guarantee of health 
insurance for all Americans had had more than 56 percent 
support, rising to close to two-thirds support in the last 
year. \6\
    And, we have recent proof that health reform is possible to 
achieve. Massachusetts enacted legislation that will insure all 
State residents beginning on July 1. California is in the 
middle of a debate over how, not whether, to insure all of its 
residents. And States like Pennsylvania, Illinois, Vermont, and 
Maine are not far behind.
    These bipartisan, successful State efforts shatter the 
prevailing wisdom in Washington that health care interests, 
protecting the status quo, are uncooperative and 
insurmountable. They belie the belief that the ideological wars 
will wage on forever. They also shed light on what might be the 
pathway from our current system to universal coverage. Romney's 
plan, to a lesser degree, Schwarzenegger's plan, and some of 
the presidential candidates' plans resemble one that my 
colleagues and I proposed in 2005. \7\ It would achieve 
universal coverage by building on what works in the system. 
Medicaid, SCHIP, and possibly Medicare would be extended to 
become gap-free safety nets. Employer-based coverage would be 
supplemented with a new purchasing pool for group health 
insurance. Assistance would be provided to ensure that all 
people could afford coverage. And, all Americans would share 
the responsibility for getting and keeping health coverage, and 
keeping themselves well.
    Covering all Americans is necessary but not sufficient to 
forge a 21st century health system. We need to lay the 
groundwork for improved efficiency and quality. This requires 
comparative effectiveness research to guide our payment and 
quality promotion policies. Health information technology is 
needed to improve system performance. And, new ways of setting 
health policies that lower political interference and raise 
private-sector trust are in dire need. Senator Daschle has been 
exploring an idea to model health system governance on the 
Federal Reserve. \8\ In addition, emphasis must be placed on 
prevention. We would carve prevention out of health insurance 
and create a new Wellness Trust to pay for it in all settings, 
like schools and workplaces. \9\
    Laying this infrastructure and insuring the uninsured will 
require an investment. My colleagues and I propose paying for 
it with a small, targeted value-added tax. Other ideas like an 
employer ``pay or play'' have been proposed as well. 
Irrespective of the financing source, Federal spending probably 
needs to be raised to lower national health costs. Lower costs 
would result from insuring all Americans in a simpler, seamless 
system. We could reduce administrative costs, which on a per-
person basis, are nearly six times higher than in comparable 
nations. \10\ Lower costs would also result from emphasizing 
wellness. Today, nearly 80 percent of our health costs result 
from chronic disease, much of which is preventable. And, 
harnessing information technology could yield system-wide 
savings of over $100 billion per year. \11\ These investments 
are not only beneficial but necessary. We cannot sustain 
Medicare--or reduce our structural budget deficit--if we fail 
to control health care cost growth.
    Consensus on health reform, by definition, is neither 
elegant nor ideal. A feasible plan cannot solve all the system 
problems. It will be called too bold by some and too timid by 
others. But the fact that Republican governors and Democratic 
presidential contenders are circling in on the same approach to 
improving and expanding coverage for all Americans suggests 
that reform is within reach.
    Progress, however, is not possible without leadership. 
Encouraging support for reform among political, business, and 
health care leaders is part of the work of the Center for 
American Progress. We were encouraged by the show of support 
for universal coverage at the presidential forum on health 
reform that we co-sponsored with SEIU in Las Vegas last month. 
\12\ We are making headway in collaboration with the Better 
Health Care Together coalition in cementing support for 
legislation to provide coverage for all, greater value, and 
shared responsibility for managing and financing a new American 
health care system by 2012. \13\
    Unfortunately, it seems clear that insuring all Americans 
is not a priority of the current President. He did not embrace 
the recommendation of the bipartisan Citizens' Health Care 
Working Group to cover all Americans by 2012. \14\ Instead, the 
President proposed replacing the employer tax exclusion with a 
standard tax deduction for health insurance. This would likely 
accelerate the erosion of employer coverage while providing no 
affordable alternative for many. \15\ His advocacy for high-
deductible plans and scaled-back Medicaid benefits could 
replace the problem of un-insurance with under-insurance, as 
people gain coverage that may not afford them access to care. 
\16\ And, his budget would under-fund children's health, 
causing a decline in the number of children insured in public 
programs, according to the Congressional Budget Office. Such 
policies could exacerbate our health system problems.
    This Congress, however, has an opportunity to make inroads 
into reform. This committee may advance and enact legislation 
on health information technology, prevention, and comparative 
effectiveness research. Most importantly, this committee has 
the responsibility to reauthorize the State Children's Health 
Insurance Program. This program has successfully reduced the 
number of uninsured children. It has built good working 
relationships between Federal and State governments, 
Republicans and Democrats, and special interests and advocates. 
Strengthening the program with the same support that created it 
would prove that, where there is a will, there is a way. And it 
would help pave the way for the next Congress, in 2009, to 
begin the legislative process on comprehensive health reform.

    Notes:
    \1\ Hadley J. 2007. ``Insurance Coverage, Medical Care Use, 
and Short-term Health Changes Following an Unintentional Injury 
or the Onset of a Chronic Condition,'' JAMA, 297(10): 1073-84.
    \2\K  Schoen C, Doty MM, Collins SR, Holmgran AL. (June 14, 
2005) ``Insured but Not Protected: How Many Adults are 
Underinsured?'' Health Affairs Web Exclusive, :http//
content.healthaffairs.org/cgi/reprint/hlthaff.w5.289v1.
    \3\ McGlynn EA, Asch SM, Adams J, et al. (June 26, 2003). 
``The Quality of Health Care Delivered to Adults in the United 
States,'' New England Journal of Medicine, vol. 348, no. 26, 
pp. 2635-45.
    \4\ National Health Accounts, National Health Spending, 
2005 available at: http://www.cms.hhs.gov/
NationalHealthExpendData/downloads/highlights.pdf; McKinsey 
Global Institute. (January 2007). Accounting for the Cost of 
Health Care in the United States. New York: McKinsey Global 
Institute. http://www.mckinsey.com/mgi/rp/healthcare/
accounting--cost--healthcare.asp
    \5\ Toner R. and Elder J. (March 2, 2007). ``Most Support 
U.S. Guarantee of Coverage,'' the New York Times.
    \6\ Teixeira R. (March 23, 2007). ``Public Opinion 
Snapshot: Universal Health Care Momentum Swells,'' The Center 
for American Progress, available at: http://
www.americanprogress.org/issues/2007/03/opinion--health--
care.html
    \7\ Lambrew JM, Podesta JD, and Shaw T. (March 23, 2005). 
``Change In Challenging Times: A Plan For Extending And 
Improving Health Coverage,'' Health Affairs Web Exclusive: W5-
119-132.
    \8\ Daschle T. (December 15, 2006). ``Trading Power for 
Progress: A Health Care ``Fed'' to Reform Coverage,'' Center 
for American Progress, available at http://
www.americanprogress.org/issues/2006/12/health--fed.html.
    \9\ Lambrew JM and Podesta JD. (October 17, 2006). ``Health 
Prevention as a Priority: Creating a Wellness Trust,'' 
Washington, DC: washingtonpost.com. http://
www.washingtonpost.com/wp-dyn/content/article/2006/10/16/
AR2006101600880.html. Lambrew JM and Podesta JD. (2006). 
Promoting Prevention and Preempting Costs: A New Wellness Trust 
for the United States. Washington, DC: Center for American 
Progress; Lambrew J.M. (April 2007). A ``Wellness Trust'' to 
Prioritize Disease Prevention. Washington, DC: Brookings 
Institution, The Hamilton Project.
    \10\ McKinsey Global Institute. (January 2007). Accounting 
for the Cost of Health Care in the United States. New York: 
McKinsey Global Institute. http://www.mckinsey.com/mgi/rp/
healthcare/accounting--cost--healthcare.asp
    \11\ Hillestad R, Bigelow J, Bower A, Girosi F, Meili R, 
Scoville R, and Taylor R. (2005). ``Can Electronic Medical 
Record Systems Transform Health Care? Potential Benefits, 
Savings, and Costs,'' Health Affairs24(5): 1103-17.
    \12\ For information on the forum, see: http://
www.americanprogressaction.org/events/healthforum/
    \13\ Freudenheim M. (April 6, 2007). ``New Urgency in 
Debating Health Care,'' The New York Times, available at: 
http://www.nytimes.com/2007/04/06/business/
06schism.html?ex=1177473600&en=679393f4626c26e6&ei=5070
    \14\ For information on the Citizens'' Working Group, see: 
http://www.citizenshealthcare.gov/. The law creating the group 
required the President to respond to its recommendations. This 
response was transmitted by Secretary Leavitt to Speaker Pelosi 
on March 13, 2007.
    \15\ Burman LE, Furman J, Leiserson G, and Williams R. 
(February 15, 2007). ``The President's Proposed Standard 
Deduction for Health Insurance: An Evaluation,'' Tax Policy 
Center, available at: http://www.taxpolicycenter.org/
publications/template.cfm?PubID=411423
                              ----------                              

    Mr. Pallone. Thank you, and thank you all. We will take 
some questions now and I will start by recognizing myself for 5 
minutes.
    I wanted to ask Mr. Knowlton, obviously a State like our 
own has major problems in terms of financing anything new and 
yet you believe and I believe that we are embarked soon on this 
effort to try to achieve universal coverage. So maybe explain 
to us why New Jersey sees the benefit of universal coverage and 
how that outweighs the financial costs that might be involved.
    Mr. Knowlton. Mr. Chairman, I think that you can't afford 
not to do it. I think that what happens is, the cost has been 
escalating in New Jersey, the cost of what we are providing in 
charity care and hospital subsidies is about the same as what 
our actuaries tell us it will cost us to cover everybody 
universally. So we are going to have a concern on how we do a 
transition to a new system and help our hospitals out but by 
and large we are going to be spending about the same amount. We 
are just redirecting how we are spending it. And yet we are 
giving astronomically better care to people and people better 
access to care. You heard the gentleman whose wife died talk 
about what it felt like to be uninsured. We are going to step 
away from that, I think, so I think it will be a good 
investment.
    Mr. Pallone. And in that same regard, the plan you proposed 
creates a new health care market rather than using the 
currently existing market. Why did you design it that way?
    Mr. Knowlton. We wanted to get one large pool and we wanted 
to get the underwriting advantage that we got from the law of 
large numbers. We wanted to stay away from a basic and 
essential plan or a catastrophic plan or a high-deductible 
plan. I am not going to comment on whether that is good for 
people on the commercial market who may choose it but we did 
not want it to be creating windows of uninsurance for people 
that were coming in from the uninsured. In New Jersey, 
hospitals are seeing a larger growing segment of bad debt that 
is coming from high deductibles and from people that aren't 
being reimbursed, so we didn't want to substitute one problem 
for another.
    Mr. Pallone. Thank you.
    I wanted to ask Dr. Lambrew, we have heard about how some 
of the members on the other side have commented on how or some 
of the other witnesses from the previous panel that if you 
expand public programs, Medicare, Medicaid or SCHIP, that that 
might lead to crowd-out, so to speak, and specifically you talk 
about the role that these public programs play and whether they 
are good use of Federal dollars and whether expansions would 
help with the uninsured, whether that is smart and link it to 
the whole crowd-out issue.
    Ms. Lambrew. Well, it is an excellent question and I think 
you all anticipated this question when in 1999 Congress 
authorized a Federal evaluation of the State Children's Health 
Insurance Program. That evaluation found ``The program did not 
lead to widespread substitution of SCHIP for employer coverage, 
even though almost all families enrolling their children had at 
least one working parent.'' A related study found that of those 
working parents, most of them were not in employer-based 
coverage. They were in jobs that did not offer health insurance 
coverage, and in a survey they found that of those recent 
enrollees in SCHIP, 43 percent were uninsured, another 29 
percent were previously on Medicaid whose families earned too 
much income to then stay in that program, and of the 28 percent 
that had private coverage, fully a fourth said their families 
could no longer afford that coverage. So this is not a program, 
according to the Federal evaluation, that is in trouble. But I 
also think it is important to go back to the study that Grace-
Marie Turner talked about. Jonathan Gruber, who is a former 
colleague of mine, wrote a letter in response to some of this 
use of this research saying, ``I am somewhat disappointed to 
see my recent research being used to attack this valuable 
program. We find no evidence of crowd-out associated with SCHIP 
per se.'' He goes on to say that there is always some degree of 
crowd-out in any sort of public program expansion but ``I find 
that the public sector provides much more insurance coverage at 
a much lower cost under SCHIP than these alternatives. Tax 
subsidies mostly operate to buy out the base of insured without 
providing much new coverage.'' So I think we have to be very 
clear about the studies that we are using as we debate this 
program so we design our programs effectively.
    Mr. Pallone. Just a general question, I guess I will ask it 
of you because otherwise it will take all afternoon if I go 
through the whole panel, but we keep having this debate about 
improving or making employer-based coverage more robust versus 
expanding the public program, and I don't have any ideological 
basis, at least I don't think I do in that regard. If I could 
find a way to get all the employers to cover everybody who is 
working and that we wouldn't need as much Federal dollars, that 
would be fine with me. And there have been proposals out there 
like Senator Kerry had a proposal to take catastrophic off the 
table so that employers wouldn't have to pay for catastrophic 
care. How do we juxtapose those two? It would be great to 
expand the employer-based system but I know there are 
limitations. If you just would comment on it.
    Ms. Lambrew. It is a great question and a very difficult 
one. I would potentially argue that if the goal is to solve the 
one problem that we could solve, which is covering the 
uninsured, that I think we have to look at a mix of public and 
private programs. 150 million people are insured through the 
employer-based system today. That is not going to go away 
overnight. People mostly like that coverage. We need to provide 
alternatives. I will be very clear about that. We all need to 
look at pools, look at what Massachusetts has done, look at 
what other people have proposed to find viable alternatives but 
I think a mix of public-private programs is probably the unique 
American solution to this. But I do want to go back to this 
issue of, does the President's proposal, which we have heard 
about a lot today with this tax fairness really get at that and 
because it doesn't actually work on the where people get 
insurance, there is a real risk that it actually is unfair 
because what it would do is, take away a worker's tax subsidy, 
tell that worker that you may get an amount, a standard 
deduction which could be less for a union worker or an older 
worker or people in high-cost areas and then they have no place 
to get insurance. In most States, there is no guarantee issue, 
meaning that you are guaranteed a coverage policy to be offered 
to you, nor a guarantee that that coverage is meaningful and 
affordable. So I actually think it is unfair to think through 
the idea of taking away what we have now and not replacing it 
with something fully developed.
    Mr. Pallone. I have to say that I think one of the mistakes 
that was made in the Clinton days was that the impression was 
being given, even if it wasn't true, that people were going to 
lose what they have and I think whatever we do, we have to make 
sure that if you have good coverage and you like it, that we 
don't reduce it and we don't take it away.
    Thank you. I know I went over, and I am sure my colleagues 
will take note of that.
    I recognize Mr. Deal.
    Mr. Deal. We would never take advantage of you.
    We are going to be dealing with the reauthorization of 
SCHIP, of course, one of the issues that is going to be before 
this subcommittee and full committee. Dr. Knowlton, I 
understood from your testimony that you had 240,000 uninsured 
children in the State of New Jersey. Is that correct?
    Mr. Knowlton. Yes, sir.
    Mr. Deal. The information that I have would indicate that 
over half of those, in other words, 125,000 of those are from 
families that are under 200 percent of poverty. In other words, 
22 percent of all children in your State from families that are 
under 200 percent of poverty are still uninsured.
    Reverend Wiggins, before we expand a program to include 
families of four with incomes of $82,600, which most of us in 
my State don't consider to be the poor of the poor, wouldn't it 
be reasonable to require that we get at least 90 percent of 
those that are in families below 200 percent of poverty, get 
them covered first before we start spending this money on the 
richer families? Wouldn't that seem reasonable?
    Mr. Wiggins. I think processes is key and eventually 
everybody should be included. I think it is just a matter of 
just really determining where we are in this process. If the 
lower number is not being covered under 200 percent of poverty 
level, we need to definitely include them and that may be the 
first step. It may be backwards possibly now but everybody 
should be included and that is our aim. That is the moral 
objective.
    Mr. Deal. But I know your program does a great deal of 
outreach and trying to get people covered. But the program was 
initially established to insure children in families under 200 
percent of poverty.
    Mr. Wiggins. That is correct.
    Mr. Deal. And yet in your State that goes up to 350 percent 
of poverty, you still have 22 percent of those children that 
are below 200 percent of poverty are uninsured. Shouldn't we 
put more emphasis on increasing the number of those children 
that are covered first?
    Mr. Wiggins. I would agree.
    Mr. Deal. OK. I am not going to take advantage of the 
chairman's time but I do have a number of other questions that 
I think we need to try to explore, and the first is, Dr. 
Lambrew, I agree with you that wellness has to be a component 
of this. I am going to look into more about your wellness 
trust, I think that you advocate. One of the things that I have 
advocated is that as we look at SCHIP, if we are looking at 
trying to get that increase on the number of children under 200 
percent of poverty enrolled or whatever the State establishes 
as its percent of poverty, one of the key places to do that is 
to find the children where they are and that is schools, and I 
notice your testimony alludes to you think that schools are a 
component in this wellness factor.
    Would anyone think it was improper for the reauthorization 
of SCHIP to allow States to use a portion of their SCHIP 
funding to establish things like a school nurse program? I 
personally believe that that is where you are going to find the 
sick child. That is where you are more than likely to have 
somebody to call that parent and say your child needs to see 
somebody else and if they say, well, we don't have any 
insurance, to find out why they don't have any insurance. Does 
anybody think that would not be a good flexible option in 
SCHIP?
    Ms. Lambrew. I would just say that States can do this today 
with what is called their 10 percent funds. Up to 10 percent of 
their allotments are allowed to be used for direct services, 
administrative costs, et cetera.
    Mr. Deal. But I don't know of any that are doing that, do 
you?
    Ms. Lambrew. It is a question I don't know offhand but I 
would say that I think it is something in the reauthorization 
process, emphasizing the use of the 10 percent funds for 
wellness, obesity reduction, which is a huge challenge that we 
must address would be some way to do this as well as linking 
health insurance to school lunch programs and some of the free 
and reduced food programs that we have at schools. That would 
be a great way to find some of those children.
    Mr. Deal. OK. I realize that this is a very complex problem 
and I think all of you have acknowledged that it is not one 
simple solution to any of it.
    Dr. Moffitt, I thought it was very interesting in your 
testimony that looking at who the uninsured really are, that 
most of them are people who are sort of in and out of jobs.
    Mr. Moffitt. Overwhelmingly.
    Mr. Deal. They lose, I believe you said only 12 percent 
were consistently there.
    Mr. Moffitt. Only 12 percent. That was the finding of the 
study, and I will tell you, Congressman, it is the best single 
thing in the English language I have ever read on the uninsured 
because what Graefe and Short did is take that data and look at 
that in great detail and they found that basically the problem 
is people losing coverage.
    Mr. Deal. And we know that a good portion of the uninsured 
are in that 17- or 18- to 24- or 25-year bracket, presumably 
the largest portion of the uninsured and they presumably are 
the healthiest.
    Mr. Moffitt. Yes, they are.
    Mr. Deal. And I don't know that we can get an answer but I 
guess the next question I have never seen answered is, what is 
the health status of the uninsured? If a large portion of them 
are these younger healthier people but they are uninsured, how 
does the overall uninsured picture stack up as to where they 
fit in the overall climate of health in the country?
    Mr. Moffitt. I think you have answered your own question. 
We know that health status and health conditions vary with age. 
That is why, for example, you have insurance rating that rates 
differently between people who are higher in age than lower in 
age. But the truth is that most young people who are uninsured 
are overwhelmingly healthy. The number of people who are 
uninsurable, that is to say people who are very, very ill, 
people who are uninsurable technically is actually a relatively 
small proportion of that population. Now, we have to design 
programs that are going to deal directly with them and I am 
very much in favor of doing precisely that. But the burden of 
my point was, is that the current employment-based health 
insurance arrangements we have today are not compatible with a 
21st century economy where anywhere between one in three and 
one in four people are changing jobs every year. We have got to 
have a situation where people have stability in their health 
insurance coverage. If they have stability in their health 
insurance coverage, they are going to have continuity of care, 
and if you have continuity of care, you are going to have 
better outcomes.
    Mr. Pallone. Thank you.
    Dr. Burgess.
    Mr. Burgess. And Dr. Moffitt, I would just add to that last 
thought that if you have continuity of your health insurance, 
the administrative burden borne by the individual trying to 
figure out what is the co-pay, what forms do I have to fill 
out, when does this trigger this event, all of that is known to 
the individual and they are less likely to be lost in the 
morass of regulations, which is one of the things we heard 
about at the last panel.
    Mr. Moffitt. That is correct.
    Mr. Burgess. I want to talk to you a little bit about the 
Massachusetts plan. When I first read about that I was 
certainly prepared not to like it and someone came from 
Massachusetts and talked to me about it and I thought well, 
maybe it doesn't sound so bad, don't tell anyone back in Texas 
I said that, and then Governor Romney came and spoke to a group 
of 14 or 15 of us here when he was still Governor and on some 
levels it did make some sense. A lot of things about 
Massachusetts you cannot extrapolate to the rest of the 
country.
    Mr. Moffitt. No, you cannot.
    Mr. Burgess. And in my home State of Texas, Massachusetts 
doesn't even make up a decent-sized county, but I really like 
the concept of coupling an HSA which is bought with after-tax 
dollars and through that insurance connector that you talk 
about, it is suddenly available with pre-tax dollars. That 
seems to me to be a powerful step that you have taken in 
Massachusetts or that you have outlined for Massachusetts and 
one that I would like other States to emulate. I took that 
concept to my State senator, who now is working on the Lone 
Star connector, and while there will be no plan that mirrors 
Massachusetts in Texas any time soon, that concept is one that 
I think could extend the availability, the reach and the grasp 
of the health insurance that is available in an HSA to 
particularly that population that you referenced, the 17- to 
24-year-old that is generally bulletproof; why do I have to 
spend all this money on this product, that amount of money 
could in fact fill up the SUV and the bass boat for the weekend 
and I could have a lot better time. But if there is a way to 
get it to them and get into their consciousness that this is a 
good investment, I think many more people will take it. It is 
interesting to me too that the flexibility that we provided in 
the Deficit Reduction Act of 2005 for all of the arrows that we 
have caught over that bill, the flexibility provided to States 
to allow them to begin to experiment with these things--again 
what is applicable and viable in Massachusetts may not be 
reasonable in Texas but we have got Massachusetts with Governor 
Romney, Vermont with a Republican Governor, California with a 
Republican Governor, and Texas is looking into doing some 
things with a Republican Governor. Of course, Jeb Bush before 
he left office was experimenting with some things. These are 
positive steps that are being taken by the States as a result 
of the flexibility that we built in for them in the Deficit 
Reduction Act. We passed that in 2005. is there anything you 
would like to add to that?
    Mr. Moffitt. No, I think that is exactly my point. You 
mentioned the Deficit Reduction Act and the waiver authority by 
the administration. Right now there are about 18 States that 
are experimenting with significant Medicaid reform. That is 
wonderful. One of the points that I tried to convey in my 
formal statement to the committee is that we are the heirs of 
political genius. The Founding Fathers designed a Federal 
system to enable a diversity of policy options. There is 
profound disagreement in Congress over which we should go in 
health care policies.
    Mr. Burgess. As you have seen today.
    Mr. Moffitt. Certainly. There is profound disagreement at 
this table, but nevertheless, the point is that we have a 
tremendous opportunity to promote experimentation at the State 
level, we can learn from that. We will find out what works in 
Massachusetts and what doesn't in California or any other 
State. But the point is, we will have a chance to see on the 
ground how these attempts to change the financing and delivery 
of health care are actually working out in improving outcomes 
and coverage.
    Mr. Burgess. Thank you.
    Dr. Antos, if I could just briefly, you talked about 
insurance market reforms. I am not entirely in agreement with 
you about the President's plan though I am grateful that he 
brought it up but in so many ways, and I don't want to be 
heretical when I say this, in so many ways it seems like this 
is a plan for insurance companies and not for patients. That 
is, insurance companies are going to sell more insurance as a 
consequence of perhaps the premium-supported tax subsidy at the 
lower end. Do we need to be concerned about that? Do we need to 
be concerned that this is a policy that seems to be directed 
more toward an insurance company than it does towards taking 
care of patients?
    Mr. Antos. I am not sure I agree with your characterization 
but isn't it better for insurance companies to sell insurance 
to people who don't have coverage now than for those people not 
to have coverage?
    Mr. Burgess. Well, obviously that is the thrust of this 
committee and hearing today and I referenced that in my opening 
statement. I wonder if we are taking the wrong approach to 
this. I like the concept of transparency. If we are going to do 
a consumer-directed health plan, transparency is key. Again, 
Texas has done I think a great thing by putting 
TXpricepoint.org up on the Internet. Anyone can go there. In my 
home county, in fact there is a significant difference between 
getting your hip fixed at one hospital versus another. The 
information now that is lacking is the information about 
doctors and again, I will probably get some pushback from this 
from my friends in the physician community but that information 
is going to be important for patients to have as well if we are 
truly going to develop a plan that is reasonable for people. Is 
there a point at which the health care premium, is there a 
percentage of the health care premium that should be returned 
for patient care, for paying for health care or is that a 
number that just is simply unknown?
    Mr. Antos. The so-called loss ratio is a magical number in 
politics but it isn't a very magical number in health 
insurance. There is an excellent article by Jamie Robinson at 
the University of California at Berkeley who explains all this. 
I will be delighted to send that to the committee.
    Mr. Burgess. Please.
    Mr. Antos. And he makes the point that, a fundamental point 
about life in this country, accountants rule us, and so 
depending on how you organize your business structure, you can 
make the administrative costs look very high or very low. The 
fact is that at least some of the administrative costs are 
absolutely necessary, if we are going to have the kind of 
insurance that we are talking about, third-party payment, if we 
are going to have somebody else pay the bills, then that 
somebody else has a fiduciary responsibility to us to make sure 
that the bills are appropriate and to negotiate reasonable 
prices and so on. That costs money. We wouldn't have the kind 
of take-up of generic drugs in this country--we are up over 60 
percent now--if it weren't for the fact that somebody was 
pushing us to do it. So it is not all waste. Another point that 
I think needs to be made is that while insurance companies can 
certainly become more efficient, they can do a better job of 
embracing the kind of health information technology that is 
appropriate at that end to make it easier for you and me to use 
our health insurance and to get better information and do the 
right thing in the first place rather than to go from doctor to 
doctor and make the wrong decisions consecutively. There is 
work being done in that area. It is slow but then everything 
else is in the health sector.
    Mr. Burgess. Isn't that the truth?
    Mr. Pallone. We are at 3 minutes over almost so----
    Mr. Burgess. Dr. Lambrew, can I just ask you, you said an 
increase in Federal spending, do you have an idea as to what 
that----
    Mr. Pallone. Doctor, please. We have got to move on. It is 
3 minutes.
    Mr. Burgess. Let her answer the question. Do you have an 
idea----
    Mr. Pallone. I have to stop. Listen, thank you all. I 
really appreciate it. I think this was--no, I know, but it is 3 
minutes. We have to stop. Thank you all really. You gave us 
some real insight into what we have to do and particularly to 
what some of the States are doing. So I want to thank you all. 
We have a process whereby members can submit additional 
questions for the record and then you would answer them, and 
those will be submitted within the next 10 days.
    And without objection, this meeting of the subcommittee is 
adjourned.
    [Whereupon, at 1:25 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

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                Statement of the American Cancer Society

    Dear Chairman Dingell, Rep. Barton, Chairman Pallone and 
Rep. Deal:

    On behalf of the American Cancer Society, we welcome your 
invitation to participate in the Energy and Commerce 
Committee's Health Subcommittee hearing entitled ``Living 
Without Health Insurance: Why Every American Needs Coverage.''
    The testimony of Mr. Gary Rotzler speaks to the experience 
of millions of American families who are either seriously 
underinsured or who have no health insurance at all. In the 
case of Mr. Rotzler, his beloved wife Betsy died prematurely 
because she did not have access to preventive health services 
that might have revealed her breast cancer at an earlier, 
perhaps treatable stage. We know that the research is clear--
people who lack insurance delay going to the doctor until they 
are sick and then they have worse outcomes.
    While some Americans have no insurance, others have varying 
levels of inadequate coverage with little real understanding of 
how financially vulnerable they may be. Over the years, the 
Society has worked to provide information, comfort and 
assistance to people who have learned they have cancer. Our 
Health Insurance Assistance Project (HIAP) operates 24 hours a 
day in 26 States providing patients information about the 
disease, medicines, available clinical trials, doctors, and 
insurance. Incidental to this process, we have captured the 
stories of thousands of people for whom the health care system 
has failed in some serious way.
    Out of these real-life experiences, we have developed four 
essential principles that define meaningful health insurance as 
part of a larger effort to elevate the importance of access to 
care to the country's ability to defeat deadly diseases like 
cancer. The principles state that health insurance must be:

     Adequate--with timely access and coverage offering 
the full range of evidence-based healthcare services, including 
prevention and early detention, and supportive needs, including 
acute treatment with access to clinical trials, chronic disease 
management and palliative care.
     Affordable--with total costs not excessive and 
based on the patient's ability to pay.
     Available--with coverage available regardless of 
health status or claims history, and that it be renewable and 
continuous.
     Administratively simple--with benefits, financial 
liability, billing procedures, and processes for filing claims 
that are easy to understand, and so consumers are able to 
compare plans when making choices about health insurance.
     These principles highlight major problems in the 
health care system--problems which continue to impede progress 
against cancer and other major diseases. As you move forward 
with your examination of health insurance, we would like to 
work with you to incorporate and operationalize these basic 
principles into health insurance reform legislation. Thank you 
again for inviting the American Cancer Society to testify 
today, and we look forward to working with you.

    Sincerely,

    Daniel E. Smith
    National Vice President,
    Federal and State Government Relations

    Wendy K.D. Selig,
    Vice President, Legislative Affairs

  American Cancer Society Statement of Principles on What Constitutes 
                      Meaningful Health Insurance

    The American Cancer Society is the nationwide community 
based voluntary health organization dedicated to eliminating 
cancer as a major health problem by preventing cancer, saving 
lives and diminishing suffering from cancer, through research, 
education, advocacy, and service. The American Cancer Society 
has set ambitious goals for significantly reducing the rates of 
cancer incidence and mortality along with measurably improving 
the quality of life for all people with cancer.
    ``The ultimate conquest of cancer in America is as much a 
public policy aspiration as it is a scientific and medical 
challenge. There are many stakeholders in the cancer fight 
actively doing their part to defeat this disease, but it cannot 
be done without the sustained leadership and strong commitment 
of government. We are poised to make gains so substantial that 
we now can talk about a time when cancer is no longer a killer 
and is instead just a chronic condition, or even better, a 
disease for which a cure is a realistic, frequently achieved 
goal. Our Nation's current health care system is not up to this 
challenge. If we are to ultimately conquer cancer our system 
must ensure that all Americans have access to high quality 
care.'' \1\
---------------------------------------------------------------------------
    1 Dr. John Seffrin, American Cancer Society CEO, Statement to ACS 
Board of Directors during January 2006 meeting.
---------------------------------------------------------------------------
    Improving the Nation's health care system requires a new 
partnership for the Nation that will facilitate the coverage 
and delivery of quality evidence-based cancer care and work to 
eliminate disparities and inequities in the current system. 
This will require a commitment from the private, public, and 
not-for-profit sectors and individuals. Stakeholders in the 
health care system, from doctors, hospitals, and insurers, to 
employers, and not-for-profit organizations, all have critical 
roles to play. All Americans have an obligation, as well, to 
take responsibility for their own health to the extent 
possible, by pursuing healthy lifestyles, and educating 
themselves about their health needs, including ways to prevent 
and detect cancer.
    A critical aspect of improving the health care system is to 
define and ensure access to meaningful public or private 
insurance. This includes adequate financing. Our Nation has had 
much conversation on the insured and uninsured and less on what 
it means to be meaningfully insured. Below is the statement of 
the American Cancer Society on what constitutes meaningful 
health insurance.

                         Statement of Principles

    It is a fundamental principle of the American Cancer 
Society that everyone should have meaningful public or private 
health insurance.
     Meaningful health insurance is adequate, affordable, 
available and administratively simple.
    Adequate health insurance means:

     timely access and coverage of the complete 
continuum of quality, evidence-based healthcare services (i.e., 
rational, science-based, patient-centered), including 
prevention and early detection, diagnosis, and treatment
     supportive services should be available as 
appropriate, including access to clinical trials, chronic 
disease management, and palliative care
     coverage with sufficient annual and lifetime 
benefits to cover catastrophic expenditures

    Available health insurance means:

     coverage will be available regardless of health 
status, or claims history
     policies are renewable
     coverage is continuous

     Affordable health insurance means:

     costs, including premiums, deductibles, co-pays, 
and total out-of-pocket expenditure limits, are not excessive 
and are based on the family's or individual's ability to pay
     premium pricing is not based on health status or 
claims experience

    Administratively simple health insurance means:

     clear, up-front explanations of covered benefits, 
financial liability, billing procedures, and processes for 
filing claims, grievances, and appeals are easily understood 
and timely, and required forms are readily comprehensible by 
consumers, providers and regulators
     consumers can reasonably compare and contrast the 
different health insurance plans available and can navigate 
health insurance transactions and transitions
                              ----------                              


                  Testimony of Sister Carol Keehan, DC

    On behalf of the Catholic Health Association of the United 
States (CHA), the national leadership organization of Catholic 
health care providers, I would like to thank Chairman Pallone 
for this opportunity to provide testimony on the problems 
associated with the approximately 46 million \1\
---------------------------------------------------------------------------
    1 U.S. Census Bureau figures originally estimated the number of 
uninsured in 2005 to be 46.6 million, but have recently been revised to 
44.8 million (http://www.census.gov/Press-Release/www/releases/
archives/health--care--insurance/009789.html) uninsured persons in the 
United States. We in the Catholic health ministry believe that the 
number of uninsured in our Nation represents both a health crisis and a 
moral crisis on an unprecedented scale, and I would like to begin by 
thanking the subcommittee for taking the time to examine this urgent 
issue.
---------------------------------------------------------------------------
    CHA and its members are longtime advocates on behalf of the 
uninsured. In our most recent history, particularly following 
the failed attempt in the early 1990's to address this problem, 
CHA has made covering the uninsured a top advocacy and public 
policy priority for the Catholic health ministry year after 
year. We do so for many reasons. As health care providers, we 
know that access to affordable care is vital to the 
individual's health and to the overall health of our Nation 
collectively. We also see the tremendous problems in our 
facilities associated with the lack of health insurance--the 
time and resources that are spent in providing acute care when 
regular and preventive care would have been more suitable, and 
the desperate situations of those lacking coverage that force 
them to turn to their local hospital after the rest of our 
health care system has failed them. Along with other health 
care provider groups, we have made Congress aware of these 
problems in the past and will continue to do so as we seek a 
solution to them.
    But above all else, the Catholic health ministry believes 
that in a nation so richly blessed as ours it is simply immoral 
that anyone should go without access to adequate care. This 
central belief--that health care is not a privilege afforded to 
the wealthy but a basic human right for all--is at the heart of 
our ministry's history and mission. Long before any Government 
regulations were established concerning the care given in 
hospitals, our ministry's facilities welcomed all those who 
sought their services. Catholic hospitals and clinics, largely 
run by religious congregations, tended the poor and sick who 
had no where else to turn. We believe that our advocacy and 
service on behalf of the Nation's uninsured continues that very 
tradition. Many of our facilities have responded to current 
health care needs through such measures as establishing health 
clinics in their communities to provide care for low-income 
families or providing other innovative services to promote good 
health among the uninsured. Over the past five years, we have 
seen a 16.8 percent increase in the number of health clinics 
sponsored and supported by Catholic hospitals in response to 
the growing number of uninsured and underinsured. But as these 
needs continue to grow year after year it is becoming 
increasingly difficult for hospitals and clinics to fill in the 
gaps.
    Simply put, our Nation cannot and should not continue to 
suffer the ill effects of having members of our society, so 
many of whom are working hard to support their families, go 
without health insurance. Unfortunately, their numbers continue 
to rise. From 2000 to 2005 the number of uninsured rose by 
nearly 7 million. During this time, from 2001 to 2005, Catholic 
hospitals also registered this increase in the number of 
uninsured through a rise in the provision of uncompensated 
care. The average uncompensated care cost to Catholic hospitals 
increased by 47 percent during this period, and continues to 
grow. \2\
---------------------------------------------------------------------------
    2 AHA Survey of Hospitals, 2001-2005 (2005 is the latest year of 
data available from this study)
---------------------------------------------------------------------------
     We also know that many of the uninsured do not seek or 
delay seeking care. According to the Kaiser Family Foundation, 
over three times (47 percent) as many of the uninsured report 
postponing care due to cost as those with insurance (15 
percent), and a much higher percentage of the uninsured (35 
percent versus 9 percent) report situations in which they 
needed care but did not receive it. \3\
---------------------------------------------------------------------------
    3 Kaiser 2003 Health Insurance Survey, http://www.kff.org/
uninsured/upload/The-Uninsured-and-Their-Access-to-Health-Care-Oct-
2004.pdf
---------------------------------------------------------------------------
    Clearly, even though our Nation's hospitals continue to 
provide care to so many who have no other options, the number 
of those who do not seek care at all or only seek care at its 
costliest point has cast a pall of inefficiency over the entire 
U.S. health care system. This situation cries out for change.
    But the problem of the uninsured goes well beyond being an 
issue that should concern only the Nation's hospitals. Can 
anyone imagine what the consequences would be if we were to 
report that approximately 15 percent of the entire population 
was being denied access to such necessities as food or clean 
water? Or even to a basic education? Why should we think the 
number of uninsured is any more acceptable, particularly given 
that nine million of these are children? This problem does not 
represent simply a financial burden on the health care system 
or a challenge for U.S. policymakers--it is a question of 
justice that highlights our failure to promote and protect the 
dignity and well-being of every single person. As long as any 
individual, particularly the poorest and most vulnerable among 
us, goes without access to adequate care we are diminished as a 
nation and as a moral society.
    Thankfully, Americans increasingly seem to view this 
situation as unacceptable and are beginning to demand a 
solution. In a public opinion survey done for CHA last year, 
the percentage of respondents ranking ``providing affordable 
quality health care''/ as a priority for the Government was 
greater than ``creating jobs'' and ``reducing Government 
spending and taxes'' combined, and only equaled by ``ensuring 
homeland security.'' \4\
---------------------------------------------------------------------------
    4 Public Opinion Strategies, National Survey, May 9-13, 2006
---------------------------------------------------------------------------
     As the demand for a solution continues to grow, we also 
recognize that there are many beneficial interim steps that 
Congress and the Administration could take to help alleviate 
the growing problem of the uninsured, particularly in regards 
to the scandal of having so many uninsured children in the U.S. 
CHA continues to work with members of Congress on both sides of 
the aisle to ensure that this year's reauthorization of the 
State Children's Health Insurance Program contains at a minimum 
adequate funding to help cover the children currently eligible 
for this program but not yet enrolled. We are grateful for the 
efforts of Chairman Dingell on this issue and for his 
introduction of the Children's Health First Act to help 
accomplish this. Ensuring that none of our children has to go 
without access to care is a vital first step in helping to 
cover the uninsured, and hopefully will give all who care 
deeply about this issue the necessary momentum to keep moving 
forward.
    As this subcommittee knows, when it comes to considering 
how best to find a solution to provide health coverage for 
everyone, there has been no lack of widely varying ideas to 
accomplish this. People of good faith from many different 
philosophical and political perspectives have proposed ideas 
relying on Government, individual and free market solutions 
over the past several years. I believe this is a positive sign, 
showing concern about the uninsured across the political 
spectrum and inviting participation from diverse groups to 
tackle the problem. At CHA we have welcomed ideas from many 
different perspectives to help cover the uninsured, and we 
continue to welcome them. We also have identified some critical 
characteristics for a proposed solution that we hope will be 
beneficial to those seeking action. We believe that any 
proposal to cover the uninsured should:

      Make health care accessible and affordable for 
everyone, regardless of employment status, one's age, financial 
means, or health status;
      Provide basic health benefits to everyone 
including services across the life span of care--preventive, 
primary, acute, long term, and end of life;
      Provide for the poor and vulnerable with special 
attention to the particular needs of low-income families and 
individuals, immigrants, the elderly and individuals with 
disabilities;
      Share responsibility for financing among 
Government, employers, and individuals;
      Encourage effective participation in decision 
making by providing patients and their families with 
information about health care providers, plans, and procedures, 
based on their quality and efficacy.

    Legislative solutions must embody these characteristics in 
order to ensure access to care for everyone. Any legislation 
that does not will only serve as a stopgap measure and push the 
need for a comprehensive solution even further down the road.
    Let me close by once again urging this subcommittee, and 
indeed all in Congress and the administration, to keep pushing 
for a solution to provide health coverage for everyone in our 
Nation. Looking back through our history there are so many 
outstanding examples of seemingly insurmountable problems that 
we collectively have faced and overcome--many would say that 
this is in fact a defining characteristic of our country and 
its people. Given that history, surely we can move ahead to 
solve the problem of the uninsured despite how difficult this 
situation seems. It is a problem that has gone on for far too 
long, and one that Americans from all walks of life and 
political backgrounds agree is simply unacceptable. This is the 
moment to take action, and the Catholic health ministry stands 
ready to assist all those who seek a solution.
    Thank you.
                              ----------                              

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              Question from Mr. Deal to Grace-Marie Turner

    Chairman Frank Pallone asked witness Dr. Jeanne Lambrew 
about studies which show that expansion of public health 
programs has an effect on crowding out private health 
insurance. Dr. Lambrew described a Federal study which she said 
shows that crowd out is not a problem, and she indicated that 
Jonathan Gruber's research does not indicate significant 
crowding out, as your testimony reported. Could you please help 
us to reconcile her comments with your testimony on the 
important issue of crowd out?

    In a paper published by the National Bureau of Economic 
Research in January 2007, MIT Professor Jonathan Gruber and 
Cornell Professor Kosali Simon state that ``crowd-out remains a 
pervasive phenomenon for recent public insurance expansions. 
Our central estimates suggest crowd-out of about 60 percent; 
that is, the number of privately insured falls by about 60 
percent as much as the number of publicly insured rises.'' 
Gruber and Simon also find that that crowd-out is a ``family 
phenomenon.'' They add that ``Crowd-out estimates are much 
larger when family-wide effects of eligibility are accounted 
for, incorporating a spillover onto other family members of 
eligibility expansions.''
    Jonathan Gruber and Kosali Simon, ``Crowd-out 10 years 
later: Have recent public insurance expansions crowded out 
private health insurance?'' National Bureau of Economic 
Research Working Paper 12858. January 2007. http://
www.nber.org/digest/aug07/w12858.html
    In analyzing this data, Linda Gorman of the Independence 
Institute in Boulder, Colorado, observes that Gruber and Simon 
extend the literature on crowd-out by addressing family as well 
as individual eligibility and by using a variety of techniques 
to create robust estimates of crowd-out for the eligibility 
expansions that occurred between 1996 and 2002.
    She says that Gruber and Simon find that there is 
considerable crowd-out associated with these recent expansions 
of public insurance and that anti-crowd-out provisions, such as 
waiting periods and cost-sharing, have increased crowd-out.

     The estimates use the 1996 and 2001 panels of the Survey 
of Income and Program Participation (SIPP). They are based on 
405,389 observations and include information on family and 
individual characteristics, individual and family public 
program eligibility by State, employment, and data on State 
waiting periods and cost sharing. Simple tabulations of changes 
in enrollment by income group suggest that crowd-out ranges 
from 47 to 92 percent. Estimates using regression analysis 
suggest that when the dependent variable is individual 
coverage, crowd-out is modest, from 24 to 37 percent. When a 
measure of family eligibility is substituted for individual 
eligibility, crowd-out is more substantial, ranging from 61 to 
68 percent. Adding additional statistical controls to account 
for differences in State insurance trends increases the 
estimate of crowd-out to 78 percent to 81 percent.''

    Source: Linda Gorman, ``Public Insurance Expansions Crowd 
Out Private Health Insurancee,'' NBER Digest, August 2007; 
based upon: Jonathan Gruber and Kosali Simon, ``Crowd-Out Ten 
Years Later: Have Recent Public Insurance Expansions Crowded 
Out Private Health Insurance?'' National Bureau of Economic 
Research, Working Paper No. 12858, January 2007. http://
nber.org/digest/aug07/w12858.html 
    In a comprehensive study on SCHIP published in May 2007, 
the Congressional Budget Office says it is difficult to 
authoritatively determine crowd out of private coverage. But it 
concludes: ``On the basis of a review of the available studies, 
CBO concludes that the reduction in private coverage among 
children is most probably between a quarter and a half of the 
increase in public coverage resulting from SCHIP. That is, for 
every 100 children who gain coverage as a result of SCHIP, 
there is a corresponding reduction in private coverage of 
between 25 and 50 children.'' The study says that crowd out is 
most likely to take place among children whose parents have 
higher incomes and who are more likely to already have private 
coverage--the very populations that the Congress is targeting 
for its SCHIP expansion.
    ``According to CBO's analysis of data from the Current 
Population Survey, 50 percent of children in families with 
income between 100 percent and 200 percent of the poverty level 
had private coverage in 2005. The rate of private coverage rose 
to 77 percent among children between 200 percent and 300 
percent of the poverty level, 89 percent among those between 
300 percent and 400 percent of the poverty level, and 95 
percent among those over 400 percent of the poverty level.''
    The State Children's Health Insurance Program, 
Congressional Budget Office, May 2007. http://www.cbo.gov/
ftpdocs/80xx/doc8092/05-10-SCHIP.pdf
    Therefore, I believe the literature is clear, especially in 
light of the CBO study published after the committee's hearing, 
that crowd-out is a significant problem, especially with the 
expansion populations targeted in the SCHIP legislation passed 
by the House of Representatives on August 1, 2007.
                              ----------                              


              Question from Mr. Burgess to Jeanne Lambrew

     In your testimony you said that $150 billion increase in 
Federal spending would cover the uninsured, and that you would 
propose covering this cost with a VAT tax. How accurate is this 
$150 billion estimate, and how would you structure the VAT?

    The details of the proposal will determine the Federal cost 
to cover the uninsured. In an article in Health Affairs in 
2005, my co-authors and I estimated that, depending on the 
nature of the financial assistance, the annual Federal cost of 
covering all Americans could range from $100 to $160 billion 
(see Lambrew JM, Podesta JD, and Shaw T. (2005). ``Change in 
Challenging Times: A Plan for Extending and Improving 
Coverage,'' Health Affairs, W5-119-132). We based this range on 
estimates of a set of health proposals done for the Robert Wood 
Johnson by the Lewin Group, in addition to conversations with 
other cost estimators. Coverage for all could be achieved for 
less, or could cost more, depending on the policy. In my 
testimony, I used $150 billion as an illustration of the high 
end of this range.
    There is a degree of uncertainty in any estimates, by 
definition. Health care cost projections must take into account 
future changes in coverage, technology, inflation, and other 
factors that are difficult to predict. In addition, how people, 
firms, and providers will react to a reformed health system is 
unclear, since we have little past experience in the U.S. on 
which to draw. It is not always the case that projections are 
too low; for example, both SCHIP and the Medicare drug benefit 
cost significantly less than the Congressional Budget Office 
predicted in their initial years of operation.
    To the extent that policy makers are uncomfortable with 
this uncertainty, they can build in policy mechanisms to 
address it. For example, policy makers in Massachusetts allow a 
public-private Board to modify key aspects of the plan like the 
cost sharing and financial assistance schedule. This allows 
them to calibrate the plan design, without returning to the 
legislature, to meet budget constraints.
    The VAT is one of many options for financing health reform. 
I have supported this option because it is broad-based and 
ensures shared responsibility: everyone both pays and benefits 
under health reform financed in this way. It is also consistent 
with how our competitor nations finance their health programs. 
To ensure that it is progressive, its revenue should be used 
for income-related financial assistance and certain exemptions 
should be included (e.g., small businesses, food, education, 
religion, and health care). With such exemptions, based on 
other research, a VAT of 3 to 4 percent should be sufficient to 
finance health reform.
                              ----------                              


             Question from Mr. Burgess to Hon. Tom Daschle

    In your testimony, you mention the important protections 
that ERISA provides. Could you share with the subcommittee some 
of the concerns you see that State regulation poses to 
employers' efforts to provide health care to their employees 
nationwide?

    The Employment Retirement Income Security Act (ERISA) has, 
among other provisions, provided firms with the option of self-
insuring for health benefits. This option has been taken by a 
number of large employers to use their economies of scale to 
achieve better results in providing high-quality, affordable 
health care to workers than commercial insurers could. At the 
same time, ERISA has exempted health coverage through these 
firms from State consumer protection and health reform 
policies. This has posed barriers to some States that have 
aimed to enact legislation to reform their systems. As such, 
there are advantages and disadvantages of ERISA from the 
vantage point of health policy. But one thing is certain: 
national health reform is needed, and in that context, ERISA 
along with other laws that affect health benefits will likely 
be re-examined, modified, and/or overhauled.
                              ----------                              


             Question from Mr. Burgess to Michael K. Smith

    In your testimony, you mention the important protections 
that the Employment Retirement Income Security Act provides. 
Could you share with the subcommittee some of the concerns you 
see that State regulation poses to employers' efforts to 
provide health care to their employees nationwide?

    It appears that my testimony about the Employment 
Retirement Income Security Act (ERISA) may have been unclear or 
was misunderstood. As you know, ERISA was implemented in 1974 
to regulate private sector pension programs, including health 
coverage, and it supercedes or preempts any State laws that 
relate to employee benefit plans. While the initial objective 
of ERISA--to encourage employers to sponsor plans and not be 
subject to multiple, varying State laws--was good, this 
preemption is now hindering States' goal to provide health 
coverage to all residents. For example, ERISA prohibits States 
from requiring that employers provide information to the State 
about their health benefit plans. Many States are trying to 
assure that all residents have comprehensive and/or affordable 
coverage, but cannot develop strategies, proposals or cost 
estimates without information from employers about their 
benefit structures. These strategies can take multiple forms, 
including assisting employers with affordability of their 
coverage plans or assisting employees to purchase employer 
offerings. For example, Vermont and other States are offering 
premium assistance to low income residents to purchase 
employer-based coverage, but ERISA prohibits States from 
requiring that employers participate or share information about 
their benefit plans with the State to facilitate implementation 
of these premium assistance programs. Finally, ERISA's 
preemption provisions are somewhat vague, creating doubt about 
what States can and cannot do with regard to requiring 
employers to help pay for broad-based financing to expand 
health care coverage for State residents.
    Hopefully, this has adequately clarified the intent of my 
remarks about ERISA.

                                 
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