[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]





                   HEALTH REFORM IN THE 21ST CENTURY:
                 PROPOSALS TO REFORM THE HEALTH SYSTEM

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

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 24, 2009

                               __________

                           Serial No. 111-26

                               __________

         Printed for the use of the Committee on Ways and Means









                   HEALTH REFORM IN THE 21ST CENTURY:
                 PROPOSALS TO REFORM THE HEALTH SYSTEM

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

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 24, 2009

                               __________

                           Serial No. 111-26

                               __________

         Printed for the use of the Committee on Ways and Means


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                      COMMITTEE ON WAYS AND MEANS

                 CHARLES B. RANGEL, New York, Chairman

FORTNEY PETE STARK, California       DAVE CAMP, Michigan
SANDER M. LEVIN, Michigan            WALLY HERGER, California
JIM MCDERMOTT, Washington            SAM JOHNSON, Texas
JOHN LEWIS, Georgia                  KEVIN BRADY, Texas
RICHARD E. NEAL, Massachusetts       PAUL RYAN, Wisconsin
JOHN S. TANNER, Tennessee            ERIC CANTOR, Virginia
XAVIER BECERRA, California           JOHN LINDER, Georgia
LLOYD DOGGETT, Texas                 DEVIN NUNES, California
EARL POMEROY, North Dakota           PATRICK J. TIBERI, Ohio
MIKE THOMPSON, California            GINNY BROWN-WAITE, Florida
JOHN B. LARSON, Connecticut          GEOFF DAVIS, Kentucky
EARL BLUMENAUER, Oregon              DAVID G. REICHERT, Washington
RON KIND, Wisconsin                  CHARLES W. BOUSTANY, JR., 
BILL PASCRELL, JR., New Jersey       Louisiana
SHELLEY BERKLEY, Nevada              DEAN HELLER, Nevada
JOSEPH CROWLEY, New York             PETER J. ROSKAM, Illinois
CHRIS VAN HOLLEN, Maryland
KENDRICK B. MEEK, Florida
ALLYSON Y. SCHWARTZ, Pennsylvania
ARTUR DAVIS, Alabama
DANNY K. DAVIS, Illinois
BOB ETHERIDGE, North Carolina
LINDA T. SANCHEZ, California
BRIAN HIGGINS, New York
JOHN A. YARMUTH, Kentucky

             Janice Mays, Chief Counsel and Staff Director

                   Jon Traub, Minority Staff Director

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.










                            C O N T E N T S

                               __________
                                                                   Page

Advisory of June 24, 2009, announcing the hearing................     2

                               WITNESSES

Karen Pollitz, Policy Director, Health Policy Institute, 
  Georgetown Public Policy Institute, Georgetown University......     8
John F. Holahan, Ph.D., Director, The Health Policy Research 
  Center, The Urban Institute....................................    22
Quentin Young, M.D., MACP, National Coordinator, Physicians for a 
  National Health Program, Chicago, Illinois.....................    33
David Gratzer, M.D., Senior Fellow, Manhattan Institute for 
  Policy Research, New York, New York............................    39

                                 ______

Richard Kirsch, National Campaign Manager, Health Care for 
  America NOW!...................................................    98
Mike Draper, Owner, SMASH, Des Moines, Iowa......................   102
Peter Lee, Executive Director for National Health Policy, Pacific 
  Business Group on Health, San Francisco, California............   107
Gerald M. Shea, Special Assistant to the President, AFL-CIO......   116
Jennie Chin Hansen, President, AARP..............................   127
Randel K. Johnson, Senior Vice President, Labor, Immigration and 
  Employee Benefits, U.S. Chamber of Commerce....................   141

                                 ______

Daniel Baxter, M.D., Medical Director, William F. Ryan Community 
  Health Network, New York, New York.............................   209
Ted Epperly, M.D., President, American Academy of Family 
  Physicians.....................................................   216
Donna Policastro, Executive Director, Rhode Island State Nurses 
  Association, on behalf of the American Nurses Association, 
  Silver Spring, Maryland........................................   227
Charles N. Kahn III, President, Federation of American Hospitals.   235
William L. Minnix, Jr., President and CEO, American Association 
  of Homes and Services for the Aging............................   248
Ronald A. Williams, Chairman and CEO, Aetna, Inc., Hartford, 
  Connecticut....................................................   203
Richard B. Warner, M.D., Member, Kansas Medical Society House of 
  Delegates, AMA Alternate Delegate, Past President, Kansas 
  Medical Society................................................   258

                       SUBMISSIONS FOR THE RECORD

Nancy G. Brinker, statement......................................   275
Albert B. (Al) Baca, statement...................................   280
Association of Professors of Medicine, Association of Program 
  Directors in Internal Medicine, Association of Specialty 
  Professors, Clerkship Directors in Internal Medicine, and 
  Administrators of Internal Medicine, statement.................   283
American Academy of Physician Assistants, statement..............   290
American Association of Colleges of Pharmacy, letter.............   294
American Farm Bureau Federation, statement.......................   297
American Society for Clinical Pathology, statement...............   299
Paul Crist, statement............................................   304
Association of Ambulatory Behavioral Healthcare, letter..........   311
Becton, Dickinson and Co., statement.............................   313
Breyer Foundation, statement.....................................   315
Budd N. Shenkin, M.D., statement.................................   320
Friends Committee on National Legislation, statement.............   323
Richard Kirsch, letter...........................................   325
Kenneth L. Sperling, Hewitt Associates LLC, statement............   341
Jaci Mairs, R.N., J.D., letter...................................   348
Max Heirich, statement...........................................   350
Medicaid and Medicare Advantage Programs Association of Puerto 
  Rico, letter...................................................   355
Medical Banking Project, Legislative Committee, statement........   357
Mark H. Ayers, National Coordinating Committee for Multiemployer 
  Plans, letter..................................................   359
National Yogurt Association, statement...........................   365
Nurse Practitioner Roundtable, letter............................   367
Steve Slagle, Promotional Products Association International, 
  statement......................................................   370
RNG Consulting, Inc., statement..................................   371
Rochelle J. Ascher, Executive Intelligence Review, statement.....   373
Ron Manderscheid, letter.........................................   377
Nancy Schwab, Wendy Warner, Bill Berlinghof, Catherine Borowiec, 
  Mark Schmid, Connie Guldin, and Mike Fritz, letter.............   377
The Alliance for Academic Internal Medicine, statement...........   378
Cori E. Uccello, American Academy of Actuaries, statement........   379
ERISA Industry Committee, statement..............................   384
The Senior Citizens League, statement............................   387
Larry S. Gage, National Association of Public Hospitals and 
  Health Systems, statement......................................   391

 
                   HEALTH REFORM IN THE 21ST CENTURY:
                 PROPOSALS TO REFORM THE HEALTH SYSTEM

                              ----------                              


                        WEDNESDAY, JUNE 24, 2009

                     U.S. House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 9:09 a.m., in 
room 1100, Longworth House Office Building, Hon. Charles B. 
Rangel (Chairman of the Committee), presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                                                CONTACT: (202) 225-3625
FOR IMMEDIATE RELEASE
June 24, 2009

                 Chairman Rangel Announces a Hearing on

                   Health Reform in the 21st Century:

                 Proposals To Reform the Health System

    House Ways and Means Chairman Charles B. Rangel (D-NY) announced 
today that the Committee will hold a hearing to examine proposals to 
reform the health system. This is the sixth hearing in the series on 
health reform in the 111th Congress. The hearing will take place at 
9:00 a.m. on Wednesday, June 24, 2009, in the main Committee hearing 
room, 1100 Longworth House Office Building.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from the invited witnesses only. 
However, any individual or organization not scheduled for an oral 
appearance may submit a written statement for consideration by the 
Committee and for inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    Rising health costs threaten access for the 250 million people with 
insurance and undermine the competitiveness of American companies. In 
addition, nearly 46 million people lack coverage today and millions 
more have coverage that fails to meet their needs. A reformed health 
system must build on what works in our current system to expand access, 
while minimizing disruption for people who have coverage and helping to 
slow the rise in health costs. Recent studies have indicated that half 
of all bankruptcies are the result of serious illness and medical debt, 
and many of these families have coverage.
      
    The Committee has held five health reform hearings this year to 
examine the current state of various parts of the health system. These 
hearings build upon hearings and legislation that the Committee has 
undertaken in previous Congresses. Among other topics, these hearings 
have highlighted the need to improve the way care is delivered and the 
problems with the current insurance market. The hearings also stressed 
the importance of the employer-based system of health insurance and the 
need to improve and strengthen current programs like Medicare and 
Medicaid.
      
    The Committee has worked with the Committee on Energy and Commerce 
and the Committee on Education and Labor to develop a proposal that 
reflects President Obama's health reform principles and will begin to 
rein in rising health care costs, protect current coverage, preserve 
choice of doctors, hospitals and health plans and ensure affordable, 
quality health care for all.
      
    In the coming days, this discussion draft health reform proposal 
will be released. This hearing will focus on that proposal as well as 
other proposals to reform the health system.
      
    ``We have an historic opportunity to reform our Nation's health 
care system, building on what works and fixing what is broken to reduce 
health care costs, protect current coverage and preserve choice for 
patients to guarantee affordable, quality care for all,'' said Chairman 
Charles B. Rangel. ``Health reform is critical to America's economic 
recovery and I look forward to feedback from Members and witnesses so 
we can continue working to make this goal a reality.''

FOCUS OF THE HEARING:

      
    The focus of the hearing will be on the forthcoming proposal 
developed by the Committees on Ways and Means, Energy and Commerce and 
Education and Labor and other proposals to reform the health system.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://democrats.waysandmeans.house.gov, 
select ``Committee Hearings.'' Select the hearing for which you would 
like to submit, and click on the link entitled, ``Click here to provide 
a submission for the record.'' Once you have followed the online 
instructions, complete all informational forms and click ``submit'' on 
the final page. ATTACH your submission as a Word or WordPerfect 
document, in compliance with the formatting requirements listed below, 
by close of business Wednesday, July 8, 2009. Finally, please note that 
due to the change in House mail policy, the U.S. Capitol Police will 
refuse sealed-package deliveries to all House Office Buildings. For 
questions, or if you encounter technical problems, please call (202) 
225-1721.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word or WordPerfect format and MUST NOT exceed a total of 10 pages, 
including attachments. Witnesses and submitters are advised that the 
Committee relies on electronic submissions for printing the official 
hearing record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons, 
and/or organizations on whose behalf the witness appears. A 
supplemental sheet must accompany each submission listing the name, 
company, address, telephone and fax numbers of each witness.
      
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://democrats.waysandmeans.house.gov.
      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TDD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.

                                 

    Chairman RANGEL. The Committee on Ways and Means will come 
to order as we begin, I guess, our ninth hearing on health 
reform. I want to thank the staffs, minority and majority, for 
bringing us to this point in our Nation's history where we do 
see light at the end of the tunnel for one of the most serious 
domestic problems our great Nation has faced.
    It is abundantly clear that we have a serious financial 
problem as the cost of health care escalates far beyond our 
imagination, and continues in this upward spiral. We have a 
moral obligation in terms of the number of people who have lost 
their homes, gone into bankruptcy as a result of the costs of 
providing health care. And of course, we have a crisis in terms 
of the waste and inefficiency and the misuse of our resources 
by health providers that find us in need of changing the entire 
system.
    We hope at the end of the day that we are able to say that 
those people who find that their insurance meets their needs, 
that they should rest assured that we have enough problems 
without interfering with the relationship they have with 
private health insurers.
    They will have to be able to understand, however, that in 
their search for profit, there has to be basic sound principles 
that health care providers would have to be involved and 
support. One thing for certain: The whole idea that insurance 
companies can pick and choose the healthiest of their clients 
is wrong, and it will be corrected as we make certain that 
those people that have preconditions will be acceptable.
    We know that there are so many employers that want to 
provide health care for their employees because it is the right 
thing to do, and they just can't afford to do it. We have to 
give them assistance.
    We know that there is nobody in the United States that is 
an adult and understands the problems we face that hasn't got a 
horror story, with or without insurance, as to what has 
happened to their families and, indeed, communities because the 
system is broken.
    We also know that we just don't have enough primary care 
doctors and nurses and support system. And we have to encourage 
these people in order for us to be healthy and competitive with 
foreign countries to be out there, not just looking for profits 
but looking to fulfill their life's work in terms of taking 
care of our sick; and, more importantly or just as important, 
to make certain that we avoid these serious and expensive 
illnesses.
    We have the support of the President of the United States. 
We sincerely wish that this could be a bipartisan effort. The 
book is not closed. We have before us a discussion draft, and 
we have had more discussion than we had thought we would have, 
which I think is healthy; so that at the end of the day, when 
we pass this, more and more Americans would understand that we 
have done the right thing.
    And certainly the polls, for what it is worth, 
overwhelmingly believe that what we are doing in terms of 
having a competitive public option so that people can go to 
exchange and pick and choose, with a variety of private options 
just as we in the Congress have, and also a public option, we 
think at the end of the day it is going to be the American 
citizens that will be the beneficiary. The industry will be 
improved. America will be stronger and more competitive. And we 
all are privileged to be able to be participants in this 
effort.
    Peter Stark is one of the--probably, with me, is 
historically the longest-serving Member of this great Committee 
that was cited in the Constitution, and the only one cited. And 
he has dedicated his entire legislative career to trying to get 
a handle on the ever-increasing problems that health care has 
caused our Nation to face.
    I know that this era is one of the most proudest that he 
has enjoyed, and the Committee is grateful for the investment 
that he has made in time and dedication to reach this point 
that during his stay here, he would be able to say, we finally 
have improved the system.
    Pete, we are indebted to you, and I would like at this 
point in time to yield to you.
    Mr. STARK. Thank you, Mr. Chairman. You and my colleagues 
and the President are committed to health reform, and I think 
we all understand this is the time to act. We have worked with 
our colleagues on the Energy and Commerce and the Education and 
Labor Committees to write a draft proposal that provides 
affordable, quality health care for all, expands choice, and 
slows the rate of growth in health care spending.
    Some will be unhappy that we still don't have CBO numbers 
for provisions. We put this bill out last Friday in draft form 
so that all Members of Congress, the American public, and 
interested parties can read the discussion draft and provide us 
with input.
    Today's hearing, we hope, will be long, and we will hear 
from three panels. The first will be our panel of policy 
experts with their thoughts; second, a panel consisting of 
those impacted by health reform--consumers, seniors, businesses 
both large and small, labor; third, we will hear from health 
care providers who will share with us their thoughts on our 
draft legislation.
    As I said, it is in draft form. Today's hearing will give 
us guidance for meetings over the next couple of weeks as we 
work to convert this draft into a final bill.
    So I want to thank all of our witnesses in advance for 
their testimony. They have had a lot to analyze in a short 
time, and we appreciate their willingness to enlighten us 
today. Thank you very much.
    Chairman RANGEL. Thank you, Mr. Chairman.
    Most of you know, and certainly the Committee Members know, 
that David Camp and I have tried with the most that we can to 
see whether or not we could work together in a bipartisan way. 
Many times this is impossible because of the differences, not 
of he and I, but certainly of the political direction in which 
the parties would want to go.
    We know that this is not a Democratic problem. It is not a 
Republican problem. And the Nation is going to look at this as 
a problem that we hope that we can come together and work 
together and bring up a bipartisan bill.
    As Peter Stark has indicated, this is a discussion draft 
bill that will help us to try to perfect our ideas. And I yield 
to my friend David Camp for whatever purposes he would want to 
state.
    Mr. CAMP. Well, thank you, Mr. Chairman. And thank you for 
holding this hearing. And I want to thank all of the witnesses 
and the panels that have taken time out to be here today.
    Mr. Chairman, I am not sure quite what to focus on this 
morning, all we know about the bill or all that we don't know 
about the bill. But in either sense, it is very disturbing. And 
let me begin with what we don't know.
    We don't know how much CBO says it will cost or how it will 
be paid for. And hopefully everybody can see page 162 of the 
bill on the TV screens. Now, I know a picture is worth a 
thousand words, but I think that picture may be worth well over 
a trillion dollars.
    The bill says other revenue raisers are to be provided. 
When will these tax increases be provided? When will the 
American public get to know how much this trip to the doctor 
will cost them? Those details aren't unimportant.
    If you are shopping for a car, even I have to admit that a 
Ferrari looks pretty good next to a Ford until you see the 
pricetag. A six-bedroom mansion on the waterfront looks pretty 
good next to a modest three-bedroom ranch until you see the 
pricetag. We need to know the pricetag of this bill if we are 
to do our jobs properly, and that is to write a bill our 
country can afford that will guarantee every American has 
access to affordable quality health care.
    Just this morning I received an independent, nonpartisan 
analysis of the bill. I know I said this picture was well over 
a trillion dollars, but this report makes it clear that I 
really don't have much future in appraising because this bill 
is actually worth $3.5 trillion.
    And let me repeat that for everyone here, especially the 
Members who have not been given any information on the cost. An 
independent, nonpartisan analysis says this bill costs $3.5 
trillion. And I ask that a copy of this report by HIS Network 
be included in the record.
    Now, that is a staggering figure, even in Washington. 
Equally staggering are some of the ideas we have heard floating 
around about how to pay for this bill, such as new taxes on 
employer-sponsored health benefits, new taxes on sugared soft 
drinks, additional taxes on alcohol that will turn Joe Sixpack 
into Joe Fourpack, a new national sales tax, new taxes on 
American businesses competing worldwide, and higher Medicare 
taxes.
    Those are pretty darned scary in and of themselves. But 
what has me in shock is the fact that those taxes won't even 
come close to covering $3.5 trillion in new Federal Government 
spending. And it is clear that if we move forward with this 
$3.5 trillion bill and with any of those taxes, whatever hope 
remained that the President would keep his word not to tax 
families earning less than $250,000 will be quickly erased.
    The President has also promised repeatedly that Americans 
who have and like their insurance will be able to keep it. Now, 
I know he is getting pressured to back off that statement. I 
would hope both Republicans and Democrats on this Committee 
would help him keep that pledge.
    But the analysis we received this morning says this bill 
would cause 64 million Americans to lose their coverage. Sixty-
four million. That means one out of every three Americans under 
the age of 65 would lose their current private health coverage. 
We need to strengthen and improve our health care system, not 
destroy it.
    No matter what comes out of this hearing, unanswered will 
be several critical questions. How much will you tax and who 
pays those ``other revenues''? What will be the impact on 
family budgets? What will be the impact on employees and 
employers and on those looking for work? What about the economy 
as a whole? I am disappointed that this information isn't 
before us since it is impossible to make a thorough evaluation 
of the bill without it.
    Now to what we do know. It creates a government-run plan 
that reimburses at Medicare rates, which will force millions of 
Americans to lose their current health care plan. There are 
absolutely no prohibitions on new government-run plan or 
government programs like Medicare or Medicaid from using cost-
effectiveness research to impose delays or denials of access to 
life-saving treatments for patients. And just the new taxes and 
penalties on employers that we have already seen will force 4.7 
million Americans to lose their job.
    Now, those aren't my numbers or my analysis. That is what 
you get when you plus the taxes associated with an employer 
mandate into the economic models developed by Dr. Christina 
Romer, the Chair of the President's Council of Economic 
Advisers, and Jared Bernstein, who is in the Office of the Vice 
President.
    What does this leave us with? In short, a bill in which the 
solution costs more than the problem, and health care reform in 
which millions of Americans lose their insurance, lose access 
to treatment, and maybe even their job.
    This is what happens when legislation of this nature is 
written in secret by a few behind closed doors without the 
input of Members on both sides of the aisle, not to mention the 
families and businesses it will affect. I have heard even 
Members of this Committee have raised their concerns about the 
way this bill was written. So have Blue Dogs in a written 
letter, and so have House Republicans.
    This painfully reminds me of the stimulus bill. But as 
important as it was, we were just talking about money then. 
This time we are talking about people's health, about their 
lives. We cannot get it wrong again.
    The President was right when he said health care reform 
should not be a Democrat issue or a Republican issue, but an 
American issue. And as you know, last week Republicans outlined 
a summary of what we believe successful health care reform 
should focus on--affordability, accessibility, and availability 
of quality health care for all Americans.
    There are a number of areas where we could reach bipartisan 
agreement. I and the Republican Members of this Committee stand 
ready to meet and work with you to get this bill right, and I 
hope we can do that soon.
    And with that, I yield back the balance of my time.
    Chairman RANGEL. Thank you. I ask you to share with me at 
some point in time the firm that did the analysis for you that 
estimated the $3.5 trillion cost because it may be helpful for 
us to be able to make up numbers since Republicans and 
Democrats are stuck with the Congressional Budget Office. And 
as you know, they have not been very friendly in their 
estimates in terms of costs. But if someone can create just 
$3.5 trillion, I can share with you that I will walk away from 
any bill that has this type of cost.
    The whole idea of cost, however, should not be an issue 
because we are going to pay for this not by raising taxes, but 
even in this walk-through that we have. Five hundred billion 
dollars is reform in the system that we have.
    And whatever we do to raise the other revenue, at the end 
of the day we will be able to say that the bill is a reform 
bill and will not be additional cost. So we have to try to read 
from the same page. And I know you won't object to reading from 
the pages given to both of us by the Congressional Budget 
Office.
    And yes, we all would want Ferraris. I was settling for a 
Cadillac since it is made in the United States. But after we 
look at the cost of the options that are there, then we will 
know what we can afford. And so it really doesn't make that 
much difference as to what we hope for. We will only do what we 
can afford and what will be acceptable to the American people.
    I am glad to hear you say that your minds are open. At any 
point during the testimony of your witnesses or ours that you 
believe we can sit down and work together, we will go into 
recess, go into the library, take advantage of that, and then 
move forward.
    So let today be the beginning of a new start. And as 
Chairman Stark has said, we have an extraordinary panel here. 
The first panel we have is Karen Pollitz, who is the Policy 
Director of the Health Policy Institute from Georgetown Public 
Policy Institute, Georgetown University; John Holahan, Dr. 
Holahan, who is the Director of the Health Policy Research 
Center in The Urban Institute; Quentin Young, Dr. Quentin 
Young, National Coordinator for Physicians for a National 
Health Program, from Chicago; and David Gratzer, Dr. David 
Gratzer, a Fellow, Manhattan Institute for Policy Research, 
from my hometown and my city, New York, New York.
    We thank you for taking the time to come here to share your 
views with us so that we can make a more perfect piece of 
legislation. We have--by unanimous consent, all of the 
documents that you have will be submitted in our record.
    Restrict it this morning to 5 minutes for each witness, 
which is indicated by the red light coming on. And the 
Republicans and Democrats welcome your appearance here before 
the Congress and the Committee.
    So we will start off with Dr. Karen Pollitz.

  STATEMENT OF KAREN POLLITZ, POLICY DIRECTOR, HEALTH POLICY 
   INSTITUTE, GEORGETOWN PUBLIC POLICY INSTITUTE, GEORGETOWN 
                           UNIVERSITY

    Ms. POLLITZ. Thank you. I am not a doctor. Just call me 
Karen.
    Chairman RANGEL. Thank you, Karen.
    Ms. POLLITZ. And good morning, Mr. Chairman, Members of the 
Committee. I want to congratulate you on the tri-committee 
draft proposal for health care reform. It contains the key 
elements needed to achieve universal coverage and introduce 
cost discipline into our health care system. It reflects both 
wisdom and practicality. And this time I believe you will get 
the job done.
    The tri-committee proposal defines a minimum health benefit 
standard. It requires all Americans to have at least that 
minimum coverage, with shared financing responsibility by 
employers. It creates tax credits for small businesses, expands 
the Medicaid safety net, and creates new premium and cost-
sharing subsidies for private health insurance coverage to help 
other Americans of modest means.
    The proposal also establishes a set of strong new market 
reforms for private health insurance, with important consumer 
protections. It creates a new health insurance exchange, an 
organized health insurance market, with greater consumer 
protections and support than individuals and small employers 
have today.
    It will provide competitive information on plan choices, 
help with enrollment, appeals, application for subsidies. It 
will have a health insurance ombudsman to help individuals and 
small businesses navigate the coverage system and make good 
choices. And on their behalf, the exchange will negotiate with 
insurers over premiums in order to get the best possible 
bargain. And importantly, consumers and employers who buy 
coverage in the exchange will also have the choice of a new 
public plan option.
    A recent national poll indicates Americans strongly favor 
the establishment of a public plan option to compete with 
private health insurers. Such an option can address failures of 
competitive health insurance markets today.
    First, it offers consumers an alternative to private plans 
that for years have competed on the basis of discriminating 
against people when they are sick. Just last week your 
colleagues on the Energy and Commerce Committee held a hearing 
on health insurance rescissions.
    There, a woman battling breast cancer testified that her 
health insurance was revoked for failure to disclose a visit to 
a dermatologist for acne. When consumers are required to buy 
coverage, having a public option that doesn't have a track 
record of behaving that way will give many peace of mind.
    Second, a public plan option will promote cost containment. 
Research shows that health insurance markets today do not 
compete to hold down costs. Rather, insurers and providers 
negotiate to pass costs through to policyholders while 
maintaining and growing profits.
    For the first few years, the public plan option will be 
allowed to base its payment to doctors and hospitals and most 
other providers on the Medicare fee schedule--actually, 
increases above those fee levels--but over time it will develop 
innovative payment methodologies that hold down costs and 
promote quality.
    Mr. Chairman, clearly, as this bill moves through the 
legislative process, there will be opportunities to improve and 
modify it. And in my written statement, I offer several 
recommendations in this regard, and would briefly describe just 
three of those for you now.
    First, with respect to the essential benefits package, I 
think there are opportunities to strengthen the package and add 
specificity. The essential benefits package in particular does 
not include a limit on cost-sharing for care received by non-
network-plan physicians. That is an important protection to 
add. And the essential benefits package doesn't have a specific 
reference to a benchmark plan, the Blue Cross Blue Shield 
standard option plan that so many Members of Congress have, and 
that has been discussed as a reasonable benchmark for coverage 
adequacy.
    It is not clear whether the essential benefits package 
outlined in the draft proposal meets that standard, but it 
should. And if it doesn't, then the standard should be 
improved. And if that requires adding more money to the bill, 
then you should add it.
    Second, with regard to rules governing health insurance, 
new rules won't be meaningful unless there are resources for 
oversight and enforcement. The Department of Health and Human 
Services today has four employees who work part-time on private 
health insurance oversight. At the Department of Labor, there 
has been testimony indicating that there are resources to 
review each employer-sponsored health plan under that 
Department's jurisdiction once every 300 years. And State 
insurance departments are also strapped for resources.
    Your colleague on the Appropriations Committee, 
Congresswoman DeLauro, has introduced legislation to provide 
resources for health insurance oversight and enforcement, and I 
hope you will work with her.
    And finally, with regard to subsidies, the bill, the draft 
bill, creates sliding scale assistance so that middle-income 
Americans with incomes up to 400 percent of the poverty level 
would not have to pay more than 10 percent of income toward 
their premiums.
    But after that level, the subsidies stop, and as the charts 
in my written statement indicate, some consumers, including 
self-employed individuals, who have incomes above that level 
might still face significant affordability problems. That is 
essentially likely for people who buy family coverage and for 
baby boomers who would face much higher premiums under the age 
rating adjustments that are provided for under the bill.
    So I hope the Committee will consider making additional 
adjustments to your subsidy to protect all Americans so that 
they don't have to spend more than 10 percent of their income 
on health insurance.
    Thank you very much.
    [The prepared statement of Ms. Pollitz follows:]

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    Chairman RANGEL. Thank you so much.
    We will now entertain the statement from Dr. John Holahan, 
director of the Health Policy Research Center. Thank you for 
coming.

   STATEMENT OF JOHN F. HOLAHAN, PH.D., DIRECTOR, THE HEALTH 
          POLICY RESEARCH CENTER, THE URBAN INSTITUTE

    Mr. HOLAHAN. Thank you. Mr. Chairman and distinguished 
Members of the Committee, thank you for inviting me to share my 
views on the discussion draft. The views I express are mine 
alone and should not be attributed to The Urban Institute, its 
trustees, or its funders.
    I believe this plan has many excellent features, and I 
commend the Committee for its efforts. The plan builds upon the 
successful health reform enacted in the State of Massachusetts, 
provides for Medicaid expansion, a set of income-related 
subsidies up to 400 percent of the Federal poverty line, a 
national health exchange, and extensive insurance market 
reforms.
    It contains an individual mandate which is essential to 
providing for universal coverage. It provides a cap on total 
out-of-pocket spending for individuals, and higher payment 
rates for primary care doctors.
    I want to spend a few minutes on the public insurance 
option. A public plan competing with private plans will provide 
more choice and place substantial cost-containment pressure on 
the health care system. The argument is often made that 
competition between public and private plans could never be 
fair and that it will lead to a single payer system.
    This argument ignores the fact that many health insurance 
markets, as well as provider markets, are simply not 
competitive and efficient. An extraordinary amount of 
concentration in the insurance and hospital industries has 
taken place over the last several years, and this concentration 
has been a significant contributor to health care cost growth.
    No one can be in favor of controlling health care costs and 
ignore this reality. Several studies have documented the 
increase in concentration and the effect on insurer 
profitability and hospital revenues. For example, a number of 
studies have shown that hospital rates are higher in more 
highly concentrated markets by as much as 40 percent.
    The public plan can help with the problem of cost 
containment. First, it is likely to have somewhat lower 
administrative costs. Second, the public plan can also 
establish and negotiate provider payment rates at lower levels 
than private payers are able or willing to negotiate today.
    Today commercial payment rates are 35 percent above 
Medicare for hospitals and 23 percent for physicians. The plan 
will likely need to pay higher rates than Medicare does today 
to assure access to a sufficient number of providers. Where 
these rates are set is critically important. I think there 
should be a key role for MedPAC in advising the Congress on 
this.
    There are a number of aspects of the public plan that are 
important to assure fair competition. The public plan should be 
legally and administratively separate from exchanges. It should 
abide by the same insurance market rules that private plans do. 
It should offer the same benefit packages, have the same levels 
of cost-sharing, and the same caps on out-of-pocket 
liabilities. The income-related subsidies should apply in the 
same way to all plans. The plans should be required to maintain 
adequate reserves.
    On the other hand, the public plan may well get a 
disproportionate share of high-risk enrollees. A level playing 
field also means that a public plan should be compensated if it 
does end up with a less healthy population.
    The public plan can reduce the costs of reform 
significantly. In a paper being released this week by The Urban 
Institute, we estimate that subsidy costs would be lower by 
$200 to $400 billion relative to a plan with only private 
insurance options.
    We also believe that the public plan will not destroy the 
private insurance market, in part because the private market 
will respond to competition from the public plan, and in itself 
become more efficient.
    In the same paper, we have estimated that the net loss in 
private coverage will be relatively small. While a large number 
of those currently in the non-group and small group market will 
purchase coverage through the exchange and many will choose to 
join the public plan, there are close to 50 million uninsured 
who will now obtain coverage. Some will enroll in Medicaid or 
the public plan, but many will end up in private plans.
    On balance, we estimate that the number of people with 
private coverage will fall from about 177 million to 161 
million. In the end, the number with private insurance will not 
be too different than it is today, and the savings to the 
government in lower subsidy costs will be substantial.
    I would like to close by saying that while there is not a 
cost estimate for this bill, the CBO estimates for one of the 
Senate bills last week was $1.6 trillion over 10 years. This 
may seem an alarming number, but it should be viewed in 
context.
    Over the 10-year period, 2010 to 2019, the amount of gross 
domestic product projected for the U.S. economy will be $187 
trillion. Even a number as high as 1.6 trillion is less than 1 
percent of the amount of GDP being produced over this period. 
The Nation will also spend $33 trillion in health care over 
this period, even without reform.
    We clearly need to gain control over this spending, and 
there are many proposals for doing this. But these proposals 
will require difficult choices. It is important that a good 
plan be passed and be fully paid for, but the design should not 
be driven by a budget goal, whether it is $1.6 or $1.2 or $1.0. 
There are many other key design features, and this is 
affordable, and there are plenty of ways to pay for it.
    Thank you.
    [The prepared statement of Mr. Holahan follows:]

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    Chairman RANGEL. Thank you, Doctor.
    The Committee would now invite Dr. Young, the National 
Coordinator for Physicians for a National Health Program, from 
Chicago.

 STATEMENT OF QUENTIN YOUNG, M.D., MACP, NATIONAL COORDINATOR, 
  PHYSICIANS FOR A NATIONAL HEALTH PROGRAM, CHICAGO, ILLINOIS

    Dr. YOUNG. Mr. Chairman, Members of the Committee, I thank 
you for giving me the opportunity to comment on the proposal 
that has emerged from the three key House Committees, and to 
articulate the single payer alternative. Thank you.
    I am the National Coordinator of Physicians for a National 
Health Program, an organization of some 16,000 American 
physicians who support single payer national health insurance. 
Our organization represents the views of the majority of the 
U.S. physicians now, 59 percent of whom support national health 
insurance in a recent survey. I wish to make two points to the 
Members of this Committee.
    The first is that the best health policy, science, 
literature, and experience indicate that the tri-committee 
proposal will fail miserably in its purported goal of providing 
comprehensive, sustainable health coverage to all Americans. 
And it will fail whether or not it includes the so-called 
public option health plan.
    The second point I wish to make is that the single payer 
national health insurance is not just the only path to 
universal coverage, it is the most politically feasible to 
health care for all because it pays for itself, requiring no 
new sources of revenue.
    The difference between single payer and the tri-committee 
proposal could not be more stark. Single payor has at its core 
the elimination of U.S.-style private insurance, using huge 
administrative savings and inherent cost control mechanisms to 
provide comprehensive, sustainable, universal coverage.
    The tri-committee discussion draft preserves all of the 
systemic defects inherent in relying on a patchwork of private 
insurance companies to finance health care, a system which has 
been a terrible failure both in providing health coverage and 
controlling costs heretofore.
    Elimination of the U.S.-style private insurance has been a 
prerequisite to the achievement of universal health care in 
every other industrialized country in the world. In contrast, 
public program expansions, coupled with mandates like those in 
the tri-committee proposal, have failed everywhere they have 
been tried, both domestically and internationally.
    First, because the discussion draft is built around the 
retention of private insurance companies, it is unable, in 
contrast to single payer, to recapture the 400 billion in 
administrative waste that private insurers currently generate 
in their drive to fight claims, issue denials, and screen out 
the sick. A single payer system would redirect these huge 
savings back into the system, requiring no net increase in 
health spending, and covering those uncovered today.
    Second, because the discussion draft fails to contain the 
cost control mechanisms inherent in single payer, such as 
global budgeting, bulk purchasing, negotiated fees, and planned 
capital expenditures, any gains in coverage will quickly be 
erased as costs skyrocket and government is forced to choose 
between raising revenue and cutting benefits, something we face 
today.
    Third, because of this inability to control costs or 
realize administrative savings, the coverage and benefits that 
can be offered under the discussion draft will be of the same 
type currently offered by private carriers, which cause 
millions of insured Americans to go without needed care due to 
the cost and have led to an epidemic of medical bankruptcies, 1 
million annually presently.
    Virtually all of the reforms contained in the discussion 
draft have been tried, and have failed repeatedly. Plans that 
combined mandates to purchase coverage with Medicaid expansions 
fell apart in Massachusetts in 1988, Oregon in 1992, and 
Washington State in 1993. The latest iteration, Massachusetts 
2006, is already stumbling with uninsured rates again rising 
and costs soaring. Tennessee's experiment with a massive 
Medicaid expansion and a public plan option worked for 1 year, 
until rising costs sank it.
    The inclusion of a so-called public option cannot salvage 
this structurally defective reform package. A public plan 
option does not lead toward the single payer but toward the 
segregation of patients, with profitable ones in private plans 
and unprofitable ones in the public plan.
    A quarter-century experience with public/private 
competition in the Medicare program demonstrates that the 
private plans will not allow a level playing field. Despite 
strict regulation, private insurers have successfully cherry-
picked healthier seniors and have exploited regional health 
spending differences to their advantage.
    They have progressively undermined the public plan, which 
started as a single payer system for seniors but now has become 
a funding mechanism for private HMOs and a place to dump the 
unprofitable ill.
    The potential $1 trillion pricetag on the tri-committee 
proposal already threatens to capsize our new President's 
flagship initiative. In contrast, single payer avoids these 
hazardous political waters entirely because it requires no new 
sources of funding.
    In tumultuous economic times, single payer is the only 
fiscally responsible option. Two-thirds of the American people 
support it. The majority of physicians are in favor of it, as 
are the U.S. Conference of Mayors, 39 State labor federations, 
and hundreds of local unions across the country. Millions of 
Americans are mobilized to struggle for single payer, but your 
leadership is crucial. I hope this Committee will see fit to 
provide it.
    [The prepared statement of Dr. Young follows:]

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    Chairman RANGEL. Dr. Young, the Chair has been advised that 
one of our most distinguished Members in the House and the 
Chairman of the Judiciary Committee has arrived and is here 
with us, and that is Chairman John Conyers. If he is here, I 
want to pause and recognize the fight that he has had over the 
decades in support of the single payer.
    And I want you to understand, Dr. Young, that our President 
has decided that he wants to make every effort to have a 
bipartisan bill. And I think there are over 83 Members of 
Congress that have supported the single payer. But I don't 
think too many of them belong to the other party.
    And so in an effort to launch this in a way that we could 
accommodate each other, we have the public program that we hope 
would compete with the private sector. But having said that, 
Members will have questions later. And I hope that if Chairman 
Conyers is in the audience, he would stand so that we would 
recognize the service he has provided over the years.
    John Conyers, we thank you.
    [Applause]
    Chairman RANGEL. We thank you for your great contribution, 
and we would not be where we are today had it not been for your 
great efforts here.
    The Chair would like to call on Dr. David Gratzer. He is 
from Manhattan Institute for Policy Research from the great 
town of New York, New York.
    Thank you.

  STATEMENT OF DAVID GRATZER, M.D., SENIOR FELLOW, MANHATTAN 
       INSTITUTE FOR POLICY RESEARCH, NEW YORK, NEW YORK

    Dr. GRATZER. Thank you, Mr. Chairman. Thank you, Members of 
the Committee.
    Mr. Chairman, as you gave me that warm introduction, I was 
reminded of a comment a colleague of mine had said a few years 
ago when he suggested that on paper, I seemed like a remarkable 
individual.
    Chairman RANGEL. Let's hope so at the end of your 
testimony.
    Dr. GRATZER. Mr. Chairman, I made a similar comment when I 
testified a couple of weeks ago before a Subcommittee of the 
Committee on Education and Labor. People also laughed then, and 
I am not sure why. Pause for a moment just to soak this up.
    I am a kid from the prairie, and it is an enormously 
humbling experience to speak before this august body. And I 
appreciate the work that you are doing. And we may agree to 
disagree on some things, but I am honored to be able to testify 
today.
    I am going to speak in a few moments about the draft 
legislation before us. But I want to pause for a moment and 
talk about some personal experiences. You know, health care is 
ultimately very personal. And it is important as we discuss 
policy details, as we discuss statistics and figures, not to 
leave out the human aspects of this.
    A few years ago my wife hurt her back. We had gone on a ski 
trip in the Rockies. Actually, I had been invited out to a 
conference, and they had generously even agreed to pay for my 
wife's plane ticket. All I had to do was buy the lift tickets, 
and off we went.
    My wife is no athlete. She is an emergency doctor, and she 
hurt her back. I want to emphasize for the sake of our marriage 
that she tells the story a little bit differently than I do. 
Her version of events involves gale-like winds of 60 miles an 
hour or so, a tall mountain rivaling, perhaps, Everest, and a 
small mammal that had crossed her path that needed to be saved. 
My version of events is a little less august, involving a small 
ski slope, the bunny hill, and a lot of falls on her rear.
    But whether or not you accept her version of events or 
mine, at the end of the day she ended up seriously hurting her 
back. And my wife, who likes to log long hours in the emergency 
department, ended up lying on her couch in pain, numbness in 
her foot, largely unable to work.
    We were uninsured at the time, and interested in getting 
her some help. Forty years ago there would have been no help to 
be had. She just would have lived her life like that. Twenty-
five years ago there would have been a surgical procedure to 
help her out that would have had a long convalescence, a risky 
procedure that may not have worked.
    My wife ended up getting a procedure that lasted less than 
28 minutes, involved a scar that she wears on her back that is 
less than a half-inch long, and within a few weeks, she was 
able to rise up from that couch and go back to life.
    It was in its own ways something of a miracle, something we 
see every day in American health care. I would emphasize that 
there are so many problems with American health care--and we 
are going to talk about that today, in the coming days and the 
coming weeks. But we should not forget what is good about this 
system, that American medicine is second to none.
    I have talked about my wife's back, but certainly we could 
cite other examples. Death by cardiovascular disease has 
dropped by two-thirds in the last 60 years. Polio is confined 
to the history books. Childhood leukemia, once a death 
sentence, is eminently treatable for people under the age of 
11.
    You know, in my other life I am a doctor, and I have seen 
miracles there, too. I had a patient who came in covered in his 
own urine who was completely psychotic. We gave him an anti-
psychotic, a new one, developed right here in the United 
States, and he went back to being a college student and living 
out his life. Let us not forget the successes when we talk 
about the failures.
    Of course, there are problems. It was difficult to find a 
neurosurgeon for my wife because quality is so uneven and they 
are such a black box. We actually Yahoo'ed ``Neurosurgery, west 
New York,'' and got a bunch of porn sites. Costs are uneven and 
at times inexplicable. We got a bill that lasted about 3\1/2\ 
feet and was unanswerable.
    People look at these problems and they say, it is time now 
for Washington to take a larger role, a more robust role. And I 
see that Members of the Committee are entertaining that. I 
understand that temptation.
    I understand the belief that government expansion will be 
compassionate and will increase quality. I understand that 
because I used to believe it. I was born and raised in Canada. 
I, too, believed in some level of socialized medicine. Then I 
got mugged by reality, and I have seen the waiting lists and 
the queues for care and how unsatisfying it is.
    You have a choice to make, and down one path is the 
government temptation. But there is also, my friends, the low 
road less traveled of individual choice and true competition. 
And that is why I think we need policy reform and regulatory 
reform and tax reform to build on what is good with this 
system, and not to end up with a system far worse like you see 
in Canada or Britain or right across the western world.
    Thank you, Mr. Chairman.
    [The prepared statement of Dr. Gratzer follows:]
       Prepared Statement of David Gratzer, M.D., Senior Fellow,
      Manhattan Institute for Policy Research, New York, New York
    Thank you for this opportunity to testify at this important time. 
My testimony is drawn from personal experience--as a physician born and 
trained in Canada, as the author of two books (and the editor of a 
third) on comparative health care policy, and as a senior fellow at the 
Manhattan Institute. (For the record, the views I present are my own 
and do not necessarily represent those of the Manhattan Institute.)
    The choices Congress will make on this issue are critical both for 
the United States and for patients around the world who benefit from 
American advances in diagnostic technology, pharmaceuticals, 
biotechnology, surgical techniques, and medical device design.
    It is not a coincidence that the United States is so productive in 
medical science. America's health care system is unique in its capacity 
to mobilize private investment. Many critics of the system look at its 
rising share of GDP and see only cost. But we must remember in these 
discussions that American medicine is second to none. The achievements 
of the last 60 years have been amazing: Polio is confined to the 
history books; death by cardiovascular disease has fallen by two-
thirds; childhood leukemia, once a death sentence, is now treatable.
    The U.S. system needs reform, yes. Costs continue to rise. Quality 
is uneven. Too many lack insurance. But in our effort to make a system 
with better coverage and access, we must not lose what is right and 
what is good.
1. BUILDING ON WHAT WORKS
    U.S. lawmakers should be cautious about borrowing reforms from 
other countries; Congress must reform the health care system with made-
in-America solutions.
    Congressional leaders would be wise to focus on simple, practical 
reforms that build on what works in this system.

      We must recognize the forgotten role of health in health 
care (policy reform);
      We should foster insurance competition in a larger 
marketplace (regulatory reform); and
      We must level the tax playing field for individuals 
seeking insurance outside the workplace (tax reform).

    Supporters of a single payer model repeatedly point to America's 
lower life expectancy as evidence of a systemic failure. As a 
physician, let me assure you that life expectancy is about much more 
than what happens in the doctor's office. Indeed, some of the biggest 
problems we face are due to choices and not (health) care. Americans 
live unhealthily--smoking, drinking, and eating more than their 
neighbors to the north, or their Western European cousins. Consider 
that the percentage of obese Americans has doubled in the last quarter 
century.
    The failure to prevent common illnesses like diabetes and lung 
cancer carries significant financial consequences for the health care 
system. Both Democrats and Republicans can agree with this point. 
Significant government and private actions are needed--we must do more 
to promote wellness, provide incentives for prevention, and encourage 
Americans to take greater responsibility for their own health.
    Market competition can contain the high cost of insurance--if 
Congress and the States would only allow it to take place. Efforts at 
creating equity and fairness in the health insurance market--done with 
the best of intentions--have created dramatic differences in price 
across the country. For example, a health-insurance plan for a family 
of four in New York can cost more than $12,000 a year, but a similar is 
about $3,000 in Wisconsin.
    The Federal Government can promote regulatory strategies that will 
increase interstate insurance competition. Proposals to create a true 
national market for health insurance is on the right track, but 
Congress must go farther to level the tax and regulatory playing field 
for non-group insurance. Once the marketplace of individuals can 
compete fairly with employer-provided plans, they can serve as an ideal 
vehicle for broadening coverage to the uninsured.
2. THE SOCIAL RISKS OF GOVERNMENT-MANAGED CARE
    Single payer advocates and their allies insist that only government 
health insurance can solve America's problems. For example, when it 
comes to wellness, some claim--without evidence--that preventive care 
will be strengthened in a single payer system.
    In reality, preventive care has suffered in many single payer 
systems because it is not urgent care. Governments in single payer 
systems have tended to see ``elective'' and preventative care as a 
safer target for rationing, in much the same way that governments 
worldwide habitually underbudget for infrastructure maintenance.
    For example, it's a common mantra that Canadians can choose their 
own family doctor in Canada's socialized health system. But as many as 
one-sixth of Canadians cannot find a family doctor. Canada has two-
thirds as many doctors as the OECD average, with severe shortages in 
several areas of specialty (for example, gynaecology). When there are 
no doctors to choose from, the ``freedom to choose'' is a limited 
benefit. The doctor shortage is a direct result of government 
rationing, since provinces intervened to restrict class sizes in major 
Canadian medical schools in the 1990s.
    To further inform Congress about the challenges of government-
managed care, I cite Canadian-sourced data.
(1) CIHI Reports on Provincial Wait-Times ``Progress''
    The Canadian Institute for Health Information (CIHI), a government-
funded body, is the designated agency responsible for collecting 
provincial wait-times data. Their reports \1\ paint a disturbing 
picture. Advocates for the Canadian system often cherry-pick broad 
averages or median wait time figures, but CIHI's most recent (2008) 
data gives a fuller picture of what service is like at the ``back of 
the line.'' Consider just a few examples:
---------------------------------------------------------------------------
    \1\ The latest CIHI reports on provincially-reported wait times are 
available at www.cihi.ca.

      In Alberta, Canada's wealthiest province, 50% of 
outpatients waited 41 days or more for an MRI scan. Ten percent of 
those patients waited 4\1/2\ months or longer.
      In Saskatchewan, 10% of knee replacement patients waited 
616 days or more for surgery.
      In Nova Scotia, 25% of patients waited 199 days or more 
for cataract removal.

    All of these and other figures reflect wait times after referral by 
a general practitioner. As noted earlier, millions of Canadians do not 
have access to a family doctor.
(2) Canadian Wait Times Alliance: Annual Reports, 2004-2009
    Canada's Wait Times Alliance offers a counterpoint to CIHI's 
reports. The Alliance consists exclusively of Canadian medical 
professional associations like the Canadian Medical Association. Their 
2009 report, Unfinished Business, opens with the observation that 
``Canadians are used to waiting.'' The report \2\ notes that provincial 
``progress'' toward wait times targets often represents progress toward 
``minimum wait-times standards, rather than desired wait-times 
standards.''
---------------------------------------------------------------------------
    \2\ The 2009 Report is available, as are previous years' reports, 
at www.waittimealliance.ca.
---------------------------------------------------------------------------
(3) Chaoulli v. Quebec (Attorney General), 2005 SCC 35
    This recent decision \3\ by the Supreme Court of Canada serves as a 
wake-up call to those who see the Canadian system as a utopian mix of 
public funding and private choice. The case centred on a patient who 
chose to sue for the right to use his own money to secure timely 
medical treatment, a right that was denied Canadians until the Chaoulli 
decision.
---------------------------------------------------------------------------
    \3\ The Chaoulli decision is online at http://
csc.lexum.umontreal.ca/en/2005/2005scc35/2005scc35.html.
---------------------------------------------------------------------------
    Writing for the majority, Justice Marie Deschamps concluded that:

          ``[T]he evidence in this case shows that delays in the public 
        health care system are widespread, and that, in some serious 
        cases, patients die as a result of waiting lists for public 
        health care. The evidence also demonstrates that the 
        prohibition against private health insurance and its 
        consequence of denying people vital health care result in 
        physical and psychological suffering that meets a threshold 
        test of seriousness.''

            Chaoulli v. Quebec (Attorney-General) 2005

(4) [Quebec] Taskforce on the Funding of the Health System, 2008
    Finally, consider the most recent report from Quebec, a 
comprehensive review of a government-managed system in peril. The 
government-appointed Chair of the Taskforce was M. Claude Castonguay, 
widely considered ``the father of Quebec medicare,'' as he co-authored 
a report in the late 1960s that created Quebec's earliest single payer 
model. Almost 40 years later, this report \4\ concluded that ``there is 
no ideal system,'' called for an increase in private sector involvement 
and cited crippling cost inflation and poorly rationed care as major 
flaws in Quebec's single payer model.
---------------------------------------------------------------------------
    \4\ The full report is online in English at http://
www.financementsante.gouv.qc.ca/en/rapport/index.asp.
---------------------------------------------------------------------------
3. THE FISCAL RISKS OF GOVERNMENT-MANAGED CARE
    These challenges are not unique to Canada. Around the world, the 
more public the system, the greater the challenge in managing it. For 
example, the United Kingdom recently increased the annual budget of the 
National Health Service (NHS) by tens of billions of pounds in an 
effort to bring wait times below their own targets. The effort 
succeeded, but only if you believe that the NHS guarantee of care no 
later than 18 weeks after a referral represents timely service. 
Recessionary budget reductions are likely to limit further progress as 
the Brown government has ordered the NHS to prepare for increases below 
core inflation (1.6%) in fiscal year 2010-2011.
    The White House is alarmed by private-sector health inflation, but 
it must also acknowledge the same trend in government-managed systems. 
Even with pharmaceutical price controls, technology rationing, and 
limited capital investments, almost all Canadian provinces carry 
substantial debts fuelled mostly by persistent health care inflation. 
Ontario's health budget is projected to grow by 7% for each of the next 
3 years. The 2008 Taskforce calculated Quebec's annual health inflation 
rate at almost 6%. In Britain, the NHS admits to a 60 year average 
increase of 3% over inflation. Ireland's single payer system has 
experienced constant price turbulence. Despite 3.5% deflation this May, 
Irish health costs still grew at an annualized rate of 4.5%.
    What causes inflation in public health insurance programs? As 
government's role as the primary funder grows, the greater the 
political contradiction between demands for fiscal restraint and demand 
for service. The pattern is consistent across national boundaries: If 
governments provide the insurance, benefits come cheap and easy in the 
early years. When the cost of treating older citizens, serving new 
patients or providing new treatments climbs, policymakers face a 
devil's choice between rationed care or tax-funded cost inflation. Most 
often, they try to balance the two bad options, restraining inflation 
slightly below U.S. levels with ever-more painful restraints on capital 
investment, human resources, technology, and drug access. Waiting lists 
for treatment are the inevitable consequence.
4. A PUBLIC PLAN OPTION IS GOVERNMENT-MANAGED CARE
    The Administration insists that support for a ``public plan 
option'' is not intended to serve as a ``Trojan horse'' for a single 
payer health care system. I can only reply with the time-honoured 
scientific observation that ``if it walks like a duck, if it quacks 
like a duck . . .''
    The historic reality is that even if the Administration sincerely 
does not want public insurance to serve as a Trojan horse for a single 
payer system, the public plan option is certain to deliver exactly that 
result, just as more limited public insurance schemes in Canada, 
Britain, and other countries, came to dominate their own health 
sectors:

      As a government program rather than a state-regulated 
insurance plan, the public plan option has competitive advantages;
      If those advantages are removed, then there is no point 
in introducing the public plan when the proposed ``Health Insurance 
Exchange'' will increase competition anyhow;
      If the advantages are left intact, the United States will 
undermine its private-sector health care, as have other western 
countries.

    The Administration believes a public option is needed to, in the 
President's words, ``keep the insurance industry honest.'' If this 
argument is carried to its logical conclusion, the public plan must 
also be ``honest.''
    Will the public plan be financed on a pay-as-you-go basis as many 
entitlement programs have been, or will it be properly financed to 
future insurance costs?
    Will the public option pay market costs for capital, just as 
private insurers must?
    Will the public plan comply with costly State mandates just as 
private insurers do, or will the Federal Government override them?
    If the public plan has any built-in government advantages, it will 
build market share--not because it is necessarily better insurance, but 
because it is subsidized and legally privileged. As the plan grows in 
size, Federal taxpayers will foot an ever-larger share of the system's 
increasing costs, and governments will be under ever-more pressure to 
ration care to contain them.
    Further, if the goal of public competition is to reduce the impact 
of public health care costs on the U.S. Treasury, then the best policy 
choices are those which extend coverage and improve affordability 
without significant damage to the U.S. tax base. Will the public plan 
pay taxes to simulate the tax costs of a private insurer? If not, then 
every dollar attracted to the public plan is a dollar taken from the 
taxable private sector, reducing the economy's ability to carry the 
costs of public health programs in future.
                               __________
    Let's be clear: American health care is in need of reform. But as 
any good doctor knows, it's not enough to get the diagnosis right, we 
need a treatment that makes sense. A massive expansion of Washington's 
role is not that treatment. Rather, Congress should look to 
alternatives:
    Prioritize regulatory reforms that will open up true competition 
between existing, fully-funded insurers.
    Target direct government aid to individuals who really need it, 
with incentives for individuals to become a powerful competitive force 
in the insurance marketplace.
    Promote rapid improvement in the personal health of Americans to 
reduce demand on the system's most costly health care services.
    These ideas would bring greater choice to American health care; 
they would also help instill in the system the oldest of American 
virtues: Personal responsibility. While they may not be as catchy as 
promising Medicare for those who want it, these ideas have the benefit 
of pushing the system toward a sustainable future, not a government 
bureaucracy.

                                 

    Chairman RANGEL. Thank you so much for your testimony. I 
can see why our Republican friends have selected you. You are 
very persuasive. And I want to make it abundantly clear: 
Anybody supporting this concept certainly cannot disregard the 
great advancements that have been made in American medicine, 
and the great contributions that the private sector have and 
continue to give.
    And I only wish that you can help us to understand that we 
cannot find acceptable 48 million people without health care. 
And I know you agree with that. Over half of that amount are 
underinsured. And the whole idea that this genius of the 
private sector cannot compete with a government operator, or 
better than that, that the American people will not seek out 
the best that they can find, certainly is a far cry from what 
you describe as socialized medicine or whatever derogatory term 
that you want to call it.
    We are not competing for a French plan or a Canadian plan 
or a foreign plan. This is an American problem, and it has to 
be an American solution to it.
    And so I just ask you, Doctor, if indeed we are talking 
about competition, don't you believe that the government can 
learn from the private sector and that the private sector can 
learn from the government? We as Americans, and certainly the 
medical profession, have never run away from the challenge of 
competition. Why won't you give us a chance?
    Dr. GRATZER. Mr. Chairman, let me agree with you that there 
are significant problems here. And certainly I don't wish to 
walk--or don't wish for you to walk away from my testimony 
today thinking that I am glossing over these problems. There 
are too many uninsured Americans.
    I am not quite sure that we should be so concerned with 
that large number, but within them there is a core group, maybe 
8 or 9 million, who really do fall through the cracks. And it 
is up to this body in these deliberations to find a way of 
reaching out.
    But be careful. Be careful what we end up doing because as 
any good doctor knows, it is not enough to come up with the 
right diagnosis. You have to come up with the right treatment. 
And sometimes when you don't do that, the patient gets worse.
    As you know, I am pretty libertarian in my thinking. Milton 
Friedman wrote the foreword to my last book. He was a mentor 
for me.
    Chairman RANGEL. What was the name of your book? We might 
as well get that in now.
    Dr. GRATZER. Well, Mr. Chairman, ``The Cure: How 
Capitalization Can Save American Health Care,'' available on 
Amazon.com at a very reasonable price, Mr. Chairman.
    [Laughter.]
    Dr. GRATZER. But today, I will offer you a book at no 
charge. But Mr. Chairman, I think one should be very careful 
about the language we use. Yes, you and I believe in 
competition. Yes, you and I believe in individual choice. But a 
public plan option as is being discussed is not true 
competition, and it is not true choice.
    As you know, the discussions underway are to have Medicare 
pricing. In other words, we would build a public plan option 
basically modeled after Medicare. Medicare is not really an 
insurance. I know you and I throw that term out. And when you 
have public plans in other countries, we talk about social 
insurance, but they are not true insurance.
    Medicare is a Federal program. Medicare is a Federal 
program with price controls, one that is opted out of State 
regulations, that doesn't require any of the capitalization 
required of private insurances, that doesn't account as private 
insurances do.
    So yes, I believe in competition. But it has to be fair 
competition. I think a better----
    Chairman RANGEL. Pause there. Tell me, please, what is 
unfair about the option? Because I have more respect for the 
ingenuity of the private sector. Why would anyone that enjoys 
the genius of the private sector walk away from that to a 
crumbling, failing, government, irresponsible program?
    Dr. GRATZER. Can I quote you on that?
    Chairman RANGEL. Well, this is your language. And I am 
saying that why would anyone walk away from what you are 
describing? The key word that separates you and I is that you 
already said the program, the public option program, is unfair.
    Well, hell, I am sorry, but if I was losing a lot of money 
to a competitor, I would try to find that word, saying, this 
competitor is coming in, reducing my profits. I am in business 
to make money. That is what my job would be in the private 
sector.
    And if anyone came in with any idea about just providing 
health care, I wouldn't call that unfair. Tell me what is 
unfair about the system since we are searching to give 
confidence that we want an even playing field?
    What could we possibly do to provide that competition, 
which I am certain you are not afraid of, as long as it is, 
what, fair? Tell me what we could do to perfect this so you can 
say, well, at least that is fair, and we can match you patient 
for patient, and in your case, dollar for dollar.
    Dr. GRATZER. Sure. Three words: Scrap price controls.
    Chairman RANGEL. Where would the price control be?
    Dr. GRATZER. Well, Medicare price controls. As you know, 
there is a committee of----
    Chairman RANGEL. We are paying for the private sector with 
Medicare. That is how they make their money. It is government 
money that goes into these programs. The doctors are reimbursed 
with Federal dollars.
    Dr. GRATZER. But they are being reimbursed at a fraction of 
what they would make in the private sector. And as you know, 
there is good evidence that there is cost-shifting going on 
whereby private plans end up picking up the weight, the dropped 
weight, from the public system.
    Chairman RANGEL. Doctor, we have so many programs that the 
patients and the clients are supported by Federal dollars and 
Medicare where they are doing so well and making profits, if 
you will, by cutting a lot of procedures that are truly found 
to be unnecessary.
    And I might say that a lot of doctors would share with you 
the lack of satisfaction that they get with the payment system, 
which forces them in many cases to find services that are not 
necessary to be funded by the government because they don't 
believe that the reimbursement is adequate. We are trying to 
take care of that. I don't think we----
    Dr. GRATZER. Hold on, Mr. Chairman. I think you have 
persuaded me that Medicare is in need of reform. I am not sure 
you have persuaded me----
    Chairman RANGEL. You bet your sweet life it is.
    Dr. GRATZER. But you have not persuaded me that----
    Chairman RANGEL. The whole system is broken.
    Dr. GRATZER. The whole system is----
    Chairman RANGEL. But we don't expect the private sector to 
come forward and fix it. We need a partnership. We need a fair 
relationship. And the only difference that separates you and I 
is that I think you are suggesting that you are not afraid of 
fair competition.
    Dr. GRATZER. Then let's agree on what fair competition 
might be for this public option.
    Chairman RANGEL. Exactly.
    Dr. GRATZER. No price controls. Reimbursement set by the 
private sector. Capitalization required.
    Chairman RANGEL. Reimbursement set by the private sector, 
did you say?
    Dr. GRATZER. Yes. Doctors ought to make a fair wage, don't 
you think?
    Chairman RANGEL. A fair wage? Okay. Okay. All right.
    Dr. GRATZER. I believe in competition. But we are not 
talking about competition between insurances.
    Chairman RANGEL. Let's talk in New York.
    Dr. GRATZER. We are talking about competition between----
    Chairman RANGEL. It is all a question of what is fair. And 
I would like to yield to the Ranking Member because we have 
reduced our differences to price.
    Mr. CAMP. Well, thank you, Mr. Chairman. We have had a 
number of hearings either in the Committee or Subcommittee--I 
think six this year--on various aspects of health reform, seven 
if you look at the Income Security Subcommittee's hearing on a 
new entitlement program that was incorporated into this draft, 
and really nearly two dozen in the last Congress.
    So I really want to focus on the specific aspects of this 
legislation before us, not necessarily in general what health 
reform--what might be right and wrong in the health reform 
system.
    And so Dr. Gratzer, you mentioned the difference often 
between the public and private plans. And I believe in section 
1401(b) of the bill, there is a new tax on all non-government 
health insurance policies, which would be another way that 
competition isn't really fair between the public plan and the 
private plans. It would be a $370 million tax to fund the 
competitive effectiveness research trust fund.
    Would this tax, in your opinion, fall on people at all 
income levels? Is it based only on who has a non-government 
health insurance policy or private health insurance?
    Dr. GRATZER. I thank you for the question. I will be honest 
with you: I am not as up on perhaps the specifics of the bill 
as I should be. It is an 825-page bill, and I have only had 
since Friday to review it.
    But my suspicion is besides the structural differences 
between a Federal program and insurance, you have hit the nail 
on the head that even this bill will exaggerate these 
differences from a tax point of view.
    Again, I believe in competition, but it ought to be fair 
competition. And if really what we are going to do is take this 
public plan option and make it just like every other insurance 
except it is not for profit, we already have the blues, sir.
    Mr. CAMP. All right. Thank you.
    And Ms. Pollitz, I am a little confused about whether 
insurance policies offered through the exchange would have to 
adhere to State benefit mandates. I believe in section 203, 
which starts on page 55 of the bill, that the new health 
choices commissioner could override State mandates with their 
authority. Is that your read of the bill?
    Ms. POLLITZ. I don't remember. I am sorry.
    Mr. CAMP. Okay. I believe on page 59 you would find that is 
the case.
    I also have a question for Dr. Holahan. It appears that 
there will be, for an employer who does not offer health 
insurance, an 8 percent tax on total wages. Is that your 
understanding?
    Mr. HOLAHAN. Yes.
    Mr. CAMP. And if there was an employee who had a spouse who 
had an insurance plan with another company, and that employee 
decided to go on their spouse's insurance for some reason--it 
may have better benefits; it may be cheaper for their family--
and that policy was in the exchange, would the employer still 
have to pay the 8 percent tax on that employee who was not 
covered by insurance?
    Mr. HOLAHAN. So you are saying the employee is covered, the 
spouse is not?
    Mr. CAMP. The spouse is covered by another plan that is in 
an exchange. This employee decides, I will go on my spouse's 
plan. I am not going to use my employer's plan. Because it 
might be cheaper. It might have different benefit levels.
    Mr. HOLAHAN. There are a lot of difficult design issues 
in----
    Mr. CAMP. My view----
    Mr. HOLAHAN. I don't know how they dealt with that, to be 
honest. I didn't see that.
    Mr. CAMP. My read of the bill is that that employer would 
still have to pay an 8 percent tax. So if the employee made 
$100,000, the employer would still be on the hook for $8,000--
--
    Ms. POLLITZ. Mr. Camp.
    Mr. CAMP [continuing]. Even though that employee was 
covered.
    Ms. POLLITZ. I believe there was a general provision in the 
bill that allowed for a delegated authority to the Secretary to 
arrange for accounting rules to take care of problems like 
that. I don't know that it is specified in the bill, but it is 
acknowledged that there would need to be accounting rules about 
how families are covered when there is more than one source of 
coverage, and that those will need to be addressed.
    Mr. CAMP. Yes. The bill, as written now, would indicate 
that that tax by the employer has to be paid. It wouldn't 
necessarily change anything. The family doesn't pay that; it is 
the employer's payment.
    I also have a question, Dr. Holahan. The health choices 
commissioner who would run the exchange, what protections are 
there in the bill to ensure that there is the necessary 
independence from the President and the Health and Human 
Services Secretary, given that this person would be running the 
health care--the government plan? What protections in the bill 
are to ensure that that is an independent position?
    Mr. HOLAHAN. I don't think I can answer that. I didn't read 
that part of it.
    Mr. CAMP. Okay. It is my understanding there aren't any 
such protections in the bill, and I think that is one of the 
concerns that we would have.
    Mr. HOLAHAN. As I said in my opening remarks, I would agree 
with that. There has to be separation.
    Mr. CAMP. Thank you.
    I see my time is expired, Mr. Chairman. Thank you very 
much.
    Chairman RANGEL. Well, I have talked with staff. And as we 
told you yesterday, we think the bill is clear that an employer 
that offers insurance will not be penalized merely because one 
of the employees would want to enjoy the benefits under another 
plan.
    But in an effort to show the direction in which we want to 
go, we are prepared to accept Republican language to make it 
abundantly clear that if he is offering the insurance, it 
doesn't mean that the employee has to accept it. So there is no 
penalty involved.
    I would like to yield to the Chairman of the Health 
Committee.
    Mr. STARK. Thank you, Mr. Chairman. And thank my colleagues 
for their patience. I think it is important to note that in 
this draft proposal, there are still many issues that are 
undecided.
    But I did feel that it is important to note that the--well, 
there has been a good bit of discussion about a Canadian 
system, which the public plan, I would suggest, is not. There 
is basically nothing in the public option that would create a 
Canadian-style system. Dr. Gratzer indicates that it would be 
important to have preventive health. I believe that we have 
eliminated copays for preventive procedures, which should 
increase preventive health.
    Canadians don't get their health care via their employer. 
Private insurers do not exist in Canada offering comprehensive 
health benefits. There are province-wide caps on spending in 
Canada. And these are four major elements of the Canadian 
system that are not at least in this discussion draft.
    So that I would just like to make crystal clear that this 
is an attempt to save money, as they say, bend the curve, and 
also a question to make sure that everybody contributes. 
Beneficiaries will contribute. Employers will contribute. 
Taxpayers will probably end up contributing. And providers 
certainly will.
    Dr. Gratzer has suggested that physicians ought to set 
their own prices. They are currently the highest-paid group of 
people in America, averaging substantially over $250,000 a 
year, many making $6 or $700,000 a year. And I have repeatedly 
said I fail to extend much sympathy to the $600,000-plus 
physicians who are back here looking for more, particularly in 
this time when so many Americans are just looking for a job.
    So that I think we have to move ahead. One of the things 
that was in this--whoever wrote this silly $3 trillion analysis 
managed to miss 500 pages of the text, and I wonder what else 
they missed, because they didn't talk about the savings in the 
bill.
    And also, I must say, in the analysis they said that in 
contrast to the Senate version, our version is more fiscally 
prudent and effective. Now, given that CBO has scored the 
Senate version at around 1 to 1.6, this certainly indicates 
that we are doing a lot better.
    So I hope we can continue to analyze the bill, and try and 
keep our analysis of it somewhat close to reality, and come up 
with a bill that will end up having more than 95 percent of the 
American public with an affordable quality access to medical 
care.
    Thank you, Mr. Chairman.
    Chairman RANGEL. Thank you, Chairman Stark.
    I would like to recognize Mr. Herger, who has spent quite a 
bit of his legislative career working on health reform.
    Mr. HERGER. Thank you, Mr. Chairman.
    Dr. Gratzer, advocates of a government-run care program 
often point to Canada as a model for the U.S. to follow. 
However, your experience shows that many Canadians can't find a 
family physician, and those that do often face long waits if 
they need followup care. In fact, some patients even die while 
waiting to receive treatment.
    Could you please elaborate?
    Dr. GRATZER. I thank the Member for the question. There is 
such a severe physician shortage in Canada that there are small 
towns where if you win the local lottery, you don't get money 
to pay off your mortgage. You don't get a boat. You don't get a 
new house. You get a trip to the family doctor.
    One in six Canadians, according to the government's own 
statistics, are actively looking for a family doctor and can't 
find one, the shortage is so severe.
    Even the Supreme Court of Canada--arguably, by the way, one 
of the most liberal supreme courts in the western world--wrote 
in a decision, writing for the majority, according to the chief 
justice, that access to wait lists is not access to health 
care.
    The Canadian system rations. The British system rations. 
The Swedish system rations. Right across the board, you see the 
same thing--not according to my statistics or right-wing think 
tank statistics; according to even their government statistics.
    Now, the question is, is any of this relevant today? And 
Mr. Stark has suggested that it is irrelevant because we are 
just talking about a public plan. But a public plan would 
inevitably lead to a government plan, and inevitably lead to a 
further skewing of the field, 120 million Americans taking up 
public insurance, and ultimately you are well on your way to a 
Canadian-style system. That is the danger.
    Look north of the 49th parallel, and you don't find a 
compassionate system. You find people waiting, and to use your 
words, in some cases dying.
    Mr. HERGER. Thank you. On a different issue, competitive 
effectiveness research, if done right, can be an important 
source of trustworthy information for patients and doctors. I 
am concerned, however, that if it is done wrong, it could take 
us down the path of countries like the U.K., where government 
agencies get in the middle of the doctor-patient relationship 
and decide whether or not to cover a medical treatment based 
solely on its cost.
    I have introduced bipartisan legislation that would 
prohibit the Federal Government from using competitive 
effectiveness research to make cost-based coverage 
determinations, while also ensuring that research is conducted 
transparently and with adequate opportunity for public comment.
    Dr. Gratzer, do you believe it is important for health 
reform legislation to include these kinds of safeguards to 
protect the doctor-patient relationship?
    Dr. GRATZER. Absolutely. I am a huge believer in studying 
what is effective and what isn't. You know, in my other life I 
am a practicing physician. As a psychiatrist, I tap the CATIE 
study funded by the NIMH all the time. It was a direct head-to-
head comparison of different anti-psychotics. It literally 
influences my practice every day. That is funding that worked 
and helped people.
    On the other hand, one must be enormously careful not to 
follow the examples of countries like Britain, where you have a 
committee of really smart, well-meaning people who end up 
making decisions that they ought not to. There is a right way 
of doing this and a wrong way of doing this. I fear in the 
stimulus bill we took the wrong tack. But I applaud your 
efforts and the bipartisanship it has enjoyed. That is the 
right way we ought to do it.
    Health care is a black box. We are power consumers. No 
matter whether you agree with a single payer system or a 
government-run system or, as you and I do, a more private 
system, we need to inform individuals more correctly--not 
through government rationing committees, but through better 
information to consumers.
    Mr. HERGER. Dr. Gratzer, again, thank you very much. I 
believe we all agree--Republican, Democrat, whoever we are--
that the system needs to be fixed. But it needs to be repaired 
and fixed in a way that is going to make it better, not make it 
worse. So thank you very much for your testimony.
    Thank you, Mr. Chairman.
    Chairman RANGEL. I would like to recognize a senior Member 
of our Committee, Sandy Levin.
    Mr. LEVIN. Well, we are having, I guess, a grand debate. So 
let's continue it.
    Dr. Gratzer, in your testimony you say--I think you mean it 
humorously--the honored scientific observation that if it walks 
like a duck and it quacks like a duck, it is a duck. We are not 
talking about a duck. It is a straw man.
    I live next to Windsor. We are not proposing a Canadian 
system, and there is no way we are going to allow the opponents 
of reform to mischaracterize what we are proposing.
    You talk about the rationing of health care in Canada or in 
Britain. One of the problems is, and we have a strong health 
care system in some respects, but the present American system 
rations health care. There is a horrible difference in the 
availability of health care for Americans in this country. And 
we have a system that needs reform.
    I think you said you are a libertarian. You say it 
straight. Essentially, you talk about the American system. That 
includes Medicare. You essentially would dismantle Medicare. I 
think you would.
    You talk about price controls. We instituted some control 
of reimbursement costs for hospitals in Medicare. You would 
turn that over to, essentially, competition without any 
government role. At least that alternative is said essentially 
straight. But America has essentially rejected it. They don't 
think Medicare is a Canadian system of health care.
    So if there is any hope for a bipartisan approach, and I 
hope there is, to reform our health care system, it will not be 
possible if the main effort of those who oppose what we are 
proposing is caricature. This is not a duck. That is a straw 
man.
    And I want to say to Mr. Camp, it is true we do not at this 
point indicate how we will pay for it. And you bring out a 
study--I don't know, really, its origin--about 3\1/2\ trillion. 
We will see what CBO says. But I don't think that kind of a 
study should scare us into inaction.
    And you also mentioned the problem of where both the 
couples, both work. You know, from Michigan, we should be 
sensitive to that because we have had a system where both 
people work. Essentially, one employer is paying all the costs 
for both people. And in 1993-1994, a plan that did not succeed 
attempted to address that. And I think it is important that we 
face up to the issue, but without caricaturing what it is all 
about.
    So Dr. Gratzer, you say that there can't be fair 
competition with government involvement. We will see. The 
reason that we have proposed focusing on reform and then 
focusing on how we pay for it is because the system needs to be 
revised.
    The reimbursement structure today that we have in Medicare 
and beyond for physicians is totally unworkable. It is totally 
unworkable. And what our proposal does is attempt to begin to 
address an unworkable system and an unfair system of physician 
reimbursement.
    And those of us on the majority side want us to examine how 
we go even further. And I think to say that a public plan is 
socialism or is Canadian misses the point. We want a public 
plan in part so that there will be more competition to address 
issues of reform. That is one of the strengths of a proposal 
that includes an option for a public plan.
    Mr. CAMP. Mr. Levin, would you yield briefly? You used the 
words characterizing your plan. I am just trying to find out 
what it says.
    Mr. LEVIN. I said caricature.
    Mr. CAMP. Caricature. On page 115, it says, ``The employer 
shall make a timely contribution to the health insurance 
exchange if an employee declines such offer but obtains 
coverage in an exchange.''
    So my read of the plain language of the bill is that an 
employer will be required to make that 8 percent. We can debate 
whether that is the right thing to do. I think at this hearing 
we are just trying to find out what does the bill do.
    Mr. LEVIN. Okay. Let me take back my time. Let's talk about 
that issue without caricaturing the plan.
    It is a problem where both work, and one employer is paying 
insurance for both. That is a problem. Let's discuss this on a 
bipartisan basis, whether the present proposal adequately 
addresses it or not. But don't caricature that provision or any 
other provision.
    For you to come here and essentially say what we are 
proposing is a Canadian system is dead wrong.
    Chairman RANGEL. The Chair would like to recognize a 
continuous service hero, Sam Johnson.
    Mr. JOHNSON. Thank you, Mr. Chairman.
    Ms. Pollitz, you state in your testimony, ``Defining a 
national standard for health insurance is crucial,'' and that, 
``an essential benefit package is necessary.''
    I was wondering if you think the benefit package should 
include acupuncture like they do in California?
    Ms. POLLITZ. No. I think we could get by without that.
    Mr. JOHNSON. No? Should it be required to cover the cost of 
prosthetic devices, as it is in New Jersey and California?
    Ms. POLLITZ. Yes. I think prosthetic devices are very 
important for people with disabilities and would be needed.
    Mr. JOHNSON. How about covering in vitro fertilization 
costs?
    Ms. POLLITZ. I am not sure I have an opinion on that.
    Mr. JOHNSON. Well, you know, a health insurance policy in 
New Jersey costs significantly more than a policy in the 
Midwest mainly because of excessive mandates. And I am 
concerned that our government bureaucrats in D.C., who in this 
bill are tasked with making decisions on what to include in an 
essential benefits package, will include too many mandates.
    Dr. Gratzer, isn't it likely, by giving all this power to 
one individual, they will succumb to the same pressures that 
landed New Jersey into their high cost health coverage 
situation?
    Dr. GRATZER. Or New York or so many States. You know, I 
walk out of the think tank in New York City, and if I wanted to 
buy a policy out of the individual market, I would pay three 
times more for a policy, as you know, than I would if I took 
the Metro north 45 minutes to Connecticut. Three times more for 
a policy that covers basically the same stuff for me.
    So absolutely, these mandates, built with the best of 
intentions, drive up costs. And we see them right across the 
United States. And the danger with a health insurance exchange 
with some czar of regulation is that we just keep adding and 
adding and adding until we get to the point, like New York 
State, where you have the most fair and equitable policy 
available. Just no one can afford it.
    Mr. JOHNSON. Yes. You are right. But, you know, we could 
have a health czar that could solve all those problems. Right?
    Ms. POLLITZ. Mr. Johnson.
    Mr. JOHNSON. Yes.
    Ms. POLLITZ. I just wanted to correct one thing for the 
record. Health insurance in New York and New Jersey is more 
expensive than in most other States because those two States 
require health insurance companies to sell coverage to people 
and to leave coverage with people when they are sick. And in 
all other States in the individual market, that is not the 
case. The pool excludes people who are sick.
    I live in the State of Maryland, which is recognized as 
being the champion State of health insurance mandates. I 
believe we have more in Maryland than any other State. And yet 
individual policies are much cheaper in Maryland than they are 
in New Jersey, again for that very same reason----
    Mr. JOHNSON. Private insurance.
    Ms. POLLITZ [continuing]. That sick people can't buy the 
coverage.
    Mr. JOHNSON. Private insurance, though.
    Ms. POLLITZ. Yes. Private insurance.
    Mr. JOHNSON. Oh, okay. But we are about to overturn that, 
are we not?
    Ms. POLLITZ. Yes. I hope you are.
    Mr. JOHNSON. Dr. Gratzer, your experience in the Canadian 
health care system seems to suggest reform that focuses on 
guaranteeing coverage. And it won't necessarily produce a 
quality health care delivery system. And your testimony also 
speaks to the fact that Canadians can't find a family 
physician, and those that do often face long waits if they need 
followup care. And I am told also that in Canada, some lottery 
winner accesses a physician.
    You know, I am not sure that this type of system, and I 
think we are having trouble in this country, too, finding 
primary care physicians. Would you comment?
    Dr. GRATZER. Well, undoubtedly there are problems with 
primary care access in the United States. Emergency room care 
also is problematic in terms of overcrowding. But in our 
efforts to achieve better reform, we should be careful not to 
end up worsening the system.
    There is no plan right now put forward by Congress for 
single payer option before this Committee. And yet when you are 
going to suck up 120 million people out of private plans and 
put them into a government system, I fear that is the road we 
are going down.
    I know that your colleague is very concerned that I would 
take apart Medicare were I to be elected President. And for the 
record, because of constitutional limitations, I will not be 
running in 2012. But it doesn't matter what I am going to do 
because who cares what I really want to do? The question is 
what you guys are going to do because you are in this 
important, august Committee and before Congress.
    And what you should be careful of is looking at this 
temptation of government and expanding Washington's reach 
because inevitably, you get to systems like you see in Canada 
or Britain or across western Europe.
    Canada, incidentally, didn't start with a single payer 
system. Canada started with hospital construction grants in the 
1950s, and then hospital insurance in the 1960s, built, by the 
way, to compete against private plans; and then physician 
reimbursement in the 1970s. And then finally, in 1984 because 
costs kept rising and so many people were in the public system 
anyway, they just went out and banned private coverage 
altogether.
    That is the path that I fear Congress is starting to walk 
down with this draft legislation, sir.
    Mr. JOHNSON. I agree with you.
    Thank you, Mr. Chairman.
    Chairman RANGEL. It is amazing how the language in 
opposition to this bill is basically the same language that was 
heard with Medicaid and Medicare: Keep government out of it. 
And now it has proven to be one of the most efficient delivery 
of services.
    No one understands this problem better in the Congress than 
Dr. Jim McDermott. And I thank him for the great contribution 
he has made over the years, and I know he is thankful that the 
moment has come to change the inequities. Dr. McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    The President has said that cost is the real problem here. 
Access is much easier to deal with than controlling costs. And 
I want to talk to you, Dr. Quentin Young, who I have known for 
not the whole 61 years you have practiced medicine in Chicago, 
but certainly a whole lot of them.
    And one of the things you said was that you thought that 
this plan that we have before us would put the sick people in 
the government option and leave the healthy ones for the 
private insurance industry.
    Now, we built in guaranteed access so anybody can get into 
both a private plan or the public option. We said there can be 
no exclusion for preexisting conditions in either the public 
plan or the private plan.
    How do you think the insurance companies will push the sick 
ones, as they do presently--how are they going to get around 
this bill and push the sick ones into the government plan and 
leave the healthy ones who pay premiums but don't get any 
benefits?
    Dr. YOUNG. Well, the recent history, I mean, the last 20 or 
30----
    Mr. MCDERMOTT. Hit your button.
    Dr. YOUNG. Thank you very much. The recent history of our 
national experience with private insurance is the answer to 
your question. Private insurance has legendary skills in 
turning any system to their selective advantage. Speaking of 
Medicare, a superb achievement and still the brightest star on 
the insurance horizon in this country, nevertheless it has been 
compromised by the insurance skill, sometimes aided with 
congressional bills.
    They have such things as Medicare Advantage. As you are 
probably aware, the President has said he wants to end that 
scam, which briefly creates a separate pool with a 12 percent 
subsidy per capita. And the insurance companies have 
dramatically been able to attract people who are under the 
Medicare average as incoming patients, and people when they 
leave the plan remarkably are much higher than average and they 
go to the public side.
    I would describe Medicare Part D, the so-called drug 
benefit, which is a catastrophe for people who need to buy a 
lot of drugs, as an example of the big PhRMA creating its 
tentacles around a much-needed program. It was tragic that 
Medicare enacted in 1965 was a spectacular breakthrough, but 
remarkably it had no drug benefit. And I think that was an 
industry that was able to influence the legislation at the 
time.
    So my answer, Congressman, is that they are good at that 
and they will continue to do it. And I want to expand a little 
bit in answer to your question. The problem in this country is 
not government medicine. It is private insurance. And private 
insurance isn't health. It is a business. And it is remarkably 
skilled. Everybody knows we are talking about one-sixth of the 
whole gross domestic product.
    And let me give another figure that doesn't seem to be 
coming up here. We are spending twice per capita, something in 
the neighborhood of 8,000 per person in this country, for our 
health system, despite the fact that we have, as we all know, 
45 going on 50 million uninsured.
    And I hasten to add, before somebody adds for me, that that 
doesn't mean they don't get any care. Indeed, they frequently 
get very expensive care in the ER. But the point is they are 
not covered. And 50 million more are underinsured.
    And we have--the other nations of the world, which I am not 
their representative but I have to defend them, the 
achievements of everyone in the countries that have been 
revolved for government medicine are spectacular and much more 
popular with their nation.
    The Canadians, for example, when polled, 96 percent prefer 
their system to the American system, which they know. The 
border is very porous. As Congressman Levin would point out, 
they know what they have and they know what we have, and they 
like theirs 96 to 4. People have pointed out 4 percent is the 
same percentage of Canadians who think Elvis Presley is alive, 
but that is not----
    Mr. MCDERMOTT. Can I get you to focus on one other issue?
    Dr. YOUNG. Please.
    Mr. MCDERMOTT. And that is how does a single payer system 
control costs? Dr. Gratzer says that the Canadian system 
ultimately was--the costs were getting out of control, and so 
ultimately they passed the umbrella law in Canada to control 
costs.
    Dr. YOUNG. Well, I think single payer is the only 
arrangement for payment that allows you to control costs. As is 
well known, there are great variations in activities of 
doctors, good faith and not in good faith--too many operations, 
not enough operations, depending on the incentive.
    The single payer system, because everything is paid for 
through a single payer, identifies doctors' practice patterns. 
And that is used as a guide to best practices, not Big Brother 
standing over you repeatedly saying, you can or cannot do this. 
Usually that is ascribed to the British system, erroneously or 
dishonestly.
    But when you have control of all the transactions, which is 
by definition what a single payer system does, you can see 
abnormalities. And there are, Congressman, huge variations in 
this country that can't be explained rationally by the various 
public health areas of this country. I think there are 11 of 
them.
    There are variations in, for example, hysterectomy, as 
three is to one. Now, some may be doing too many; some may be 
doing too little. But best medical practice has to be sought. 
The single payer system allows you to identify these patterns.
    And the great tradition of medicine, going all the way 
back, of using experience to define behavior can be implemented 
because you have the knowledge. In a multi-payer system with 
the variety of inhibitions and other distortions of 
utilizations, you don't know.
    And as a result, we American people don't--despite the fact 
that yes, ours is the best in the world when you can get it, 
there are tens of millions of people that can't get near that 
best. And that is why we are here and you are here.
    But I want to, if I may, as an extension of my answer, end 
the myth that private is good and public is bad. It ill 
behooves the Congress, who enacted it, to neglect the 
superiority of the NIH, for example, the best system in the 
world for stimulating research, and is the reason for America's 
primacy in biomedicine.
    And indeed, the VA system, which now sets the standards for 
quality for the whole world, and I would add military medicine, 
with its mission defined, it is fantastic the achievements they 
have been able--these are all government medicine. For the 
naysayers, I would like them to find whether they want to 
abolish VA and Medicare.
    And so my experience, those 61 years you were talking 
about, by and large the private control of finances is bad. I 
can't name a single improvement that is a result of putting 
health insurance in the hands of the private sector.
    So I would plead that this Committee have an orientation 
that seeks to bring health care to all the American people at 
the best price, and even if it means bucking against right-wing 
criticism of government medicine. Thank you.
    Mr. MCDERMOTT. The Chairman is being more than generous.
    Dr. YOUNG. I know. And I have been generous, but I have 
been outnumbered.
    Chairman RANGEL. Thank you. Thank you so much for your 
contribution.
    The Chair would like to recognize Mr. Ryan, who has 
authored a bill to attempt to deal with this problem.
    Mr. RYAN. Thank you, Chairman.
    A couple of points I think we ought to dig into in this 
Committee. And hopefully we can have some more hearings on this 
because this is obviously probably the most important subject 
we are going to tackle here this year.
    The one point is, we oversee Medicare in this Committee, 
and the trustees have just told us that Medicare right now has 
a $38 trillion unfunded liability. So we can talk about how 
efficient that system is. The system is going broke in just a 
few short years. And if we want it to be there for the 
generations alive today, we would have to literally set aside 
$38 trillion invested at Treasury rates in order to pay the 
bills for Medicare.
    And the question we ought to be asking ourselves is: Are we 
creating a new program, a new entitlement program, that will 
rival the size and liabilities of Medicare? And what is 
unfortunate about this debate is we are not going to get scores 
outside of the 10-year window.
    Yes, we will probably in a number of days get scores from 
CBO and Joint Tax showing us what this thing will cost in 10 
years. But they are not going to give us--and we have already 
been asking for them--they are not going to give us scores of 
what it will cost in the out years.
    So I think it is just a point worth making because we ought 
to know what kind of liabilities we are creating here and what 
kind of new entitlement this will be in its size.
    The second point, and I would like to get into something 
with you, Dr. Gratzer, is I will take my colleagues at their 
word that their goal here is not to create a Canadian-style or 
a British-style system. Unfortunately, just looking at this 
bill from an actuarial standpoint, from a mathematical 
standpoint, I believe it is impossible to conclude that this 
does not create such a system. And here is why we believe this 
point.
    No. 1, a public plan as designed in this bill has such a 
stacked deck, has such a huge competitive advantage over the 
private sector, it is impossible to conclude that the private 
sector won't buckle under this kind of a confrontation.
    What are the advantages? Well, the public plan doesn't have 
to pay taxes. The private sector does. The public plan gets to 
dictate the prices it pays to providers. We are going to cut 
Medicare by, I don't know, $4 or $500 billion, and then pay 5 
percent above that for 5 years, and then Medicare after that. 
The private sector doesn't get to dictate its prices it pays to 
providers.
    And the other issue is the private sector does have to have 
capital reserves set aside. The public plan doesn't have to do 
that. The private sector does have to pay for and account for 
its employees and their benefit and wage costs. The public plan 
does not have to do that.
    So there are enormous, enormous advantages. It is kind of 
like my 7-year-old daughter's lemonade stand competing against 
McDonald's. It is an impossible stacked deck whereby actuarial 
firm after actuarial firm, expert after expert, are telling us 
what is going to end up happening here is the private sector 
will not be able to compete with the public plan.
    And remember, the people who decide for the most part who 
gets health insurance in this country are the employers. 
Individuals don't choose this. Employers choose this. And most 
people in this country like their employer-sponsored care. Most 
people would like to keep what they have.
    But the talking point, that if you like what you have, you 
can keep it, just doesn't add up when all these actuaries are 
telling us, an employer faced in a situation of ever-higher-
growing prices for their private insurance, because of the 
overwhelming advantage of the public plan, will be faced with.
    Pay the 8 percent payroll tax that is indexed at inflation, 
which is predictable--they can budget for that--or pay this 
unpredictable, ever-higher-growing private health cost. And 
what are all the employers telling us? They are going to dump 
their people on the public plan. And that is what the actuaries 
are telling us. All of the actuaries are telling us this.
    So it is not a number. It is not a measure of whether it is 
going to be 120 million people or 64 million people or 23 
million people. What it is is people are going to get dumped 
onto the public plan, and we will have a new program which will 
rival the size and liabilities of Medicare.
    And my question, Dr. Gratzer, is this: If the intention of 
this thing is not to have Canadian-style health care today, the 
clear trajectory of this plan is that it will be Canadian-style 
health care tomorrow. And the authors of this claim that this 
is better to get our hands on health care costs.
    So in the out years, we are worried. Medicaid, Medicare, 
and then this new entitlement which I don't think we have a 
name for this yet, will be so expensive we are going to have to 
contain costs in order to, you know, make sure that the next 
generation doesn't get swallowed up in debt and high taxes.
    And my question is this: Under those models, do they 
contain the costs? I mean, we know rationing is the method of 
containing costs. But even with all of this rationing, even 
with all of these waiting lines, do they actually achieve the 
cost containment that these goals are intended to achieve?
    Dr. GRATZER. Congressman Ryan, you ask a great question. 
Undoubtedly we are concerned about cost inflation of the 
private system in the United States, but also the public system 
in the United States.
    I would point out, though, when you look across western 
Europe and you look across Canada and their experiences with 
public health care, one finds cost containment isn't as great 
as one would assume. I will throw out some numbers, and you 
will find them also in my written statement.
    Ontario's health budget is growing by 7 percent over the 
next 3 years, Quebec 6 percent. In Britain, I will say 60 years 
of data where health inflation has outstripped real inflation 
by 3 percent, on average, every year. In Ireland, my last 
statistic, one finds that they actually had de-inflation this 
May of--they had 3.5 percent de-inflation this May, and yet 
health costs are growing at an annualized rate of 4.5 percent.
    My friend Shakira Delmia has done 30 years' worth of 
analysis, and suggested at best a mixed picture on public 
containment of costs. But you still have the rationing, the 
waiting lists, and the lack of availability of modern care.
    Mr. RYAN. Medicare is at 6\1/2\, Medicaid is at 7\1/2\. 
Thank you.
    Chairman RANGEL. Well, I think all of you have done a 
pretty good job of trashing the health care system in Canada 
and in Ireland and in Europe generally. But by unanimous 
consent, I would like, Mr. Ryan, to introduce a solution for 
the record because one of the things that we need is to find 
out, if not this bill, what?
    I would like to recognize Mr. Neal. But before I do, I want 
to make it clear that we have a vote on the floor, and the 
Ranking Member and I agreed that to the best we can, we will 
keep the Committee going and rotate. And since this is a single 
vote, those who want to go and come back, this would be the 
right time to do it.
    And Mr. Ryan, would you like to start your testimony or 
vote or whatever?
    Mr. NEAL. We share a similar background, Mr. Chairman, 
but--Mr. Neal and Mr. Ryan. You called me Mr. Ryan.
    Chairman RANGEL. I am so sorry.
    Mr. NEAL. I was just about to give him a bad time, and he 
left.
    [Laughter.]
    Mr. NEAL. Thanks, Mr. Chairman. I find it ironic that our 
friends on the other side all of a sudden profess this newfound 
interest in adding to the deficit. Their Medicare legislation 
in 2003 added $500 billion to the deficit. Two point three 
trillion dollars of their tax breaks for wealthy people were 
added to the deficit.
    The war in Iraq is headed toward a trillion dollars added 
to the deficit, much of it borrowed money. And for them to 
complain today all of a sudden with this newfound conscience of 
debt spending I think falls by the wayside under the magnifying 
glass of critical analysis.
    Let me, if I can--because a couple of you have mentioned 
Massachusetts--let me give you the framework, as an architect 
might. The Massachusetts plan was proposed by a Republican 
Governor who launched a campaign for President in some measure 
based upon that plan; a legislature that is--I think there are 
four or five Republicans in the State Senate. There are 19 in 
the House of Representatives out of 160. But the Governor did 
it with a Democratic legislature.
    The plan was blessed by Senator Kennedy, whose credentials 
on that I think are unrivaled in the Congress. And there have 
been some bumps. I don't think anybody would argue with that 
notion. However, it has been well met by business, labor, and 
advocates across the State. And in fact, the argument might be 
made, I think with accuracy, that the uninsured part of the 
population has decreased dramatically, the suggestion being 
that there is some skin in the game for everybody.
    So with that, Ms. Pollitz, could you perhaps give us some 
thoughts about that plan based on your knowledge?
    Ms. POLLITZ. Well, John and his colleagues have studied it 
far more closely than I.
    Mr. NEAL. Let me go back to Dr. Holahan, then.
    Ms. POLLITZ. But it is a terrific success, what has been 
accomplished in Massachusetts. It is 3 years in the making. 
There are certainly still some growing pains. Not every problem 
has been worked out, but the State has achieved a coverage rate 
now of 98 percent.
    Employer-sponsored coverage has increased. Individual 
responsibility, individual purchase of coverage, has increased. 
They have expanded public programs and created new subsidies 
for private coverage similar to what is in the draft bill 
today. People are overwhelmingly supportive of the program and 
are willing to do their part, and have really kind of stepped 
up to make it work as well as it has, which is most impressive.
    Mr. NEAL. About 97 percent of the people of Massachusetts 
are covered right now.
    Dr. Holahan, would you comment, please?
    Mr. HOLAHAN. I think Karen covered the most important 
things. I think there is a set of surveys that have been done 
annually that have tracked what has happened, and they continue 
to show reductions in out-of-pocket costs and burdens that 
families are facing and improvements in access on almost all 
measures.
    And so I think in addition to gaining coverage, I think on 
other things that you care about in terms of measuring the 
success of a program, Massachusetts has done quite well.
    In the early years, there was a jump in costs that was 
alarming to a lot of people. But a lot of that was explained by 
the fact that sicker-than-average people were the first to 
join; that the people who were fully subsidized as opposed to 
partially subsidized were the first to join; and they 
miscounted the number of uninsured low-income people they are 
dealing with because of survey issues.
    But I think that has generally slowed down. I think the 
State does face long-run cost issues that they are going to 
have to wrestle with. But, you know, on balance it has been a 
big, big success.
    Mr. NEAL. Thank you.
    Dr. Gratzer, would you list Medicare as one of the maybe 
top 20 legislative accomplishments in American history?
    Dr. GRATZER. I think Medicare did an enormous amount to 
help elderly Americans.
    Mr. NEAL. Would you say that it was successful?
    Dr. GRATZER. I would say that aspects of it have been 
enormously successful, though there are cost problems today and 
there are cost problems around reimbursement and other aspects.
    Mr. NEAL. During your medical training, did you receive any 
reimbursement under graduate medical education from Medicare?
    Dr. GRATZER. I actually did my training in another country, 
sir, so the answer would be no. But many of my colleagues did, 
absolutely.
    Mr. NEAL. Would most of your colleagues professionally have 
received some benefit under Medicare under GME?
    Dr. GRATZER. I would suspect all of them did.
    Mr. NEAL. I didn't say that. I said would most of them.
    Dr. GRATZER. I suspect all of them, yes. I agree.
    Mr. NEAL. Okay. How would you handle the GME portion of 
Medicare now?
    Dr. GRATZER. I think that is a topic for another day. And I 
am, to be blunt, not a Medicare expert. But I would suggest 
that both in the public system and the private system, we have 
enormous difficulties.
    We see costs rise in both systems, costs that are 
unsustainable.
    Mr. NEAL. I acknowledge that. My point is that Medicare has 
been transformative. It has changed the way tens of millions of 
people have lived their lives.
    Dr. GRATZER. Absolutely.
    Mr. NEAL. Overwhelmingly for the better, I think you might 
acknowledge.
    Dr. GRATZER. Absolutely.
    Mr. NEAL. Thank you, Mr. Chairman.
    Chairman RANGEL. I would like to leave on that positive 
note, but Doctor, you have made it clear that we haven't 
impressed you with our health reform plan. Has there been any 
Republican plan offered to you to study that you would think 
could do a better job?
    Dr. GRATZER. I think there are a few proposals out there 
that I like. And I don't think that there is one plan that 
necessarily excites me. I think plans, particularly bipartisan 
plans, that look at prevention and wellness excite me.
    Chairman RANGEL. Could you tell me the author? Is the 
Republican leadership supporting any one of these plans that 
you find to your liking?
    Mr. NEAL. There are aspects of different plans I like. I 
mean, Congressman Ryan's plan about a tax credit I think has 
some worth in it. I think on the Senate side, Senators Bennett 
and Wyden have some exciting ideas that they are conveying.
    Chairman RANGEL. Well, with all due respect to the Senate, 
I really was trying to think of the House of Representatives 
because right now we don't have much competing in terms of a 
health program before us, even though we are getting more than 
our share of criticism.
    So since you and I are from New York, if in the course of 
your thinking that you think there is something that we could 
improve upon, I look forward to meeting with you in New York 
and see what we could do.
    Dr. GRATZER. I would be excited to draft something with 
you. But as I suggested before, I think we need some policy 
reform around health, not just health care. I think we need 
some regulatory reform to increase competition on insurance 
companies. And I also think we need some tax reform that 
doesn't--a system that won't discriminate against the self-
employed and the unemployed.
    Chairman RANGEL. That goes unchallenged. The thing is, how 
do we get together and do it?
    Mr. Linder, thank you so much for your patience, and I 
welcome the opportunity to allow you to ask questions.
    Mr. LINDER. Thank you, Mr. Chairman.
    Ms. Pollitz, you referred to the Massachusetts model being 
quite a success. Still have some problems to be worked out. The 
States' overall costs on health programs have increased 42 
percent since 2006. For an individual earning $31,213, the 
cheapest plan in Massachusetts can be $9,800 in premiums and 
out-of-pocket costs.
    The longest wait times in Boston to see a physician, almost 
50 days. Double the costs of--double the time of Philadelphia. 
The government-run Medicaid plan, MassHealth, denied the 
highest share of medical claims in the State, four times more 
than the private plans denied.
    It has not reduced the rate of adults seeking non-emergency 
care in an emergency room. Both before and after reform, 15 
percent of adults and 23 percent of low-income adults sought 
care in an emergency department.
    Is that a success story?
    Ms. POLLITZ. I think, Congressman, Massachusetts has been a 
success story and they clearly have not solved all the 
problems. Massachusetts is unique, I think, from most other 
States. They have always had, even prior to reform, very, very 
high costs.
    They have always had a particular shortage, I think, of 
primary care physicians. Many of the best medical schools in 
the country are located in Massachusetts, in Boston, and many 
of the best medical schools around the country don't even have 
a department of family medicine. They are just kind of too good 
to train primary care physicians.
    So there have been some structural problems that are 
throughout the Nation that have been particularly intense in 
the State of Massachusetts for a long time, even leading up to 
reform. And they still have not all been addressed.
    I was on a panel yesterday with someone from the 
Commonwealth Connector, who talked about how tackling the cost 
problem is particularly difficult in that State, that the 
Boston area in particular is one where there has been not only 
a high concentration of insurers but also a very high 
concentration of providers.
    And the competition between, you know, concentrated 
providers and insurers you would think would be kind of, you 
know, King Kong vs. Godzilla and someone would be lying on the 
ground at the end, but that is not the case.
    Instead, the high prices are demanded by the providers and 
just passed through by the insurers. And they haven't yet been 
able to get a handle on that. And what she testified yield was 
that if there were a public plan option that were available in 
addition to the mix of private plan options that they have made 
available, that that might begin to change.
    Mr. LINDER. Let me comment just briefly. But first of all, 
Dr. Gratzer, do you have a comment on that?
    Dr. GRATZER. I just want to add, you know, if you are 
suggesting that costs haven't been contained in Massachusetts, 
even she has acknowledged that. I will just throw out a few 
figures in terms of the rise in health insurance premiums 
between 2007 and 2009.
    In Massachusetts, 7.4 percent, 2007; 8 to 12 percent, 2008; 
and 9 percent is forecasted for this year. Outside of 
Massachusetts, 6.1 percent, 4.7 percent, 6.4 percent for those 
same years.
    I would point out for a family of four in Massachusetts, a 
health insurance plan now costs almost $17,000. Nationally, it 
is closer to $12,500. Massachusetts has in no way, shape, or 
form contained costs.
    There are successes there, particularly, I think, for the 
self-employed and those in the small business coverage pool. 
But yes, costs have just continued to rise.
    Mr. LINDER. Thank you. I want to comment on the public 
plans. We have had testimony before this Committee in the past 
that the typical small business spends about 12 percent of 
their payroll on health care costs. Some of the bigger 
companies with Cadillac plans spend as much as 14 to 18 percent 
of their payroll.
    We hear a lot of talk about choice, options. And the 
President says, if you like your program today, you know you 
will have to give it up. But we don't have--our citizens don't 
make these choices. Their employers do. And if the employer can 
pay 8 percent instead of 14 percent, my guess is he is going to 
put the people on--in fact, that is what they tell us. They 
will move their people to the public plan, and there will be no 
choices left at all.
    I don't know why this is considered such a good option. Dr. 
Gratzer.
    Dr. GRATZER. I agree.
    Mr. LINDER. Thank you all. Thank you, Mr. Chairman.
    Chairman RANGEL. Thank you.
    The Chair recognizes Mr. Becerra for 5 minutes.
    Mr. BECERRA. Thank you, Mr. Chairman. And I don't know if 
these charts are ready or not, Mr. Chairman, so I think I will 
just quickly run through them.
    But in something Dr. Gratzer said earlier, I wanted to just 
give him some food for thought. I am sure he is aware of this 
already because he mentioned Canada and Great Britain.
    I am looking at a chart of the infant mortality rates of 
the leading industrialized countries of the world. And as I 
look at this chart--I don't know if we have it available, but 
this, CRS-54, if it could be put up if we happen to have it; I 
don't know if we do--the industrialized country with the 
highest infant mortality rate of those industrialized rates, 
Turkey.
    After Turkey, Mexico. After Mexico and Turkey is the United 
States. Well above Canada, well above the United Kingdom in 
terms of the rates of infant mortality, in other words, 
children, babies, who die early. So our infant mortality rate 
is still very high compared to the two countries you rail 
against, Canada and Great Britain.
    When you take a look at the deaths from medical errors per 
100,000 people in the country, the countries with the worst 
record of having people die from medical errors are Greece, 
Australia, and in third place, the United States, well above, 
once again, the United Kingdom and Canada.
    And so once again, we seem to be doing worse than Canada 
and Great Britain when it comes to the deaths that occur in 
this country simply as a result of medical errors.
    When you take a look at mortality rates, how long do people 
in our countries, respective countries, live, once again 
comparing these industrialized countries, you take a look at 
the worst mortality rate--or, excuse me, life expectancy rate 
of people.
    Turkey is least, has the lowest rate. So their average life 
expectancy at birth is 71 years. There you see the United 
States at 77\1/2\ years. Guess what? Once again, the United 
Kingdom does better in letting people live longer than we do. 
And guess what? So does Canada. And so--way up here. Canada is 
way up here. The U.S. is way down here. And so perhaps there 
are reasons to rail against what Canada and Great Britain do.
    But I have to tell you, if you want to live longer, you 
want to have a better chance of living when you first are born, 
or you want to make sure you don't die from some basic medical 
error, you may be better off living in some of these other 
countries.
    That is why, rather than come with a Canadian model or a 
Great Britain model for American health care, we are coming up 
with a uniquely American solution to that, which offers choice.
    To the issue of choice, I guess it is in the terms of the 
private for-profit health insurance companies because you seem 
to be saying it is good to have competition so long as it is 
only on the terms that the private insurance companies wish to 
have, but not to have it on an equal basis business.
    Because we talk about the fact that there are price 
controls. Medicare, you said, Dr. Gratzer, is price control. I 
would tell you that anybody who has a private health insurance 
company insurance policy cannot go in and negotiate with that 
insurance company on what they wish to pay for a doctor or 
hospital. There are controls that are put in place by those 
insurance companies that doctors have to accept, hospitals have 
to accept, and certainly the consumers who asked to have those 
insurance policies.
    So I guess it is all in the definition, as I think the 
Chairman tried to say with regard to the definition of what is 
fair. I think most of us are going to try to make it so that it 
is not you. It is not me. It is certainly not a private health 
insurance company that is there for profit. And it shouldn't be 
the government who determines your choice as a consumer. It 
should be the consumer's choice.
    So if you have a lot of different options where the 
consumer chooses which plan to select, then it makes no 
difference. If you have an overly burdensome government plan, 
as you would like to describe it, or if you have a very abusive 
private health insurance plan, consumers won't have to go in 
that direction. They can go anywhere they want.
    And so no one need fear being dumped, as some would say, 
into any particular plan because it is not anyone's choice 
where to send that consumer but the consumer's. That is 
hopefully what this unique American solution to health care 
will provide us.
    But Dr. Holahan, I wanted to see if I could ask you one 
question. With regard to this choice, can you have real choice 
when you have a private sector insurance system where in most 
geographical areas of the country there is very little choice 
for consumers because most areas of the country only have one 
or two health insurance providers to begin with that offer 
coverage to Americans.
    And can you really have choice if you shackle, as I think 
Dr. Gratzer would do to the public health insurance plan, the 
opportunity to compete on a level basis, no advantage to the 
public health insurance option?
    Mr. HOLAHAN. I think that is a good point. In many parts of 
this country, there really is only one choice.
    Chairman RANGEL. Doctor, I hope you might be able to submit 
your answer in writing to the Committee. The gentleman from 
California's time has expired, and we have a very long, long 
day ahead of us.
    The Chair would like to recognize Ms. Brown-Waite from 
Florida for 5 minutes.
    Ms. BROWN-WAITE. Thank you very much, Mr. Chairman, and I 
thank the panelists for being here.
    When we look at the Ways and Means Committee, you would 
think that we would be looking at ways and means to pay for 
this, but when subtitle D says, ``to be provided,'' I just 
wanted to list some of the suggestions thus far and get your 
reaction to them, if anyone on the panel wants to jump in. One 
is tax your employer for providing health insurance; two, tax 
your employer for not providing health insurance, tax you for 
owning health insurance, tax you for not owning health 
insurance, tax you for spending your money on health, tax you 
for saving your money for future health-related expenditures, 
tax you for drinking soda and other sweetened beverages, tax 
you for having an alcoholic beverage, tax you for making 
charitable contributions, tax mortgage interest payments, 
increase personal income taxes, energy, pollution tax as a part 
of the cap and trade taxes, increase taxes on American 
companies doing business overseas, increase taxes on domestic 
oil and gas production, raise taxes on oil or natural gas 
obtained from the Gulf of Mexico, raise taxes on domestic oil 
refineries, raise taxes on drilling equipment, raise taxes on 
prescription drugs, increase taxes on dividend income, and just 
last night I put--I have about eight more. I will not go 
through them, but I can just tell you that Americans right now 
in this economy are very concerned. Businesses in most of our 
districts are having their lines of credit called, and when you 
are talking about this kind of additional tax to cover this 
kind of health care when estimates are that if this bill is 
passed, about 120 million Americans will lose their health 
care, I do not see where this is a win/win situation.
    I would ask--and I apologize, I do not--Ms. Pollitz, I will 
just go from one end of the panel to the other end because I 
obviously will run out of time, I would like to have your 
reaction to this?
    Ms. POLLITZ. Actually, if you would not mind, 
Congresswoman, I would defer to Dr. Holahan. I know they are 
doing some research on options for funding health care.
    Ms. BROWN-WAITE. Okay.
    Mr. HOLAHAN. Well, that was a pretty amazing list. I think 
some of those things have to be on the table. I think that what 
we call sin taxes, I think a cap probably starting at least at 
a high level on the employer exclusion and some of the other 
things that you mentioned. And certainly we should exploit all 
the possibilities for savings that we can, including trying to 
reform the way we deal with chronic illness.
    I just want to make a point because the issue of the cost 
of reform has come up several times. There is a huge cost if 
you do nothing. We published a paper about a month ago called, 
``Health Reform: The Cost of Failure.'' If there is nothing--no 
reform, the number of uninsured could go up into the mid-60's, 
65 million roughly in the worst case. The employer-sponsored 
coverage will drop quite a bit. The number of people going on 
Medicaid will expand, that is a cost to government. The number 
of uninsured will mean more uncompensated care that will have 
to be financed.
    Ms. BROWN-WAITE. Sir, did you miss the part about 120 
million will lose their coverage under the proposed plan?
    Mr. HOLAHAN. No, that is not possibly right. That is 
ridiculous.
    Ms. BROWN-WAITE. That is not possibly right?
    Mr. HOLAHAN. No, it is ridiculous.
    Ms. BROWN-WAITE. You think it is ridiculous? Well, sir, I 
really think that employers will be dropping their plan because 
the 8 percent may be----
    Mr. HOLAHAN. But they offer it now and they pay no penalty, 
right?
    Ms. BROWN-WAITE. If they offer it now, there is still a 
question about if someone is covered by the spouse's plan and 
also the percent that they cover of the employee's plan. So I 
think we need to be very careful where we go with this.
    Dr. Gratzer, I would like to hear your comments?
    Dr. GRATZER. With the 120 million figure, by the way, that 
you just quoted is not something, as you know, out of a right-
wing think tank or plucked out of thin air but was a Lewin 
Group analysis.
    I would also point out that Professor Jacob Hacker, who 
really came up with this idea of a public plan auction, he 
called it Medicare Plus, as you will recall, in fact had worked 
with the Lewin Group about 10 years or so ago as he designed 
this specifically to pluck more than 100 million people out of 
the private insurance market. So to suggest that that estimate 
is wrong, it is designed to compete with and overshadow 
eventually the private system.
    Now, as for your list of taxes, I would simply say that we 
are all concerned about health costs. It is curious how much 
more we need to spend and how much more we need to tax to get 
those costs under control. Needless to say, I share your bias, 
we need a more focused plan, a plan that directly helps the 
uninsured who need help, and a more innovative plan, for 
instance with uncompensated care, trying to get over to the 
States to let them innovate. But certainly spending so much 
money that even Paul Klugman says, ``Well, it is not as much 
money as the Bush tax cuts,'' is hardly a great plan for us to 
endorse.
    Ms. BROWN-WAITE. Thank you. I see my time has elapsed. With 
that, I yield back my time.
    Chairman RANGEL. The Chair recognizes Lloyd Doggett of 
Texas to inquire.
    Mr. DOGGETT. Thank you, Mr. Chairman. Just picking up right 
there, we are spending over $2 trillion on a health care system 
now that leaves many Americans out, and we are proposing to 
add, in order to ensure more Americans are covered, another 
$100 billion a year to that system and to finance much of that 
by squeezing some of the inefficiencies out of the existing 
system. That is hardly spending gone wild.
    The notion that compassion is a distinguishing 
characteristic of the American health care system is a fantasy. 
For those people who lack insurance, they do not find much 
compassion in our current system. There is an estimate that 
22,000 people died in America last year because they did not 
have health insurance. The notion that delay would be a feature 
of our system because of the changes we propose in this 
legislation ignores the fact that delay is a major 
characteristic of the current system.
    The American Cancer Society has estimated that an 
individual who has cancer and no insurance has a 60 percent 
greater chance of dying in America today because of the 
``compassion'' that is in the American health care system.
    And, of course, one of the hopes that we have with a public 
plan is to squeeze some of the inefficiency out of that system, 
which has more people in the American health care system today 
who are not providing health care themselves directly than 
those who are providing health care and a significant number of 
people who spend every waking hour of their day trying to find 
a way to deny health care to someone else.
    Recently, we had testimony here in Congress that three 
major insurance companies continue to engage in the practice of 
recision, a practice where people who are paying their health 
insurance premiums incur substantial bills and find out that 
their insurance company has dropped them. That is 
``compassion'' in the American system.
    As far as independence is concerned, I am reminded of a 
conversation I had out in south Austin with my constituent, 
Laura Stager, who said, ``My husband is entrepreneurial and 
wants to own a business, but he tells me it would be 
irresponsible for him to form his own company because we would 
lose our health insurance.'' That is the independence of 
forcing people to stay where they have insurance even though 
that may not be the most productive use of their resources and 
their talents.
    I had another constituent, Mark Seefgan, talk to me about 
what is happening to his small business and the difficulty of 
dealing with a huge bureaucracy within the insurance industry 
that seems to be bigger than anyone could imagine in Canada or 
anywhere else in terms of the challenges to a small business 
and how it is hard to explain to his employees that they just 
got a $200 increase in their pay but Blue Cross took all of it 
in increased health insurance premiums.
    Are these problems, Ms. Pollitz, that my constituents face 
in Austin, Texas and in other parts, do you find the same kind 
of problems in other parts of the country?
    Ms. POLLITZ. Yes, sir, and that is how the private 
insurance market competes. That is not compassion, that is 
competition in the private insurance market. I was at that 
hearing on rescission last week, and just yesterday, the 
Governor of Connecticut vetoed a bill that was passed in her 
State legislature to limit the rescission practice. And the 
reason she vetoed it was she said that would raise premiums, 
and so we need to let that practice continue because that is 
what keeps health insurance cheap.
    Clearly, we cannot continue to let health insurance compete 
in that way. There has been a lot of talk about a level playing 
field, we do not want to be on that playing field anymore. In 
that playing field, the house wins every time. And we need to 
compete on the basis of compassion. We need to put a plan in 
place that is oriented toward patients and not profits and 
stimulate the market to compete in that direction.
    Mr. DOGGETT. Dr. Holahan, if we just pour more money into 
the system that we have now, that permits rescission and this 
kind of activity, and do not have an effective, meaningful 
public plan, will we really have any reform of our health care 
system at all?
    Mr. HOLAHAN. I think you could have some but the kind of 
insurance reforms that this bill calls for, it would improve 
things a great deal. I think the bigger problem is what I talk 
about in my testimony, the lack of true competition. And if you 
go back to the Massachusetts problem, the costs are growing at 
levels that they are not going to be able to sustain but it is 
because of a very dominant hospital system, a very dominant 
insurer, and the way they negotiate with each other. And that 
problem exists around this country.
    Mr. DOGGETT. Well, what is it with all these people who are 
always here telling us in the rhetoric, ``Government cannot do 
anything efficiently, government is broken,'' that they fear 
something like a Medicare plan that does not pay Medicare rates 
as one alternative to compete with these private insurance 
companies?
    Mr. HOLAHAN. I think it fails typically to recognize what 
really goes on in the market. And the idea that we should not 
have price controls because the private system can negotiate 
all this, that is what we have today. If you are in one market 
and you are a strong insurer, and there are a lot of hospitals 
with very little leverage, you get one outcome from those 
negotiations. If the opposite is true, that you have a strong 
hospital and many insurers or an insurer without enough 
leverage, you get a very different outcome. Negotiations simply 
are not working unfortunately. As an economist, I would prefer 
to have the market work. No one can say that these markets meet 
the conditions that you expect to get, the efficiency that you 
would expect to get out of competitive markets. It just does 
not exist.
    Mr. DOGGETT. Thank you.
    Chairman RANGEL. Thank you. The Chair recognizes Mr. Davis 
of Kentucky.
    Mr. DAVIS OF KENTUCKY. Thank you, Mr. Chairman. Just one 
comment that Dr. Young made before going on with the questions, 
he made the statement that the only way to control cost is a 
single payer system, well, the mathematics simply do not work 
on that. We have proven that in defense contracting here in the 
United States, that the single contractor will ultimately drive 
costs and overhead and likewise the former--our former 
opponents of the Cold War learned that single State systems did 
not tend to deliver quality, they ended up limiting capacity.
    I am very concerned, and what I think many of us are really 
struggling with here today is that we do not have the facts on 
this bill, and we have been told this will be likely our only 
hearing. And we are talking about entirely changing the 
framework of health care in America with no debate of any 
substance other than we think this is great.
    This appears to be reform in name only because the actual 
delivery cost drivers are not being touched at all. We are not 
going to reform the CMS process and dramatically compress it, 
which we could do to improve quality. We are not touching true 
insurance reform on the process for how pooling is controlled. 
And liability is not on the table at all, which drives a huge 
portion of costs.
    Do any of you have any idea how much this could cost, even 
an approximate number, a range? Ultimately, we have to pay for 
this, nothing is free, and since you are not going to actually 
tamper with the system because you are convinced that the CMS 
is to make Medicare basically the dominant market player here, 
how are we going to control costs? We are mandating increases 
in taxes, and we are mandating reduction in payment to 
providers without dealing with the core engine. How much will 
it cost?
    Mr. HOLAHAN. Are you asking us to make a cost prediction?
    Mr. DAVIS OF KENTUCKY. Yes, just as a group. You all have 
advocated this, I am just kind of curious how you actually pay 
for it? I think the talk of compassion also has to be done with 
realism. In Greek it means to ``suffer with.'' And I think that 
if we are going to suffer with and come alongside the thousands 
of people, who many of us help in our offices, we have to get 
down to a legitimate understanding of the nature of the cost.
    Dr. YOUNG. Well, I will take a percent at that. Presently, 
we have about a 38 to 40 percent add-on by the bureaucratic 
practices of the private insurance that add nothing to the 
health care of the people, and indeed I think aggravates their 
problem. Recovering that money in the single payer system would 
be a giant step forward for cutting costs.
    I would like to add to the list the Congressmen and women 
have made, that we have two big increases in health care needs 
and costs in the form of aging of the population and increasing 
bio-technical skills, which are costly.
    Mr. DAVIS OF KENTUCKY. Okay, I would like to reclaim my 
time, Doctor, just because it is limited today. Still nobody 
has actually answered the question with a number, and I believe 
the reason we cannot answer the question with a number is there 
are no true metrics that are framed. All of this at core has 
been wrapped around the existing government system. Do any of 
you know how many more Americans will be covered under this 
bill when you actually factor in the millions estimated to lose 
employer-sponsored coverage? Are there any numbers there?
    Ms. POLLITZ. Mr. Davis, I am sorry, I am not a budget 
estimator and I cannot answer those questions, but I would 
suggest that there are very specific metrics in this bill and 
that those should be--when the CBO finishes its work, they 
should be able to give you----
    Mr. DAVIS OF KENTUCKY. The initial CBO scoring on a sister 
piece of legislation was well over $1 trillion for about the 
first quarter of the bill. I am just concerned that you all 
were propounding the benefits of this without laying out a true 
cost before the American people. And I know many in my district 
that would either lose coverage or not be covered in the 
language that this is written.
    Without the basic facts, how can you come here today to 
support a bill and tell us it is going to lower costs and 
increase access when those fundamental answers are not there? 
That would be unacceptable in a business system. It would be 
unacceptable from any type of appropriation from a contracting 
standpoint too because of the precision that is required in 
those areas.
    Dr. Gratzer, do you have any thoughts on this?
    Dr. GRATZER. Well, if you are advocating a CBO scoring 
before you vote on it, I am on your side. I think we have to be 
very cautious about this. I think that we can all agree there 
are problems with American health care. On the other hand, (a) 
I have significant issues with the way they are going about 
reforming it. It is not just that the government plan would be 
price controlled, but I do not see government's role as 
providing competition in general to the private sector. I don't 
particularly like my cell phone, but I do not think that the 
goal then should be or the proposal should be that the Federal 
Government create a new cell phone company to compete with 
existing providers.
    But, second, I think cost is a huge factor. And if you look 
at some of the preliminary scoring, we are talking about well 
over $1 trillion and still we would have uninsured and still 
Medicare and Medicaid remain fundamentally the same.
    Mr. DAVIS OF KENTUCKY. My fear, Mr. Chairman, is that this 
legislation is actually going to hurt the most those who it is 
designed to help based on the economic realities of this. And 
with that, I yield back my time.
    Chairman RANGEL. Thank you. But I would just like to make 
it clear, and I think everyone is in accord, you cannot say how 
much it is going to take to pay for it until we have the 
Congressional Budget Office give us the numbers. And then we 
will have to determine how we are going to pay for it, and we 
are not prepared to do it for now. We are not going to ask you 
to vote for a bill unless it is fully paid for.
    Mr. DAVIS OF KENTUCKY. Mr. Chairman, may I respond?
    Chairman RANGEL. Yes.
    Mr. DAVIS OF KENTUCKY. Just respectfully I do not 
understand how we can do a capital plan for the country without 
actually understanding the magnitude of the capital required 
before we begin to set priorities by effectively approving 
legislation and then determining how to pay for it afterwards.
    Chairman RANGEL. Your questions are right on point, but 
there is no bill before us to mark up. And we will have answers 
for you when we ask for your vote. Right now, we are just 
trying to make certain that we perfect this. We would not dare 
ask you to support something without knowing how we are going 
to pay for it but this is not the forum.
    The Chair recognizes the gentlemen from Dakota, Earl 
Pomeroy--North Dakota.
    Mr. POMEROY. Thank you, Mr. Chairman. The difficulty of 
conducting even this hearing in the middle of all these delayed 
votes I think is reflective of the fact that the minority 
participation in trying to build a health reform package is 
more focused on delay and disruption rather than making some 
meaningful contribution. I am still frustrated that our meeting 
last week was canceled, the joint bipartisan meeting to discuss 
the architecture of the plan, because we were on the floor with 
procedural votes.
    Mr. BOUSTANY. Will the gentleman yield?
    Mr. POMEROY. No, I will not yield. I have 5 minutes, and I 
have all kinds of votes going on, I have to run and vote, so I 
have to get my question in.
    I think there is a contribution, I would say this to the 
good doctor who was just seeking time, we want to make this 
thing work. And we believe that the status quo has gotten out 
of control cost inflation that is wrecking our health care 
system and threatening our Federal budget. So especially I 
would be interested in ideas, referenced for example by my 
friend, Congressman Davis, in his questions, he alluded briefly 
to CMS payment reform. So if you have ideas about cost 
containment you want to put on the table, whether or not you 
are for the final bill, I think these are legitimate ideas we 
need to study carefully and include where they have merit. And 
that would be a much better way to proceed than simply throwing 
the usual lines of attack that this is on the one hand going to 
cost too much, on the other hand, it is going to do too little, 
and we are going to have rationing somewhere in between. This 
is not helpful. Let's work together and build a good deal, and 
let's focus, among other things, on system reform that contains 
costs. I believe that that is absolutely critical.
    Now, another thing my friend Mr. Davis said was he thinks 
this bill is going to do too little to help those who need the 
help the worst. On this one, I believe that he is completely 
mistaken. The strength of the bill is going to be getting 
coverage to those who do not have coverage, 45 million there, 
and assisting at least as many, and maybe even more, that are 
struggling mightily to keep their present coverage in place in 
the face of rapidly rising costs.
    One of the strategies by which premiums have been paid is 
to shrink basically the coverage you are buying. And so it is 
interesting that recent bankruptcy statistics show the high 
number of bankruptcies caused by medical costs and the high 
number of people in that bankrupt situation that had insurance 
but the co-pays, the deductibles, the out-of-pockets in the end 
proved too much to handle.
    And so as a former insurance commissioner myself, I have 
seen you paying more and more for less and less, more and more 
for less and less and the health security of everybody, those 
with insurance and without insurance, has been placed squarely 
at risk.
    Now, one of the things I believe Congress has done when 
talking about health reform over the years is we focus on the 
intermediary, the insurance layer, and we do not get right down 
to cost drivers. And I believe we need to spend a lot of time 
dealing with cost drivers.
    Dr. Holahan, if I understand your testimony, it is that the 
public plan option is a new competitive element in the 
marketplace, not just to offer another insurance alternative, 
but maybe they will be able to try some things that more 
effectively give value to the consumers than the conventional 
options. I think those that are opposing a public plan option 
have to explain to taxpayers why we are going to put a major 
investment into the system, a system that has out-of-control 
cost inflation, and essentially not do anything relative to 
trying to structurally add some opportunities for innovation.
    Would you respond on that point?
    Mr. HOLAHAN. Well, I think I could not say it any better 
than you did, I totally agree with that. I think it is an 
opportunity not only to gain control over the costs of care, 
but to innovate, through a lot of payment and delivery system 
reform, the development of medical homes.
    Mr. POMEROY. There is a final point I want to get in before 
my time elapses. I will ask Ms. Pollitz this one. There has 
been some discussion about the level of delegation between 
Congress and the executive branch relative to running, for 
example, a Medicare program relative to payment reforms. So 
when my friend on the other side of the aisle talks about CMS 
payment reforms, possibly he is contemplating the idea that 
there ought to be delegation of authority to the executive 
branch, to CMS, relative to being able to initiate payment 
reforms. What are your thoughts on that one?
    Ms. POLLITZ. I'm sorry, sir, I cannot really comment on 
that.
    Mr. POMEROY. You are a long-term health expert with 
experience in the executive branch yourself. I am surprised 
that you cannot comment.
    Ms. POLLITZ. I know there is interest in trying to remove 
from the political process some of these important decisions so 
that they are made on a more scientific basis, and I think 
there may be some value in trying to accomplish that.
    Mr. POMEROY. Thank you.
    Chairman RANGEL. Mr. Boustany.
    Mr. BOUSTANY. Thank you, Mr. Chairman. Dr. Gratzer, I am a 
cardiac-thoracic surgeon who has 20 years experience, clinical 
experience dealing with patients before coming to Congress, and 
I appreciate your comments earlier about quality and 
innovation, which have been really unique in medical history 
worldwide. What we have seen in this country has been 
tremendous development. The question is how do we most 
efficiently use all that.
    I think there are a couple of things missing in this 
debate. First of all, the basic things we ought to be talking 
about are access to a physician, a doctor/patient relationship 
that is actually meaningful, that focuses on prevention and 
screening built on trust. And, second, the cost issue. But what 
has been missing in this debate are the real drivers of cost, 
and it is at the level of the doctor/patient relationship 
because you have physician behavior and you have patient 
behavior. And this bill does not do much at all to address 
either one of those. And, in fact, I would submit that the 
bill, there are elements of this bill that will make that 
worse.
    Would you like to comment?
    Dr. GRATZER. So you were a surgeon?
    Mr. BOUSTANY. Yes.
    Dr. GRATZER. I am a psychiatrist. We have nothing in 
common. Look, I could not agree more with you.
    Mr. BOUSTANY. Compassion.
    Dr. GRATZER. Look, there are certain things we can agree on 
no matter whether you are a Republican or Democrat or what your 
political affiliation. One is that the doctor/patient 
relationship should always be preserved, that it is the 
building block of the modern health care system and should 
always be preserved within any reform package. But I also think 
you would agree that we spend in America and do not always get 
results.
    Again, I am not arguing that some of the medical technology 
has not been extraordinary. You mention cardiac-thoracic, as 
you know, death by cardiovascular disease has plummeted by two-
thirds in the last 60 years. And we have seen innovation time 
and time and time again. But just because you go to a doctor 
and there are new drugs do not necessarily mean that they are 
better drugs. Just because you get a procedure does not mean 
you needed it or it was well done. I think that goes back to 
some of the things that Peter Orszag and others in the White 
House are talking about that I agree with, that we need better 
value. There is a smart way of doing that and a bad way of 
doing it.
    Mr. BOUSTANY. I agree and that is what is missing in the 
debate.
    Dr. GRATZER. Absolutely.
    Mr. BOUSTANY. Because I think we are still at the 30,000 
foot level. If I can reclaim my time for a moment, I was 
listening to the testimony very carefully and, Ms. Pollitz, you 
talked about a government controlling costs. Does Medicare 
control cost?
    Ms. POLLITZ. To some extent, yes.
    Mr. BOUSTANY. It does not do a very good job, does it?
    Ms. POLLITZ. Well, I think Medicare cost growth in most 
years has been at or below that of the growth of private 
insurance.
    Mr. BOUSTANY. As my colleague from Wisconsin, Mr. Ryan, 
pointed out, the looming insolvency of the Medicare Trust Fund. 
We have serious Medicare problems that we need to address. And 
so I think to pose a government option at a time when we are 
dealing with existing government programs is at the very least 
problematic.
    A question, let's see, for Dr. Holahan. You mentioned 
Medicare rates in the government plan. Do you believe that the 
Medicare rate structure has caused distortions in the entire 
reimbursement structure given that Medicare rates most of the 
time do not cover cost of basic goods and services? And do you 
advocate price controls extending beyond the provider side to 
the suppliers of medical technology and devices?
    Mr. HOLAHAN. Well, that is what we do today and the 
government sets them, but by and large there----
    Mr. BOUSTANY. So you do agree with price controls and you 
want to see it extended into the----
    Mr. HOLAHAN. Yes, I do not think you really have much 
alternative in the current market so it will be some----
    Mr. BOUSTANY. Thank you.
    Mr. HOLAHAN. But if you had----
    Mr. BOUSTANY. I appreciate your answer, thank you. Thank 
you, sir. I have a question now for Dr. Young. Dr. Young, you 
talked about a single payer using ``inherent cost control 
measures.''
    Dr. YOUNG. Yes.
    Mr. BOUSTANY. Explain what that means?
    Dr. YOUNG. Well, I tried to dialogue on that when I 
described the single payer giving you a complete record of the 
pattern of behavior of doctors.
    Mr. BOUSTANY. So, in other words, you are having a 
bureaucrat make a medical decision and in fact rationing care?
    Dr. YOUNG. I don't think that is what I said. I described 
the fact that you have the data that allow you to see patterns 
of excess or under service, and that we certainly need 
oversight. That is the great tradition of medicine.
    Mr. BOUSTANY. Has Medicare done a very good job of that 
because we have Medicare data?
    Dr. YOUNG. I think it has done a terrific job. I think it 
is the far best of the insurers in this country.
    Mr. BOUSTANY. Could you comment on the use of the Society 
of Thoracic Surgeon's database in cardiovascular disease?
    Dr. YOUNG. I cannot help you, I am not acquainted with 
that.
    Mr. BOUSTANY. I would think as someone who is interested in 
data and using best practices, this database has been 
outstanding. It was developed in 1989 and has gone a long way 
toward the improvement in care in cardiovascular disease. I 
suggest you look at it.
    I see that my time is up. I thank the Chairman.
    Mr. STARK [Presiding]. Mr. Thompson, would you like to 
inquire?
    Mr. THOMPSON. Thank you, Mr. Chairman. And thanks for 
holding today's hearing and for your effort to make sure that 
this process has been open, and that we are able to work 
through this to address all these issues. I just hope that the 
ongoing procedural votes that we are taking do not further 
disrupt our efforts here.
    I want to first point out there has been a lot of talk 
about this independent, nonpartisan study that associates some 
pretty high prices with doing what most Americans believe we 
need to do, and that is reform health care. And I think it is 
important to note for the record that this HSI Network that is 
supposed to be nonpartisan and independent is actually a group 
that is--one of the participants is the modeler for Senator 
McCain's health care and his work. And it has been pointed out 
in the press that some of what they said had not always been 
based in fact. There was one quote that I found interesting, 
``Every candidate should say that these numbers were produced 
by my experts, and they are my best estimates but they are not 
exact.''
    And if you look at what this same group, this HSI, did in 
regard to modeling the health bill over in the Senate. They 
were four times higher than what the CBO came in with. So I 
think we need to know where these numbers are coming from.
    And as they relate to our tri-committee effort, I think it 
is important also to note that they said that the analysis has 
no offsets, their analysis, there are no offsets in this 
discussion draft. And that is just patently false. We know that 
to be the case. And so if they miss that, it is hard telling 
what else they missed.
    Mr. CAMP. Would the gentleman yield for just a moment?
    Mr. THOMPSON. On a positive note----
    Mr. CAMP. Would the gentleman yield for just 30 seconds?
    Mr. THOMPSON. I want to finish my thought here, then I will 
get back to my other issues there. On a positive note, they did 
say one thing that was interesting, and I will quote. They 
said, ``In contrast to the Senate version of this bill, the 
House version is more fiscally prudent and effective.'' Yes, 
for 30--for 15 seconds.
    Mr. CAMP. Just to say that CBO did not score the full 
Kennedy bill, so the $1 trillion is really not the final 
number. I just wanted to clarify the record on that. We are not 
comparing apples to apples here.
    Mr. THOMPSON. Reclaiming my time, and the numbers that we 
are being told are nonpartisan and independent are not real 
numbers at all, so it is a very, very biased study.
    I want to get some policy changes that I believe will lead 
us to better health care and at the same time drive down 
prices. I would like to get the experts' opinion on this. I am 
one who believes that an expansion of technology can really be 
beneficial in all this and think that there is a lot more in 
the area of telehealth that we could be doing that would 
provide better outcomes and drive down the cost. And there are 
a couple of examples that I have seen in my district alone. UC-
Davis does a virtual tumor board, and they have just example 
after example of cases where they have helped people and driven 
down the cost. They talk about one where they were able to 
confer with a local team and diagnose a patient and a treatment 
plan for a patient who was in an underserved area, doing this 
through telemedicine. And they were able to treat it in a non-
invasive way at a much lower cost. And, ironically, that work 
is not reimburseable under the Medicare provisions that we have 
now.
    I have another case, I could just go on and on and on with 
examples of this, but I think it is an area where we can really 
pick up some costs and do better health care. And I would like 
to hear your impression of that and if you think that we should 
really expand the provisions for telehealth in this bill? We 
can start with Ms. Pollitz.
    Ms. POLLITZ. I am not an expert on this area, but I don't 
believe a lot of private insurance health insurance would pay 
for that either. And this kind of consulting between 
physicians, whether it is face to face or on the phone or 
telehealth, I think is very important in patient coordination 
of care. And that we do need to find ways to support that and 
reimburse it.
    Mr. THOMPSON. Anyone else care to?
    Mr. HOLAHAN. It seems to me that it is a very good idea, 
but you really--you need payment reforms that bundle payments 
that can include that kind of contact.
    Mr. THOMPSON. Well, these are not even included in many, 
many cases. And in underserved areas, there is some expansion 
in rural but urban underserved areas do not get the attention. 
And underserved is underserved, it does not matter where they 
are. And these are people who are going without health care or 
were provided at a much higher price.
    Mr. HOLAHAN. I agree with you.
    Dr. GRATZER. Look, there is a role for other things as 
well. I do not think necessarily everyone needs to see a 
doctor. There is a greater role for nurses and nurse 
practitioners. I really think in the United States we have done 
ourselves an enormous disservice by not tapping more in terms 
of information technology.
    You know, in Denmark--Denmark, everyone's health record who 
wants it is put online. You can look up your own cholesterol 
and track it over time. I think if that is good enough for the 
Danes, it ought to be good enough for the Americans. I think it 
also would address to a small extent Mr. Becerra's comment 
about the high level of medical errors we have in the United 
States. So much technology if you go to Wal-Mart and you buy 
your kid a plastic lawnmower but so little technology in terms 
of your health records. You can see your doctor right across 
the street from a hospital, and go to the hospital because you 
are feeling worse, the ER, and no one would know any blood test 
that had been done. It is just absurd. So I agree with your 
point.
    Mr. THOMPSON. Thank you.
    Mr. STARK. Mr. Nunes, would you like to inquire?
    Mr. NUNES. Yes, thank you, Mr. Chairman. I want to thank 
the panel for being here today. Ms. Pollitz, Dr. Holahan and 
Dr. Young, the three of you support the underlying bill, right, 
even though----
    Dr. YOUNG. No.
    Mr. NUNES. Oh, you do not? Dr. Young, you do not support 
the bill?
    Dr. YOUNG. That is right.
    Mr. NUNES. Okay, but the first two of you, you do support 
the bill?
    Ms. POLLITZ. I think it is a very good bill and it could 
use some additional improvements.
    Mr. NUNES. Okay, like finishing the bill, you guys have 
seen this, one of the parts not finished yet? I am wondering if 
that is--is that the strategy is to get 50 votes in the Senate 
and then let the Administration fill in the bill, do you guys 
know?
    Ms. POLLITZ. I cannot comment on that.
    Mr. NUNES. Well, for the two of you that support the 
underlying bill or the basics of the bill, I do not think there 
is any argument that under this bill more people would be 
eligible for Medicaid and more people would be pushed on to 
Medicaid, do you agree with that?
    Ms. POLLITZ. More people would definitely be made eligible 
for Medicaid, which is a very important reform, but the bill 
also provides that people who are in Medicaid can have the 
choice of enrolling in a private plan through the exchange.
    Mr. NUNES. Can you--go ahead.
    Mr. HOLAHAN. I think the answer is basically yes, but I 
think there are people that are above the level, the income 
level that they talk about who might eventually move off of 
Medicaid into the exchanges. So there will be some moving 
around.
    Mr. NUNES. I have trouble understanding, maybe the two of 
you can help me understand, why would we want to put more 
American citizens on to Medicaid? I have a lot of people on 
Medicaid in my district, and for the life of me, I cannot 
understand why we would want to make more people eligible for 
Medicaid and why we would want to shove more people on to 
Medicaid, can you guys answer that question, why that is a good 
idea?
    Mr. HOLAHAN. It is a program that is big, it has a lot of 
history, a lot of law and regulation around it. And we are 
taking on a lot in reform in terms of putting even more people 
potentially into these exchanges and potentially into the 
public plan. I think it would make the job harder if you did 
not build on to some extent on what we already have. And I 
think down the road, you might want to revisit whether Medicaid 
should stay distinct or how it gets incorporated within the 
exchange, but I think that for the moment that would make the 
whole job harder.
    Mr. NUNES. Right, unless you are on Medicaid right now. I 
do not have anyone that I know of, and maybe you guys could 
help me dig some folks up, that like being on Medicaid and that 
want to be on Medicaid.
    Ms. POLLITZ. I do.
    Mr. NUNES. You know people who like Medicaid?
    Ms. POLLITZ. Yes.
    Mr. NUNES. Well, I would love to meet these people.
    Ms. POLLITZ. I would be happy to introduce you.
    Mr. NUNES. Because I have a whole bunch of people on 
Medicaid in my district, and the doctors do not want to see 
them, the people that I know are embarrassed to even admit that 
they are on Medicaid. They do not want to be on Medicaid. If 
that is the case, why don't we just make--why do we need this 
big plan, why don't we just put everybody on Medicaid?
    Ms. POLLITZ. Congressman, I think there is no question that 
the Medicaid program has suffered from underfunding over the 
years and that there has been a stigma attached to a poverty 
program, but the Medicaid program has incredibly important 
protections that it offers people, very comprehensive coverage, 
no cost sharing, coverage for all kinds of additional services 
that are important and that people with limited means need in 
order to get the health care, transportation care services.
    Mr. NUNES. But you know someone, you said that you know 
people that are on Medicaid that like it?
    Ms. POLLITZ. Yes.
    Mr. NUNES. And they would prefer to stay on Medicaid?
    Ms. POLLITZ. I have a friend--yes, her--a friend of my 
daughter, a 14-year-old young lady, her mother just passed 
away, she had been on private insurance.
    Mr. NUNES. She likes Medicaid better than private 
insurance?
    Ms. POLLITZ. It was a pretty good plan but it has a $500 
deductible and 20 percent call insurance, and she had to go to 
the emergency room earlier this year because she was very sick 
and her aunt took her and a great big bill generated. My 
husband and I ended up paying it for them.
    Mr. NUNES. So if the hypothesis is----
    Ms. POLLITZ. She just got on Medicaid and now----
    Mr. NUNES. The hypothesis is though, your hypothesis that 
Medicaid is insurance from what I just heard?
    Ms. POLLITZ. No, I am just saying that Medicaid has a lot 
of advantages and offers a lot of extra protections for people 
and it is important.
    Mr. STARK. Would the gentleman yield?
    Mr. NUNES. Well, my time is running out. My time is running 
out, Mr. Chairman.
    Mr. STARK. I will extend it. Just if I could suggest----
    Mr. NUNES. Just for 10 seconds here because I do not want 
to lose my time.
    Mr. STARK. After 5 years, people could choose in the 
exchange.
    Mr. NUNES. The public option?
    Mr. STARK. They could choose private or public and not take 
Medicaid if they did not want to. In other words, after the 
first 5 years with the exchanges that are running, the bill, 
the draft would suggest that at that point people would not 
have to go into Medicaid, they could choose an exchange. And we 
would welcome other options, but once the bill--it is not the 
intent of this draft to force people into Medicaid. That is all 
I am saying.
    Mr. NUNES. But I think there is no question though that it 
would make--it would put people into Medicaid, which I have--
Mr. Chairman, I have a fundamental problem with. I think 
Medicaid is broke now, it has a $20 trillion unfunded mandate, 
and the more people we throw on to them, how are we going to 
pay for this?
    Mr. STARK. In California, you have a real problem.
    Mr. NUNES. That is our problem I guess to deal with too, 
Mr. Chairman.
    But in finishing up, I would just say that I really do not 
understand a plan that we would put out there that would put 
more people into Medicaid even in the short term. I think if we 
are going to revamp health care, we ought to look at Medicaid 
and try to get as many people off of Medicaid as possible 
today, not tomorrow.
    And I will yield back. Thanks, Mr. Chairman.
    Mr. HOLAHAN. One point to make is that one of the things 
that I think that you were concerned about is access to primary 
care physicians, and there is a provision in this bill that 
would increase those rates.
    Mr. STARK. I thank the gentleman. Mr. Blumenauer, would you 
like to inquire?
    Mr. BLUMENAUER. Thank you, Mr. Chairman. I appreciate the 
opportunity for us to start focusing in on some of these items. 
And I appreciate in particular Dr. Holahan talking about the 
cost of doing nothing. And I think that is one of the things 
that is so critical that gets lost. If we float along for 
another year or two or three or four, we are going to find more 
uninsured. We are going to find fewer people who are insured by 
their employers. And those that are, are going to be facing 
higher costs and less comprehensive coverage.
    I hope that we as a Committee will be able as we go forward 
to look at getting more value out of the existing system. There 
is some in the draft that I like. There are things that I have 
in terms of end of life transitional benefits. There are a 
whole series of things that I am excited about, some of which 
are in the draft. We can do more. I do not think we have gone 
far enough in terms of dealing with radical disparities of 
Medicare reimbursement around the country. I am particularly 
concerned that what is in the bill for Medicare Advantage will 
hurt efficient areas and will have virtually no effect on very 
high cost States. But this is a process that I hope we can work 
on together.
    The notion of how we are going to pay for this is part of 
the cost containment. We have 3 or 4 years before this kicks 
in, so we will have a chance to refine the getting more value 
out. And I do not think any of us feel that when the other 
areas where there will be some costs associated, and the polls 
show the American public is in favor of paying a little bit 
more if they get security and 50 million, more or less, get 
health insurance, they think that is a good deal. But it is not 
going to kick in this year or next year. We will have a chance 
for the economy to regain its footing.
    I am a little concerned about the language here about 
somehow forcing people on to the public plan because people 
will go into the exchange where the public plan is one of their 
choices, and that sort of gets lost in the discussion.
    And I want to pose my question because, Dr. Holahan, you 
referenced it in your testimony, but as I read it, it is a 
little esoteric, with all due respect, about where the 
Department of Justice thinks it is noncompetitive and there 
might be antitrust. My reading of the data is that there are 25 
States where one insurance company has 50 percent or more of 
the market. If you could perhaps discuss a little bit in 
practical terms about the lack of competition that most 
Americans face now with meaningful choices of health insurance. 
And my read of this is that the insurance companies themselves 
are going to be advantaged because we are going to streamline 
some of this process and squeeze out some of the goofy stuff 
that goes on. Right now, trying to deny people coverage, we are 
not going to have preexisting conditions, that is going to be a 
level playing field that is going to make I assume a very big 
difference.
    And if you want to also comment for a second about the 
sound bite that you got trapped into saying about cost controls 
and then cut off, if time permits to elaborate. But I would 
like you to talk for a moment about meaningful competition that 
we are going to be providing under the framework that has been 
offered.
    Mr. HOLAHAN. Yes, a few months back, we had some executives 
from a big Blue Cross plan in the Midwest visit us to get 
advice on how they could control costs. And the first thing I 
asked was how well do you pay relative to Medicare. And the 
answer was they paid 79 percent above Medicare rates to 
hospitals and 68 percent above Medicare to physicians. And so 
like why are you here? They did this because they can. They 
have no competition. And they can pass on, to the extent this 
means higher premiums, they are able to pass that on. And I 
think that is a role that this public plan would have to--I 
think could help with, help in those markets and help in others 
where there are more insurers but one that is really dominant 
and still not able to deal with dominant hospital systems or 
single specialty groups that essentially bargain as 
monopolists.
    Mr. BLUMENAUER. Thank you. I appreciate that. I would just 
close by noting it would be interesting to take a test of the 
people on this Committee who have health insurance, I assume 
most of us probably do, and find out how many of us made the 
decision based on what was the cheapest plan? It would be 
interesting to find out if we could figure out what was the 
cheapest plan. I get my insurance through my wife's company 
because I think she has greater contact with their Department 
of Human Resources to try and decipher stuff that I cannot, but 
I think the record is rather clear that there are lots of 
people, including in the Federal system, and I will bet people 
on this Committee, who make lots of choices that are not the 
cheapest as it appears on that chart. And so I think the fear 
somehow that all competition would stampede to a public plan if 
it appeared a little more affordable is at least near-fetched.
    Thank you.
    Mr. STARK. Thank you. Mr. Roskam, would you like to 
inquire?
    Mr. ROSKAM. Thank you, Mr. Chairman. First of all, thanks 
for your time and your attention today. I think all of us have 
been enlightened by the nature of your comments. And you have 
been fairly transparent, when you have not known what is in the 
bill, I appreciate someone saying, ``I have no idea what is in 
the bill.'' I do think this time, this season that we are in is 
absolutely incredible. There is momentum here, right, and there 
is an opportunity I think transformational, but it has struck 
me as strange that here we started this hearing at 9 o'clock, I 
was out for a couple of minutes for some of the procedural 
stuff that is happening on the floor but we are well into this 
hearing, and we have not had much of a conversation about 
Medicare fraud, about fraud within the system and abuse within 
the system.
    I have been briefed by experts, and I do not think these 
are folks that are pulling punches one way or the other in 
terms of donkeys and elephants, but have come to the conclusion 
that as much as 13 percent of current Medicare outlays are 
fraudulent. I have a quote from the chief counsel to the Health 
and Human Services Inspector General who said, ``Building a 
Medicare fraud scam is far safer than dealing in crack or 
dealing in stolen cars and it is far more lucrative.'' And here 
we are on the verge of something that is absolutely enormous in 
terms of costs. Frankly, when costs come up, the Majority kind 
of loses high contact and gets a little bit defensive, with all 
due respect, about, well, who is putting these estimates out 
and so forth. But as we are sitting here today, no real number 
in terms of a cost estimate.
    And, yet, here we have this opportunity to recast resources 
and put it in the proper direction that I think ultimately can 
have a huge impact. So I would like to shift the conversation a 
little bit. Dr. Holahan, something that you said concerned me, 
and I want to give you a chance to clean it up. But when you 
were having a conversation I think it was with Mr. Nunes a 
minute ago, in sort of defense of Medicaid, you said, and I 
jotted it down because it really got my attention, and ``these 
were attributes that I interpreted as positive attributes,'' 
right? You said that, ``It is big, it has a history and it has 
lots of law and regulation around it,'' meaning sort of this 
case law around it. And I would suggest that I think that is 
one of the real weaknesses of the current system, that it has 
become hidebound, an inability to recognize fraud within the 
system and an inability to recognize abuse within the system, 
an inability to recognize overutilization and so forth. And I 
just wanted to first of all give you an opportunity to--surely 
those three adjectives of big, rich history and lots of law and 
regulation is not an attribute, those are not characteristics 
that you are lauding, are they?
    Mr. HOLAHAN. Well, what I meant was--to be more specific, I 
think this is a really big deal to reform our health system. To 
the extent you have something that you can build upon that 
works reasonably well, despite some problems, I think that is a 
good thing when we are taking on so much.
    A few years back, I did a study with a colleague of mine to 
look at whether Medicaid is really high cost relative to 
private insurers, so we compared Medicaid to people with 
private coverage, all low-income people, and looked at whether 
medical benefits, when you controlled for health status and 
income and education and other characteristics, controlled 
statistically for that, and Medicaid it turns out is less 
costly. And that is not to say there is not fraud in Medicaid 
and Medicare, but despite that, it is less expensive than 
private insurance by some margin. And we certainly should go 
after fraud wherever we can. I guess the thing I would be 
curious about is whether the same study that you were referring 
to had anything to say about fraud in Aetna or Blue Cross plans 
or anything like that. I do not know whether it did or not, but 
I can't believe it is totally absent.
    Mr. ROSKAM. There is no question about it, but I think here 
we are 3 hours into a hearing that by the proponents' own 
adjective is going to transform the system and yet we really 
have not had much of a conversation as it relates to driving, 
just rampant abuse out of the system.
    Thank you for being transparent about that. The people that 
I have interacted with as it relates to Medicaid feel 
underserved by it, feel discouraged by it, and it has taken the 
joy of the medical practice from physicians.
    My time has expired, and I yield back.
    Mr. STARK. Thank you. Mr. Kind, would you like to inquire?
    Mr. KIND. Thank you, Mr. Chairman. I too want to thank our 
witnesses today for your patience and also the task of trying 
to absorb an 840-page piece of legislation in a short period of 
time, and I think you have been doing a good job today.
    But I think my friend, the gentleman from Illinois, Mr. 
Roskam, raises a very important issue and that is what is 
contained in this health care reform that can really help crack 
down on fraud within the Medicare system? And with that, I 
would just reference Title 6 of the legislation and go through 
those specific provisions.
    We are trying to not only enhance resources to the agencies 
in charge of detecting fraud and bringing greater 
accountability but also enhancing the penalties when it is 
ultimately--and that whole section is devoted to cracking down 
on fraud and the waste that exists in the system today. And if 
the gentleman or others have more ideas on what we can do to 
beef this up, we are all ears.
    But I think the sweet spot we have to hit here is the 
ability to distinguish between unintentional error and 
intentional fraud, and I think that does concern a lot of the 
providers out there, especially in submitting their billing 
claims, that if something was inputted wrong, are they going to 
be subject to the full weight of investigation and fraudulent 
penalties due to a harmless human error in the system.
    But, listen, I want to take my time to direct your 
attention to Title 4 of the draft discussion piece. That is 
titled, ``Quality,'' and I think this is the key to how 
successful we are at the end of the day, of whether or not we 
can enhance the quality of care and finding cost savings at the 
same time. That section is devoted entirely to the comparative 
effectiveness research. And that is what I want to get your 
response on, if you had a chance to review that provision.
    Let me preface my question by saying I come from western 
Wisconsin, which has been recognized as a high-quality, low-
cost area. We have Mayo in there, Marshville Clinic, Gundersen, 
even the President has recognized that the health care models 
that have been developed in our region, as examples of what we 
need to incent in reform in order to achieve the type of cost 
savings without jeopardizing quality at the end of the day. 
This is coordinated, integrated care practices, more emphasis 
on primary, prevent, wellness programs, things that have proven 
very effective in helping drive down cost while enhancing care. 
And I think that is the key to doing comparative effectiveness 
research the right way and not the wrong way and establishing 
the center in the legislation for comparative effectiveness 
research, establishing an independent commission comprised of 
independent, both public and private stakeholders as part of 
the commission, to review the research, the data, making 
recommendations to the center. And then I think this is the key 
distinction, empowering our doctors and patients with the 
information so they know what works and what does not work. And 
we are placing a huge bet on that, that with doctors and 
patients armed with this information, that they are going to 
make the right decisions which is going to not only improve 
patient care but help drive down costs. And it is tough to 
ignore a study of a reputable organization like McKenzie 
Institute that claims based on their research that $650 billion 
of health care spending every year goes to care and treatment 
that does not improve the quality of results at the end of the 
day. And that is going to be the key I think to comparative 
effectiveness.
    I see Mr. Herger has joined us because he raised a very 
important issue when it came time for him to question the 
panel, and that is how the information is ultimately going to 
be used. And I would reference, and he is involved in a 
conversation, but on page 446 of the discussion draft, lines 
three through six, the construction on the use of comparative 
effectiveness. And let me just read that real quick. This is an 
important point. It states that, ``Nothing in this section 
shall be construed to permit the Commission or the Center on 
Comparative Effectiveness Research to mandate coverage, 
reimbursement or other policies for any public or private 
player.'' And I think that is a hugely important provision in 
this legislation, basically saying we are not going to ration, 
we are not going to be making those type of cost decisions 
based on CER research. And I think that is going to be 
important that we recognize that as we move forward.
    So, Ms. Pollitz, let me first give you a chance to respond 
as far as the role you see CER research playing and how 
important or vital that is going to be for the health care 
reform that we are trying to offer here today?
    Ms. POLLITZ. I think it is very important, Congressman. I 
had the pleasure of attending a conference a couple of weeks 
ago where the director of the agency in Australia that heads 
this up was just talking about how this research gets brought 
to bear in decisions in that country and people were left 
breathless, like why don't we do that here? So I think it is a 
very important investment, and I commend you for including 
that.
    Mr. KIND. It is interesting a lot of providers are doing 
that. In fact, Cleveland Clinic has been doing this for a long 
time, and the CEO of Cleveland Clinic just indicated they had 
70 countries contact them to find out what they are doing and 
how well it has worked, 70 countries. So even countries outside 
of the United States are recognizing the type of model of care 
that is being provided and the cost savings that comes with it.
    Dr. GRATZER. I note as well that there are some private 
sector innovations that are also useful. Think about Safeway, 
which has actually brought health inflation to a stalemate in 
the last 3 years. Some of the information is its comparative 
effectiveness, it is transparency of prices. If you are in 
certain regions in the country and you are a Safeway employee, 
they will actually list out your options for say CAT scan and 
the prices and soon they are hoping to put quality on board. So 
it is not just a role for government, I think. I am a little 
bit more hesitant on comparative effectiveness perhaps than you 
are, but there is a role for government undoubtedly, but I 
think there is also a role for the private sector as well and 
ultimately culturally as people demand more and should be 
required to shop around and gain more information, just as they 
do for much mundaneness things like food, clothing and shelter.
    Mr. KIND. Thank you, Mr. Chairman. I see my time has 
expired.
    Mr. STARK. Thank you. Mr. Pascrell, would you like to 
inquire?
    Mr. PASCRELL. Thank you, Mr. Chairman. Chairman, I want to 
clear up some things that were mentioned before about New 
Jersey.
    [Laughter.]
    Mr. PASCRELL. New Jersey is more expensive because 
insurance companies are required to cover all comers. Without 
an individual mandate, healthier people drop coverage, leaving 
behind the sickest people. That drives up the cost, doesn't it, 
Ms. Pollitz?
    Ms. POLLITZ. Yes, it does.
    Mr. PASCRELL. If anything New Jersey is a case study in why 
we need universal coverage, just the opposite of our 
proponents--or opponents, whichever you decide, are talking 
about. State mandates are designed to protect people. And I 
would argue that if everyone were in the pool, folks in New 
Jersey would be better off because they would be guaranteed 
access to the services they need, like childhood immunizations. 
Let's not mandate that. What is the consequences of not 
mandating that? Aren't we talking about preventing diseases and 
in that way lowering costs?
    How about my favorite chronic diseases, diabetes care. When 
we look at the cost of health care, who is seeking aid later in 
life because of situations that occurred much earlier, which 
they were not able to get hold of? How about prostrate cancer 
screening, do you want to mandate that? Do you want to bring 
down the cost of health care? Let's mandate it. Would anyone on 
the other side say, ``No, we should not mandate that''? How 
about mammograms? We thought we had that battle a few years 
ago, but that continues to come up. Maternity care, treatment 
for alcoholism? Now, why in the world should we mandate that? 
Look, the patient is the center of what we are talking about 
here, not insurance companies, not Congressmen, the patient 
therefore is the main priority of putting a system together 
built around that patient. And that is what I have on my mind.
    Now, Mr. Gratzer, in your testimony you said that, ``We 
must reform our health care system with `made in America' 
solutions.'' Well, that goes with a lot of other rhetoric I 
have heard. I could not agree more. The discussion draft that 
we are considering is a ``made in America'' solution. It builds 
on lessons that we have learned right here in the United 
States. It brings competition and choice and a system of checks 
and balances, we do not have checks and balances now. We do not 
even have checks and balances with regard to ferreting out 
those who abuse the system, who actually purvey fraud on the 
system. In fact, we slap them on the wrist and say, ``Sin no 
more,'' but we do not prosecute them.
    I take issue with your focus on a single payer system, 
which despite your arguments is not the issue at hand. Even Dr. 
Young has told us that our plan is not a path to single payer. 
Unfortunately, you make fundamentally different underlying 
assumptions about a public health insurance option that most of 
the individuals on the panel, and many of the questions you 
pose about a level playing field can be answered with a 
resounding yes. In fact, we have gone to great pains to make 
sure that this public health insurance option is indeed on a 
level field with its private competitors.
    And I would like you to comment on some of the arguments 
made by Dr. Holahan. Specifically, in the absence of a public 
health option, how would you propose bringing real competition 
to health insurance markets that currently have none?
    Dr. GRATZER. I think we have regulated ourselves into a 
situation where in many States, too many States, you----
    Mr. KIND. Who is ``we,'' who is ``we'' regulated?
    Dr. GRATZER. It is between Congress and State legislatures.
    Mr. KIND. What have we done, what regulations have we put 
forth that have resulted in the consequences which you say 
exist? What is the regulation. Tell me one regulation, two 
regulations, three?
    Dr. GRATZER. Well, in some States community rating.
    Mr. KIND. ``We,'' we said the Federal Government, you said 
the Congress, do not go back to the States. What did the 
Congress do?
    Dr. GRATZER. Right, I said both, sir. And I would emphasize 
that it is a collective problem, and I think that these 
mandates end up driving out insurance companies and reducing 
choice. But, look, I agree with you, there is not enough 
competition in some States. In some States, in the small group 
market, you are down to literally one option or two options, 
but I think the way around that is through deregulation and 
allowing more competition amongst insurance companies rather 
than the Federal Government creating an insurance company, 
which by the way, as you know, would not be covered by those 
regulations, would not pay the tax, would not----
    Mr. KIND. Dr. Gratzer, what would you deregulate right now?
    Dr. GRATZER. Why would I deregulate?
    Mr. KIND. Yes.
    Dr. GRATZER. I would allow people to purchase insurance 
plans across State lines.
    Mr. KIND. That is your deregulation moment?
    Dr. GRATZER. Well, that would be one of the things I would 
do for sure. And then for the people who, as you point out, are 
chronically ill, I would----
    Mr. KIND. I'm sorry, go ahead.
    Dr. GRATZER [continuing]. Put them in high-risk pools and 
the like. I am not going to argue today that some people cannot 
afford a private insurance plan, of course, but I think we have 
to be focused on our aid.
    Mr. KIND. What do you do with those people? What do you do 
with those people, Dr. Gratzer, the people that cannot afford--
--
    Mr. STARK. We will have to come back to this later, Mr. 
Pascrell, and let Mr. Reichert find out what Dr. Gratzer wants.
    Mr. REICHERT. Well, thank you, Mr. Chairman. I want to at 
least first of all make a statement on I think Mr. Pascrell is 
absolutely correct, the patient really is the focus here, and I 
think all of us here today who have had a chance and 
opportunity to question and hear some of the answers to the 
questions are all in agreement that we are trying to do the 
best thing for the people of America, for those people who, all 
of us at some time or another, who need health care. And so 
that is why we are here today.
    To fight over one system over another is counterproductive 
because I think we all can agree that the patient is the center 
of our attention and should be, that there are not enough 
checks and balances, I agree with that. There is a lot of 
fraud, waste and abuse, I agree with that. We are not doing 
anything with that. And we all agree that we would like 
Americans today to have better access to health care, better 
quality health care. We would like this health care to be cost-
effective. We would like people to have a free choice. And I 
think that people, I know myself personally, would like to have 
some control over the treatment and the medication that is 
prescribed to me for my health care. Those things we all agree 
on.
    The question, I think the major overarching question is how 
do we really overcome this fear of a lot of the American people 
today regarding this discussion we are having today about a 
government takeover of the health care plan, especially when 
you throw in the considerations that Mr. Ryan has expressed 
today and one other Member here, and the trillions of dollars 
of unfunded mandates. And so the fear of the cost and the fear 
of the lack of control and the reduction of your access to 
health care and the reduction of the quality of health care.
    Dr. Gratzer, I would ask you first maybe to respond to 
that?
    Dr. GRATZER. I want my colleagues to answer first.
    Mr. REICHERT. Okay, anyone else, anyone on the panel?
    Ms. POLLITZ. Congressman, I think public opinion polls show 
that the public overwhelmingly favor having the choice of a 
public plan. I think it is also true, and it was in The 
Washington Post this morning, that people are always nervous 
about change. I was here in this room, sitting in that row 15 
years ago, the last time health reform care was considered and 
the Harry and Louise ads were all over the airwaves, and I 
think there is no question that the greatest vulnerability of 
the reform effort this time is to frighten people into thinking 
that they will be worse off.
    Mr. REICHERT. I am just going to interrupt you for a 
second. I stepped out in the hallway and met with some 
representatives of a union who said we want a public health 
plan, we want to make sure that those people who are not 
insured get health care, we all want that. But the other thing 
they said to me was we do not want our health plan to go away 
and on top of that, I do not want my health plan taxed. So we 
have a problem here. How do you address those concerns, people 
who--and I am one of them, and I think as I said most people 
here, we all want people without health care to get health 
care, but I like the plan that I am in. Others in this room I 
am sure do, 75 percent of Americans it said do like their 
health care plan. They do not want to be taxed on it. So the 
question here again goes back to cost. How much is this going 
to cost us and how are we going to pay for it?
    And one of the issues around this is the waste, fraud and 
abuse. Some estimates place Medicare fraud at $13 billion per 
year. The GAO found that Medicare has paid at least $92 million 
to Part B for providers who are deceased. How can we reduce the 
staggering amount of fraud in the Medicare system? And what is 
to prevent this fraud, waste and abuse from happening in the 
government takeover of other parts of this system? Anyone want 
to respond?
    Mr. HOLAHAN. I just was talking to the question about 
choice. I think that the way I understand this plan, there 
would be more choices. And I think sometimes the way----
    Mr. REICHERT. What about the fear though that the private 
sector will not be able to compete with----
    Mr. HOLAHAN. Well, I do not agree with that. I think there 
are some insurers----
    Mr. REICHERT. But some people do----
    Mr. HOLAHAN. I understand.
    Mr. REICHERT [continuing]. How do you explain that?
    Mr. HOLAHAN. I think the best insurance companies in this 
country are very, very good. They will be able to compete with 
the public plan. The weaker ones that have competed by just 
going after good risks and not being effective managers of care 
delivery could be at risk, but I think it will, at the end of 
the day, be an effective and healthy competition between the 
public plan and good insurers.
    Mr. REICHERT. I appreciate your answer. Thank you, Mr. 
Chairman.
    Mr. STARK. Ms. Berkley, would you like to inquire?
    Ms. BERKLEY. Yes, thank you very much, Chairman Stark. And 
thank you all for being here and sharing your expertise with 
us. I am strongly in support of passing comprehensive health 
reform legislation this year. A third of the people I 
represent, and I represent the urban core of Las Vegas, have no 
health insurance. So it is imperative for the people that I 
represent, that they have some access to health care through 
insurance.
    It is not as if people that do not have health insurance do 
not get sick. They get sick, and the additional cost is borne 
by the rest of us. I would say statistically speaking, $1,000 
for each of us that is insured, there is an extra $1,000 
attached to the cost of our health insurance in order to 
subsidize others.
    In an effort to give full disclosure, my husband is a 
nephrologist, my stepdaughter is a primary care physician, we 
need more doctors, and we need to incentivize the opportunity 
for people to go to medical school, which is not only multiple 
years of their lives but also a great deal of expense. When my 
stepdaughter graduated--not graduated, but when she graduated, 
she had $190,000 debt. I am a tremendous advocate of loan 
forgiveness and also an advocate of increase GMEs. I think it 
is very important, and they need to be spread out around the 
country a little bit more proportionately than they are now.
    I do not think--look, this is a work in progress. I am not 
willing to sign off on the legislation. A draft proposal that 
was dropped on Friday is the beginning of an important and 
comprehensive discussion among all the stakeholders and those 
of us that are going to be voting for it. That is why your 
being here is so important today. Hopefully, this will be the 
first of many hearings in order to improve our expertise and 
knowledge so we can do the right thing and fine tune this.
    Cost is definitely a factor. There is no doubt about it. 
But right now we have the most costly health care system on the 
planet. We are not getting a bang for our buck. Doctors do not 
like the system. The hospitals do not. The patients do not. And 
we need to change the paradigm so that we are investing our 
money wisely and having a far better outcome than we have now.
    One of the things I am a great advocate of is preventative 
medicine, and I am the original sponsor of the DXA bill. 
Medicare cuts payments to people that need bone density by 60 
percent, which means that the doctors are not administering 
them anymore. Nineteen billion dollars it costs this country in 
order to pay bone-related osteoporosis fractures every year. 
Let us take that money and put in the front end. It is going to 
cost us less. We are going to have a whole lot less bone 
fractures and statistically speaking, if you are over 70 and 
you break your hip, you are going to be dead within 10 months. 
It seems that we will improve the quality of life, we will 
enhance life, and we are going to save billions of taxpayers' 
dollars by using our dollars wisely in the front end of the 
process rather than in end of life care.
    And if any of you care to discuss any of those, I would 
love to hear your point of view.
    Ms. Pollitz.
    Ms. POLLITZ. That was a lot and all excellent. I think just 
on the prevention, an important feature in the required 
essential health benefits package is that preventative services 
would be covered without any cost sharing so that people can 
have access to those services and not face those barriers. That 
is an important component.
    Ms. BERKLEY. May I say one thing, and it just gets my goat, 
I am not the defender of every doctor on the planet, and I know 
we have a lot of real stinkers, but I will tell you something 
the doctors I know work like dogs and this fraud and abuse 
thing as if every doctor is out to scam the system is highly 
offensive to me as a spouse. I just want to get that on the 
record.
    Dr. GRATZER. I would add, it is not just about prevention, 
though I fully agree with your comments on this. There is also 
some element of people taking more responsibility for their 
actions.
    Ms. BERKLEY. What do you do with a patient, doctor, and I 
know you are a psychiatrist, but my husband does all the 
dialysis in Las Vegas, so that we know that smoking, obesity, 
lack of exercise----
    Dr. GRATZER. Sure, incredible.
    Ms. BERKLEY [continuing]. So patients are on the machine 
for 3 hours. They get up, they light up a smoke and they go 
grab McDonald's. Now, how responsible should that doctor be 
because the patient is being irresponsible?
    Dr. GRATZER. Well, it is a heartbreaker certainly in your 
husband's field of work but so many health costs are in some 
ways avoidable. Again, we have to be very clear. There are 
people who are genetically endowed to develop certain diseases, 
there are people who are just unlucky. On the other hand, 
smoking is 100 percent avoidable. We are seeing in America an 
obesity crisis, doubling of obesity rates over 25 years. And 
the best evidence, it seems to me, it is just we are taking in 
too many calories. I think part of that is a government 
solution in terms of like school lunch programs, funding better 
school lunches. I think part of that comes from the corporate 
community. I am excited with Safeway and what they have managed 
to do to better people's health. But part of it is also 
culturally people have to take more responsibility. It should 
not be societally acceptable to smoke and yet in a lot of ways, 
it still remains somewhat glamorous.
    Dr. YOUNG. I would like to compliment your summary. I am in 
complete accord with several points you made, but to make the 
point from our purpose being here, I think your goals would be 
much more readily achieved in a single payer system with 
improved access and for that reason, I commend you to consider 
that option.
    Ms. BERKLEY. Thank you.
    Mr. STARK. Thank you. Ms. Schwartz, would you like to 
inquire?
    Ms. SCHWARTZ. Yes, thank you. Thank you, Mr. Chairman, and 
thank you panelists for your patience and your willingness to 
be here for a number of hours.
    I think we have covered some ground here but on some of the 
things--we get lost a little bit in some of the various 
specific details we have been discussing and forget our larger 
goals and how we are going to accomplish them. We are really 
very committed, as the President has asked us, to contain the 
rate of growth costs in health coverage and in health care, 
both through the government and for businesses and for 
families. And we know we can do that by some of the delivery 
system reforms we have, some of the payment reforms we are 
intending to--will be created in this way.
    And we are also really clear about the fact that we want to 
deal with access to health coverage. I do not know that you 
would all agree that all Americans ought to have health 
insurance. I think at least three of you would. I think one of 
you would say, ``Well, they are on their own, good luck. We 
will give you some tax credits and go and see what you can 
find.''
    But one of the things that this draft bill does do very, 
very clearly is to say that we are going to create a way to 
help all Americans purchase affordable, meaningful health 
insurance coverage. And there can be disputes about how we are 
going to do that, but the idea here is that there are numbers 
of Americans who have insurance that is not very meaningful. I 
think, Ms. Pollitz, I would want you to speak about this. We 
find particularly for small groups and for individuals buying 
meaningful health insurance that is affordable, if you have a 
preexisting condition now, if you are a small group that buys 
insurance and I just talked to one businessowner who said their 
rates just went up 40 percent from one year to the next. We 
have all in this country seen our insurance premiums double in 
the last 9 years. That is unsustainable for families. It is 
unsustainable for businesses. And it is unsustainable for 
government. So we believe we have to take action.
    Now, one of the things we are going to do, in spite of what 
the Republicans say, is to put a whole lot more Americans, 
almost 50 million of them, out there purchasing health 
insurance, private health insurance by and large. So I think 
that insurers should step up to the plate and offer some 
meaningful coverage. But we are going to change some of the 
market rules because if we are going to help Americans buy 
private health insurance, and we are, then we want to make sure 
that they meet some rules.
    And I would like you, Ms. Pollitz, if you would start with 
some of the rules that we are going to change, preexisting 
condition exclusions, you cannot do that anymore. You cannot 
rate people based on gender. You cannot rate them based on 
their health status. We will make some changes in age. We are 
going to make it more affordable but also mean something. Now, 
you had mentioned in your testimony initially, way back when, 
earlier this morning, that one of the ways that you think we 
could strengthen the legislation, even though there is language 
in there now, is to make sure that a consumer, individual or 
small business or bigger business, knows what they are buying. 
When they are buying insurance, they know what they are buying. 
And right now, that is also very, very difficult.
    There was a report recently about a woman who thought 
cancer care was covered. It turns out that the cancer care she 
was getting was outpatient and what was covered was inpatient. 
Now, there was no way of her knowing that when she read the 
policy. So, unfortunately, she got cancer, she had health 
insurance and it did not cover her care in the least expensive 
way possible.
    I will just give you one statistic, 61 percent of the 72 
million working age adults who had problems paying medical 
bills or paying off medical debt in 2007 were insured at the 
time the care was provided. That is again unsustainable. We 
know 50 percent of bankruptcies are due to medical debt.
    So we are going to help people to be able to buy private 
insurance. Could you start by telling me what else you think we 
ought to be doing? I do have a bill with Congresswoman DeLauro 
that we are advocating putting some of that language in this 
bill that would make Americans feel more secure that when they 
are buying private insurance or public insurance, that they 
actually know what they are buying, they get what they are 
paying for, and that we reduce the cost of administration of 
private insurance companies now, just spending literally 
millions and tens of millions of dollars to screen records to 
make sure that they do not pay coverage. So could you just--I 
know I went on probably more than my allowed but if you would 
answer that and give us some information about what else you 
are doing, how important you think it might be to be doing 
this?
    Ms. POLLITZ. I am happy to, and I will talk very fast. I 
think it is definitely the case that health insurance today is 
very complicated. Industry studies show that people do not 
understand overwhelmingly how their coverage works and that 
most would prefer to do anything, including work on their 
income taxes, rather than try to read the insurance policy and 
figure it out.
    I think you can make health insurance more predictable and 
more understandable for people by making it more standardized. 
If there is coverage for hospitalization, it should cover the 
whole hospital stay, not leave out the first 2 days. If there 
is a deductible, that should mean a deductible. If there is an 
out-of-pocket limit, that should actually limit your out-of-
pocket costs. You could have more standardization of terms.
    Also, we have suggested a new kind of labeling system for 
health insurance that I believe is included in the bill that 
you referenced.
    Ms. SCHWARTZ. It is a little bit like the way when you buy 
a food product?
    Ms. POLLITZ. Exactly.
    Ms. SCHWARTZ. It is consistent.
    Ms. POLLITZ. A coverage fact label, we would suggest that, 
our methodology was to simulate what it costs and what the 
claims are to have different illnesses and then have insurance 
companies process those claims and show you exactly what would 
be covered and what you would have to pay for the whole episode 
of illness so that people could synthesize and see that.
    Ms. SCHWARTZ. We will continue to work together. I thank 
the Chairman for his indulgence.
    Mr. TANNER [Presiding]. Thank you.
    Mr. Davis.
    Mr. DAVIS OF ILLINOIS. Thank you very much, Mr. Chairman. 
Listening to some of my colleagues would lead us to believe 
that the only relevant part of this discussion is not to have a 
public option included with our private system. I have heard a 
great deal this morning about costs. I have not heard much 
about service or quality of care. I have not heard much about 
accountability, responsibility or the need for access for the 
millions of individuals in our country who have no insurance at 
all. And in many instances no place to go if they get sick.
    Dr. Young, I want to commend you and my colleague, 
Congressman Conyers, for your many years of long struggle and 
sometimes suffering to try and push our country toward 
understanding of what a single payer system would do. 
Sometimes, I did not know whether you were pushing or leading, 
but either way, you helped to get us where we are.
    You have already told us that we have fallen short of the 
goal with this tri-committee draft that I think has been a 
tremendous effort led by our Chairman, Representative Rangel. 
Given that we have this document that we have put together, and 
I know that you are good at dual diagnoses and things like 
that, what would you say were the part that you like best or 
might be its strongest features?
    Dr. YOUNG. Okay.
    Mr. DAVIS OF ILLINOIS. And what would you say might be its 
weakest features?
    Dr. YOUNG. Well, I naturally am pleased with those parts of 
the bill that extend coverage to people now not getting it, 
that is truism. The part I do not like is that it finds it 
necessary to retain the private insurance system, which is the 
heart of our present dilemma. I am well aware of the awesome, 
real power the industry has, and I think I understand the 
legislative process. But having said that, my criticism or 
opposition to these other forms is not the purist point of 
view, I do not have that. I have had too many life experiences 
to have that view. It is that it will not work. And that I feel 
that all of--both sides of the aisle with their criticisms and 
suggestions have the same goal, but what is emerging is not a 
practical arrangement. And it has already been said, and I will 
echo it, the cost will sink not only the health economy but the 
national economy.
    And I am happy, you suggested and I will emphasize, that 
the American people are increasingly aware of the desirability 
of a national health insurance, treating health care as a human 
right by society, emulate the achievements of other countries 
with much lower costs. I mean not a little lower, starting the 
highest competitor for cost, France, Switzerland and Germany, 
spend one half per capita. So with all that money and our 
American ingenuity and eliminating the unnecessary waste 
associated with the private insurance system, we could have a 
fabulous system and the country's mood, solidarity, confidence 
in government would go up tremendously.
    Mr. DAVIS OF ILLINOIS. Thank you very much. Ms. Pollitz, 
let me ask you if I could, in some of our districts, 400 
percent of the Federal poverty level seems like pretty high 
income. Yet, you propose that subsidies be set at an even 
higher level. Why would Congress need to subsidize health care 
for a family earning $88,000 a year?
    Ms. POLLITZ. Well, if the cost of that coverage is $12,000 
or $13,000 a year, that takes a big bite out of the paycheck of 
that family. And if the family head is my age, in their 50's, 
the cost will be much higher than that because age rating is 
provided for in this bill. So I think when you watch and set 
your policy about affordability, you need to step away a little 
bit from the optics that associate with this measure of the 
poverty level. It is in many ways an artificial measure and way 
too low for measuring the needs of families to pay for 
anything. And really look at what is the cost of good health 
care coverage and how much do you want families to have to pay 
out-of-pocket for that if they do not have other subsidies?
    Mr. DAVIS OF ILLINOIS. Thank you very much. Mr. Chairman, I 
see that my time has expired but with your indulgence, could I 
just ask Dr. Gratzer, when we talk about costs, do you have any 
idea of how much of that cost is plowed back into the economy? 
Let's say if we spend a dollar for health care, how much of 
that goes back into the economy?
    Dr. GRATZER. Well, you have asked a physician whether or 
not he likes health spending, you are going to get a pretty 
predictable response. And I think what you are hitting on is 
the right question, which we cannot just look at costs, we have 
to look at effect on lives. My wife's life has infinitely 
improved by a procedure. People suffering from cancer are 
infinitely improved by the technology we have available. It is 
also true that to some extent it is good for an economy. One 
must be careful though that we probably do waste money within 
the system, and that is I think we would all agree getting 
better value for our dollar is worthwhile.
    But to turn around and say we spend 16 percent, we would be 
economically better off spending 12 percent, I think is just 
very simplistic and unfortunately too many economists seem to 
fall in that trap.
    Mr. DAVIS OF ILLINOIS. Thank you very much. Thank you, Mr. 
Chairman.
    Mr. TANNER. Mr. Heller, you are recognized.
    Mr. HELLER. Thank you, Mr. Chairman. And I want to thank 
the panel for your patience. Running back and forth between the 
forth, at least I get some exercise. Anyway, thank you very 
much for being here, and I appreciate your comments.
    One of the things that intrigues me as we go through this 
conversation and one of the things that I would like to raise 
is a question that I am constantly asked by my constituency 
back in Nevada and that is what would happen if Members of 
Congress had to live with the same health care system that 
everybody else has to live by?
    And I will assure you there is a great divide on this side 
here, of us sitting in front of you and everybody else out here 
in this room. There are people here in this room and in this 
audience that do not have the health care options that Members 
of Congress, whether it is the House or the Senate, have, and I 
believe that if we are going to go forward with this exercise, 
regardless of what plan ends up at the end of the day, that we 
ought to, if we are intellectually honest, ought to require 
Congress to live by those same provisions. Is there anybody on 
this panel that disagrees with this?
    [No response.]
    Mr. HELLER. Having said that, and again I think that is 
critical as we move forward in this debate is to make sure that 
Members of Congress, as they move forward on this, understand 
what their constituents have to live with.
    Now, I want to go to you, Dr. Gratzer. In fact, I had a 
question for Secretary Sebelius, who was sitting right where 
you were a month or so ago, and I was talking about my 
district. And this could be rural America as much as rural 
Nevada, I have a very large district and talked about access to 
health care and the cost, and my question to her is would a 
public health care plan solve access and cost? Her response to 
it was, ``I do not think anyone is talking about a government-
run program.'' She also went on to say that, ``I think the goal 
with this legislation is to have most Americans without health 
coverage in a health insurance exchange run by the private 
market to stabilize the current private market.''
    So, doctor, based on the draft we have in front of us 
today, I am pretty sure someone in Washington has a government-
run health care in mind. Do you think this bill reflects a 
respect for the power of the private market as Secretary 
Sebelius envisioned?
    Dr. GRATZER. No. Would you like me to elaborate?
    Mr. HELLER. Would you, please?
    Dr. GRATZER. I was going to rest on the eloquence of my 
response.
    [Laughter.]
    Dr. GRATZER. Again, I believe in competition, and I think 
that we should be very mindful of the fact that the system 
works well when we do have competition. The Federal Employee's 
Health Benefit Plan has actually kept costs relative to other 
types of health insurance down. I think most Members of 
Congress are very pleased with the literally hundreds of 
options they have available.
    I belong to a think tank in New York, we have a choice of 
exactly one plan. So I think there are things to learn from 
that approach, but I also think we must be very cautious about 
this concept of enhancing competition with a government plan. 
The government plan is in fact price controlled. It will offer 
substantially lower premiums than anyone else can offer because 
it is paying a fraction of the amount, as Medicare presently 
does.
    Mr. HELLER. Sure, similar to what we have in Congress now 
as Members?
    Dr. GRATZER. And I think it will suck away from the private 
sector. So I think one must be very cautious about a public 
plan option. But I do think one can learn from what Members of 
Congress have, that you have many options available and that is 
useful, and the question is how do you get that to Americans 
who are too often available--have available just one choice of 
plans?
    Mr. HELLER. Doctor, I know that you have looked at health 
care systems around the world, could you touch on survival 
rates, point out some of the statistics that might help this 
Committee, survival rates of patients in America and other 
nations?
    Dr. GRATZER. Sure, look, comparing one system to another is 
enormously challenging and crude. Mr. Becerra, your colleague 
for instance, infant mortality rates. Unfortunately, as you 
know, a lot of health has to do with things other than health 
care. Infant mortality statistics would be a wonderful example 
of that. It turns out that in America the group with the best 
health infant mortality rates are Hispanic Americans. They also 
have the least access to health insurance and in fact are most 
likely to birth outside of a hospital. I am not advocating 
births outside of hospitals. What I am advocating and 
suggesting is that one must be cautious. Other factors, drug 
use, family structure, and so on has enormous weight.
    So what are better ways of comparing systems than just 
saying infant mortality statistics? I would suggest looking at 
how people fair with different diseases, like cancer survival 
rates. Lancet Oncology as an example, compared American 
survival rates to European survival rates. Sixty-six percent 
versus 44 percent survival rates over 5 years. American 
medicine is second to none. We have problems here but do not 
lose the good.
    Mr. HELLER. Thank you very much. I know my time has run 
out, but I just want to reiterate that I think it is critically 
important that we make sure Members of Congress live by 
whatever plan comes out of here. And I would challenge the 
leadership on this Committee to see fit that the necessary 
provisions are put into this bill so that Members of Congress 
and our constituents live with the same health care programs 
across this country.
    Thank you, Mr. Chairman. I yield back.
    Mr. STARK [Presiding]. Thank you. Mr. Etheridge, would you 
like to inquire?
    Mr. ETHERIDGE. Thank you, Mr. Chairman. Let me join the 
others in thanking you for being willing to stay this long and 
stay in your seats. I know it has been tough, so we appreciate 
it.
    There has been talk here about all the issues that we have 
to deal with, and it is a complicated issue. Whether people 
want to call it waste, fraud and abuse, whatever you want to 
call it, it is savings within the system, and we have to get it 
out because that will provide for more care, more quality care. 
I cannot imagine any person sitting on this panel, or hopefully 
not any Member of Congress, would be opposed to doing that. So 
I hope this bill is a start in that direction.
    It is a draft, it is not perfect. It probably will not be 
perfect after it gets through the House and through the Senate, 
but I happen to remember something that Confucius said, he 
said, ``The longest journey starts with the first step,'' and 
if you are always fussing about where you can go, you will 
never get anywhere, so you have to get started. And so at least 
the process has started and the dialogue is in place.
    And I think the President is right saying that this is the 
time to talk about it. He said that if you like the plan you 
got, you keep it, you choose your own doctor, you do that and 
that the timing is right. I think the quality of care is a 
critical issue and you only worry about that if you get sick. 
If you are not sick, you do not need a hospital, do not need an 
insurance plan and that is why young people a lot of times do 
not get one. They choose not to. And the quality care, access 
to care and certain affordability, and these are some of the 
issues we are talking about.
    Let me just tell you a quick little situation I bumped into 
Saturday with a friend. I went up to pick up some posts, I was 
doing some work on the farm, and this guy was selling them. And 
I looked at him and I said--he said, ``Well, I don't feel 
well.'' And I said, ``What is your problem?'' He said, ``I 
really need to go and have some medical attention. Number one, 
I don't have insurance.'' He owned his farm, but he did not 
make enough money to afford health insurance, he could not 
afford to have the kind of care he needed. So as any other 
Member of Congress would do, he happened to be in my district, 
we called, we tried to find care, and tried to link him up with 
people who do it, but a lot of that happens. The point is that 
ought not be the way people have to get care. So my question is 
that if you have care in a lot of cases, and in some places 
depending on where you are, if you live in a rural area, you 
are less likely to have access as you have already heard 
because primary care is very difficult, people have figured out 
the way we reimburse, and we have to change that, and I hope we 
do it in this legislation.
    But let me ask a question to you, Ms. Pollitz, because, as 
you know, insurers, and you mentioned this earlier in your 
testimony or in answer to a question, rescinding health 
insurance policies if the policyholder has lied or concealed 
information from his or her--on his or her application. Okay, 
we understand that, that makes sense. But in a number of cases, 
in testimony even before this--not before this Committee but 
before other Committees, on June 17th, it was reported that 
three major insurance groups went before a Committee and 
admitted and said they were going to keep doing it for people 
because they were sick. It reminds me if I have fire insurance 
and my house burns down, I expect the insurance company to pay 
it unless I set it on fire myself. And what they are saying is 
if you have a fire, you can pay your fire insurance as long as 
you do not have a fire. But if you have a fire, you are out of 
luck because we are going to cancel your plan or you are going 
to court. Well, we are saying the same thing with insurance, 
aren't we? Isn't that the same kind of thing we are talking 
about, if you get sick and you are really in bad shape, you 
have a policy, where you have a condition that stretches out, 
you have cancer, you have liver disease, you have a number of 
things, that bothers me. I don't know if we can fix it all but 
certainly--if you are going to be in the business of insuring, 
if you only choose people that are healthy, you are going to 
make money and you are not going to pay much out.
    I would be interested in--I know these people are smart, I 
want them to make money, but at the same time I don't want them 
to discriminate against sick people, especially if they are 
people I represent.
    Ms. POLLITZ. You are absolutely right, Congressman, and I 
was at the hearing, at the table with the executives when they 
said they would not cease to practice. And Mr. Barton, the 
Republican leader, said to them, ``You do not have a friend in 
this room.'' One of the witnesses was a constituent of his who 
was a nurse, she had purchased a policy, she had paid her 
premiums, she was diagnosed with cancer, and at one point 
investigated, re-investigated--everything that they had 
investigated previously when she applied, they investigated 
again with a fine-tooth comb and they found that she had failed 
to disclose a visit to a dermatologist for what turned out to 
be acne and on that basis they took her policy away. And Mr. 
Barton fought them until they put it back. And there were other 
witnesses with similar stories and it is a common practice.
    The executives testified that they maintain lists of as 
many as 1,000 to 2,000 different conditions and as soon as a 
claim comes in on one of those conditions for a new 
policyholder, that will trigger the post-claims underwriting 
process.
    And I think it is important that the draft legislation 
makes extra clear, I think it is already illegal under current 
legal, but makes extra clear that policy rescission would not 
be permitted any longer.
    Mr. ETHERIDGE. Thank you. Thank you, Mr. Chairman. I yield 
back.
    Mr. STARK. Mr. Yarmuth.
    Mr. YARMUTH. Thank you, Mr. Chairman. I hate to spend any 
of my time on this subject but we now have had four votes since 
we convened this hearing this morning. All four were motions by 
the Minority to adjourn the House in a dilatory effort to just 
gum up the works so that we cannot accomplish what we are 
trying to do for the American people. I was not here when we 
were in the Minority, maybe my party did the same thing, but I 
consider it, and I know many of my colleagues and the 
Republicans consider it disrespectful to the American people. 
So I hope who is watching would take the opportunity to call 
their Representative and urge the Republican leadership to let 
us get about the business of the American people.
    Now, with that being said, Dr. Gratzer, how many countries 
are there in the world?
    Dr. GRATZER. Oh, if you looked at my geography marks back 
in high school, you would know I am not----
    Mr. YARMUTH. About 190, give or take one or two. How many 
of those countries have some kind of a health plan, do you 
know? They said you studied these.
    Dr. GRATZER. Well, I have studied Western Europe and the 
United States and Canada, I could not comment on Africa and 
Asia.
    Mr. YARMUTH. Okay, well, let's just limit our discussion to 
the industrialized nations. How many of the industrialized 
nations in the world have some form of government single payer 
health care?
    Dr. GRATZER. Many.
    Mr. YARMUTH. Most, if not all but this country, is that 
correct? Are you aware of any that do not?
    Dr. GRATZER. Well, it depends on what you mean by single 
payer. I mean if you think if you take it more broadly to 
include social insurance, all except the United States.
    Mr. YARMUTH. Thank you, that was the answer I was looking 
for.
    Dr. GRATZER. There you go.
    Mr. YARMUTH. Are there instances in which government single 
payer health care co-exists with private insurance?
    Dr. GRATZER. Yes, in most countries. Canada would be 
exceptional.
    Mr. YARMUTH. Canada is the exception, so what you and other 
opponents of the public option have chose to do is single out 
Canada as the one example, even though it is an outlier of the 
supposed plans that we are trying to model. Is there anything 
else that we have modeled other than hockey that we have tried 
to take from the Canadians?
    Dr. GRATZER. I would point out that while you have tried to 
model hockey----
    Mr. YARMUTH. We have tried to model hockey.
    Dr. GRATZER [continuing]. Canadians still have the 
advantage.
    Mr. YARMUTH. I concede that.
    Dr. GRATZER. Well, I was going to----
    Mr. YARMUTH. No----
    Dr. GRATZER [continuing]. But hold on a second, sir. I 
think it is important to draw lessons, and I see your point 
that Canada is a bit of an outlier. I would point out though if 
you look at countries like Britain or Sweden, while they have 
the option of private insurance, those markets remain 
incredibly small because they got crowded out and the 
problems----
    Mr. YARMUTH. What about Germany?
    Dr. GRATZER. Germany has a social insurance policy that is 
tightly regulated by the government. As you know, France has a 
similar one.
    Mr. YARMUTH. But there is also a private insurance market, 
health insurance market in Germany, isn't there?
    Dr. GRATZER. And in Canada, I should point out, you can opt 
out as well. You cannot buy private insurance but you can opt 
out and buy private service.
    Mr. YARMUTH. So the point is we have the opportunity to 
follow any number of models, to do none of them, to create 
something that is distinctly and uniquely American, don't we?
    Dr. GRATZER. I think that that would be a good thing, but I 
would be cautious about----
    Mr. YARMUTH. I am glad you----
    Dr. GRATZER [continuing]. In Washington given the way 
government expansion has gone in other countries.
    Mr. YARMUTH. I am glad you applaud our effort. Now, I want 
to get to this issue of 120 million people who would move from 
a private plan to a public option supposedly, the Lewin Report. 
Was the Lewin Report based on an analysis of the discussion 
draft that we have before us now? Does anybody want to comment, 
Dr. Holahan?
    Mr. HOLAHAN. Yes, I would. No, it was done before this 
draft came out obviously, but there were a lot of assumptions 
in there that got them that high a number. There were no 
exchanges. They made a big assumption about the difference in 
administrative costs. They assumed that the plan would pay 
Medicare rates as opposed to Medicare plus something.
    And there were some other issues that I cannot recall, but 
it was--oh, one of the things that I think was very important 
is that they assumed the private system would not respond at 
all to competition from the public.
    Mr. YARMUTH. Right, so it is fair to say that that analysis 
and that projection has nothing to do with the document that is 
before us?
    Mr. HOLAHAN. It does not.
    Mr. YARMUTH. When the representative from the Lewin Group 
was here, he mentioned the same thing, he said 70 something 
percent of the American people are happy with their insurance, 
and they prefer to get it from their employer. And yet he also 
said that 120 million people would move. And I asked the 
question of him, ``Well, if they love their plans so much, why 
would they move?'' And he said, ``Because it would be 
cheaper.'' Is that your assessment, Dr. Gratzer, that that is 
why they would move because it would be cheaper?
    Dr. GRATZER. That is the way it was designed. That is Jacob 
Hacker's original analysis, sure.
    Mr. YARMUTH. Is it your contention or is the implication of 
that that all insurance companies do is compete on the basis of 
cost, this was a point that was actually made by Mr. Blumenauer 
and others?
    Dr. GRATZER. Of course not.
    Mr. YARMUTH. Of course not?
    Dr. GRATZER. Of course, there are also quality issues for 
sure.
    Mr. YARMUTH. Right. And if it were just a matter of cost, 
then the implication would be that the insurance companies are 
basically overcharging. If the government could create a plan 
that would provide the same service for less money, then the 
implication would have to be the inference that the insurance 
companies were overcharging.
    Dr. GRATZER. No, the implication is that the Federal 
Government does not play fair in price controls.
    Mr. YARMUTH. How would the government be able to price 
control? There is nothing in this bill that forces a doctor to 
participate, is there?
    Dr. GRATZER. As with Medicare, one sees that price controls 
can have an enormous impact and you can provide cheaper 
insurance. Be careful what you wish for.
    Mr. YARMUTH. My time is up, Mr. Chairman. Thank you.
    Mr. STARK. I know the panel does not believe this, but I 
think we have concluded. And I cannot thank you enough for your 
patience and discomfort of sitting so long as we have leaned on 
you for help and information and it is helpful. I know that 
many people, so I can excuse the panel.
    I just would summarize that there will be lots of changes 
between now and the middle of July when we start to mark up and 
know more about the costs than we do now, but I appreciate your 
indulgence and your help.
    And if the second panel has not escaped, I would ask them 
to come forward if they are still here. Mr. Kirsch, who is the 
National Campaign Manager of Health Care for America NOW; Mr. 
Mike Draper, who is the owner of SMASH from Des Moines, Iowa; 
Peter Lee, the Executive Director for National Health Policy, 
Pacific Business Group on Health from San Francisco; Mr. Gerald 
Shea, who is the Special Assistant to the President of the AFL-
CIO; Ms. Jennie Chin Hansen, who is President of AARP; and Mr. 
Randel K. Johnson, who is the Senior Vice President for Labor, 
Immigration and Employee Benefits for the U.S. Chamber of 
Commerce.
    Get a nice soft seat. I would also as you are getting 
settled suggest that we may have interruptions from time to 
time for votes, but I know that all of the Members have 
received your prepared testimony, and I know that they have 
prepared questions from that. And while they will be interested 
in hearing a summary of that, it is obvious that many of them 
are not here. I hope you will forgive our formalized 
procedures. We will ask you to summarize your testimony, and we 
will get through that. We will start to give the Members a 
chance to inquire, which will I think elicit a lot of 
information that will help us as we move ahead with this 
proposal.
    I am looking to say with us and so we are missing Mr. Shea. 
He will be back, okay. Mr. Kirsch, would you like to proceed 
since you are first on the list?

STATEMENT OF RICHARD KIRSCH, NATIONAL CAMPAIGN MANAGER, HEALTH 
                     CARE FOR AMERICA NOW!

    Mr. KIRSCH. Yes, I would. Thank you very much, Chairman 
Stark and Members of the Committee for your patience this 
morning as well as ours.
    My name is Richard Kirsch. I am the National Campaign 
Manager of Health Care for America NOW, which is a coalition of 
more than 1,000 organizations in 46 States that are committed 
to specific principles to provide a guarantee of quality, 
affordable health care for all. Those principles have been 
endorsed in writing by the President of the United States and 
196 Members of Congress, including 176 Members of the House of 
Representatives from both parties.
    I am so pleased to join you this morning because the 
legislation you have drafted meets those principles; it would 
deliver on the promise of quality, affordable health care for 
all in a health care system that is retooled to deliver better 
quality at lower cost. You have done so in this unique, tri-
committee process that recognizes the urgency and historic 
imperative of this issue.
    Our current health care system is a huge stumbling block to 
the American dream. No matter how hard we work, or make 
responsible choices for ourselves and our families, our health 
care system often gets in the way. For too many families, one 
serious illness can mean financial disaster, as medical costs 
contributed to more than three out of five personal 
bankruptcies, and most of those were people with insurance. And 
even those with good insurance have limited choices and dreams 
deferred in our system because if you want to look for a new 
job, start that new business, retire at 59, you are trapped 
because you will not be able to get affordable coverage--if you 
can get coverage at all.
    And of course, so many working families cannot get coverage 
at all. Neither can many small businesses--that other engine of 
the American dream--who want to do the right thing for their 
employees, but cannot as health care premiums skyrocket every 
year.
    The good news is that we can fix what is wrong with the 
system with a uniquely American solution. For those who say we 
cannot do this, it is too complicated, it is too much to take 
on, it's too much at once, your legislation is proof positive 
that yes we can.
    As Americans begin to pay attention to the health care 
debate, they are asking what does this mean to me? Here is how 
I would explain to people how this works and how your 
legislation will make their lives better.
    First, if you have good health coverage at work, you can 
keep it. But there will be two important changes. Under your 
legislation, you will no longer have to worry about your 
coverage at work getting skimpier every year, or your employer 
taking a bigger chunk each year out of your paycheck. Your 
employer coverage will not be barebones. It will cover most of 
your health care. It will not stop paying if you get seriously 
ill. Your job will pay for a good share of coverage for you and 
your family. One more thing, whatever job you take, you will 
have good health care. That is because all employers will 
either provide coverage or help pay for it.
    Now, if you do not get health coverage at work, you work 
several part-time jobs, you are self-employed, an early 
retiree, or simply out of work, you will now be able to get 
good, affordable coverage. You will not be turned down because 
of a preexisting condition or charged more because you have 
been sick or you are a woman of childbearing age. You can still 
be charged more if you are older, but only so much.
    And how much will it cost you? That will depend on your 
earnings, the size of your family, the assistance for low-, 
moderate-, and middle-income families.
    You will go to get insurance in a new marketplace, called 
an exchange. In the exchange, all plans will have a decent 
level of benefits and play by the same rules. And no matter 
which plan you choose, your out-of-pocket costs will be 
limited; no more catastrophic medical bills.
    You will have a choice of the new public health insurance 
plan too, so you will not be limited to the same private 
insurance companies that have a record of denying and delaying 
care while they raise premiums three or four or five times as 
much as wages.
    As the President says, there are two reasons for the choice 
of a public health insurance plan. The first is to lower costs 
from a plan that does not pay the average CEO $12 million a 
year, or have sky-high administrative costs. The mission of the 
public health insurance plan will deliver the kind of delivery 
system changes we need to innovate, provide better value and 
invest in our communities and make real progress in eliminating 
the barriers and disparities and access to services we 
experience today.
    The second reason the President says we need a public 
option is to keep the insurance companies honest. The 93 
percent of Americans who do not trust private insurance 
companies know that no matter how much we regulate them, their 
first order of business, actually their legal fiduciary 
responsibility to the shareholders is to make a buck. When they 
pay for someone's costly care, their profits go down.
    This legislation also answers the crying needs of small 
businesses for affordable coverage. By offering tax credits and 
allowing small businesses to enter the exchange, it gives them 
the advantage of a large pool and lower costs.
    Your legislation does a great deal more for the poorest 
through Medicaid and for seniors on Medicare to address the 
lack of primary care providers and disparities in access to 
health care.
    Are there ways we would improve on this draft? There are, 
although not a great number. And we will detail them in our 
written testimony and I can suggest some today if you would 
like.
    I would like to conclude by asking you to keep in mind one 
question over the coming weeks, as you hear from a myriad of 
interest groups complaining about this and that. It's the 
question your constituents will ask at the end of the day: Will 
I have a guarantee of good coverage that I can afford?
    The draft legislation you have presented answers with a 
resounding yes. And if the answer remains yes, next fall when 
you send a bill to the President for his signature, you will 
have done your jobs. And in doing so, made history.
    Thank you.
    [The prepared statement of Mr. Kirsch follows:]
                 Prepared Statement of Richard Kirsch,
        National Campaign Manager, Health Care for America NOW!
    Good morning, Chairman Rangel, Chairman Stark and Members of the 
Committee. My name is Richard Kirsch. I'm the National Campaign Manager 
of Health Care for America NOW, a coalition of more than 1,000 
organizations in 46 States that are committed to specific principles to 
provide a guarantee of quality, affordable health care for all. Those 
principles have been endorsed in writing by the President of the United 
States and 196 Members of Congress, including 176 Members of the House 
of Representatives from both parties.
    I am so pleased to join you this morning because the legislation 
you have drafted meets those principles; it would deliver on the 
promise of quality, affordable health care for all in a health care 
system that is retooled to deliver better quality at lower cost. You 
have done so in this unique, tri-committee process that recognizes the 
urgency and historic imperative of this issue.
    Our current health care system is a huge stumbling block to the 
American dream. No matter how hard we work, or make responsible choices 
for ourselves and our families, our health care system often gets in 
the way. For too many families, one serious illness can mean financial 
disaster, as medical costs contributed to more than three out of five 
personal bankruptcies, and the great majority of those are people who 
are insured. Even having good insurance limits choices and defers 
dreams. Want to look for a new job, start that new business, retire at 
59? Trapped because you won't be able to get affordable coverage--if 
you can get coverage at all.
    And of course, so many working families can't afford coverage at 
all.
    Neither can many small businesses--that other engine of the 
American dream--who want to do the right thing for their employees, but 
can't as health care premiums skyrocket every year.
    The good news is that we can fix what is wrong with the system with 
a uniquely American solution. For those who say we can't do this, it's 
too complicated, it's too much to take on, it's too much at once, your 
legislation is proof positive that yes we can.
    As Americans begin to pay attention to the health care debate they 
are asking what does this mean to me? Here's how I would explain to 
people how this works and why it will make their lives better.
    If you have good health coverage at work you can keep it. But there 
will be two important changes. Under your legislation, you will no 
longer have to worry about your coverage at work getting skimpier every 
year, or your employer taking a bigger chunk each year out of your 
paycheck. Your employer coverage will not be barebones. It will cover 
most of your health care. It won't stop paying if you get seriously 
ill. Your job will pay for a good share of coverage for you and your 
family.
    One more thing, whatever job you take, you'll have good health 
care. That's because all employers will either provide coverage or help 
pay for it.
    If you don't get health coverage at work, you work several part-
time jobs, are self-employed, an early retiree, or simply out of work--
you'll now be able to get good, affordable coverage. You won't be 
turned down because of a preexisting condition or charged more because 
you've been sick or you're a woman of childbearing age. You can still 
be charged more if you are older, but only so much.
    How much will it cost? The amount you pay will be based on your 
earnings and the size of your family, with assistance for low-, 
moderate- and middle-income families.
    To get insurance you'll go to a new marketplace, called an 
exchange, one-stop shopping for health coverage. All plans will have a 
decent level of benefits and play by the same rules. No matter which 
plan you choose, your out-of-pocket costs will be limited; no more 
catastrophic medical bills.
    You'll have a choice of a new public health insurance plan too, so 
you won't be limited to the same private insurance companies that have 
a record of denying and delaying care while they raise premiums three 
or four or five times more than wages.
    As the President says, there are two reasons for offering the 
choice of a public health insurance plan. The first is to lower costs 
from a plan that doesn't pay the average CEO $12 million a year, or 
have sky-high administrative costs. The mission of the public health 
insurance plan will be to drive the kind of delivery system changes we 
need to innovate, provide better value and invest in our communities' 
health. A plan that will inject competition into the 94% of markets in 
this country that are anti-competitive under Department of Justice 
standards.
    The second reason the President says we need a public option is to 
keep insurance companies honest. The 93% of Americans who don't trust 
private insurance companies know that no matter how much we regulate 
them their first order of business--actually their legal, fiduciary 
responsibility to their shareholders--is to make a buck; when they pay 
for someone's costly care, their profits go down.
    An additional reason for the public health insurance plan is to 
ensure that we make real progress in eliminating the barriers and 
disparities in access to needed services that are too often experienced 
today.
    Poll after poll shows strong support for the choice of a public 
health insurance plan. This Sunday the New York Times/CBS poll found 
that 72% of those polled support ``offering everyone the choice of a 
government-administered health insurance plan--somewhat like the 
Medicare coverage that people 65 and older get--that would compete with 
private health insurance plans,'' including half of the Republicans, 
three-fourths of the independents and nine out of ten Democrats.
    This legislation also answers the crying needs of small business 
for affordable coverage. By offering tax credits and allowing small 
businesses to enter the exchange, it gives them the advantage of a 
large pool and lower costs.
    To the question of how we will pay for this, you have said with 
shared responsibility: Individuals responsible for what they can 
afford, employers responsible for paying for more affordable coverage. 
Government will fulfill its responsibility by achieving savings in the 
system and by raising new revenues that you will soon detail. In doing 
so, we would urge you to raise revenues from those who can most afford 
it and by closing Wall Street and corporate loopholes. Not by taxing 
the health care benefits of those who still are fortunate enough to 
have good insurance.
    Your legislation does a great deal more, for the poor through 
Medicaid, for seniors on Medicare, to address the lack of primary care 
providers and the disparities in access to health care.
    Are there ways we would improve on this draft? There are, although 
not a great number. We will detail them in our written testimony and 
I'd be glad to discuss some suggestions during the question period.
    I'd like to conclude by asking you to keep in mind one question 
over the coming weeks, as you hear from a myriad of interest groups 
complaining about this and that. It's the question that your 
constituents will ask at the end of the day: Will I have a guarantee of 
good coverage I can afford?
    The draft legislation you've presented answers with a resounding 
yes. And if the answer remains yes next fall when you send a bill to 
the President for his signature, you'll have done your jobs. And in 
doing so, made history. Thank you.

                                 

    Mr. STARK. Thank you. And, Mike Draper, the owner of SMASH 
from Des Moines, would you like to proceed? Is your microphone 
on?
    Mr. DRAPER. Yes.
    Mr. STARK. Okay.

            STATEMENT OF MIKE DRAPER, OWNER, SMASH, 
                        DES MOINES, IOWA

    Mr. DRAPER. I may be a little nervous. This is my first 
time speaking to so many empty leather chairs.
    [Laughter.]
    Mr. DRAPER. As I look through this list, I am probably the 
only person who is not recognizable with the organization I am 
from, and so I thought maybe I would start with explaining 
exactly who I am and how I got to be here.
    I own a store called SMASH. I am 26 and SMASH is a clothing 
store and screen printing shop located in beautiful downtown 
Des Moines. So essentially I am the token Main Street guy, the 
``Mike Six Pack,'' if you will.
    I grew up in a small town in Iowa, studied history at the 
University of Pennsylvania, then moved to the United Kingdom 
where I married a girl from London, who was more than surprised 
when I decided to move back to Iowa and start a screen printing 
retail store, not just for the fact that she had to move from 
London to Des Moines but for the fact that I had no experience 
in retail, design or screen printing. And the closest I had 
come at Penn to a formal business education was a 
macroeconomics class, which I dropped after getting 42 percent 
on the supply and demand test.
    I started the company at the bottom, printing shirts and 
selling them out of a bag on the street or on college campuses. 
While I was selling shirts on the street in Union Square with 
other vendors, I thought to myself, ``Well, it is true. You 
really cannot do anything with a history degree.'' But I worked 
constantly and set up a website in 2004 and then opened SMASH 
in 2005 as an 1,100 square foot retail store by myself and 
grossed $90,000 the first year. Now, 4 years later, the store 
has 4,200 square feet, 12 employees, and we will gross over $1 
million this year, having been featured in the New York Times 
twice, NPR twice and several other national publications.
    Along the way, I got the business education I needed. I 
have had to figure out business strategy, management, 
bookkeeping but health care has proved probably the most 
frustrating. In 2007, after 2 years of being uninsured, I 
bought an individual policy and felt like I was one of the 
``chosen few.'' And my insurance epiphany probably came when I 
had a minor surgery and weeks later was sent a bill for $347 
for miscellaneous hospital charges. I started to wonder what 
would happen if I started sending out customers $347 
miscellaneous T-shirt charge bills after I got done. But that 
is kind of the introduction of the system does not work on a 
market and it did not make sense.
    And you guys probably know most of the problems as well as 
I do but the solution is a lot trickier. I think the bill that 
everyone has come up with here is a pretty good start. I think 
the exchange addresses a lot of those problems with general 
regulation, better pricing, transparency and coverage rules. 
But in my opinion competition is always more effective than 
just regulation and the public option is the only option strong 
enough to compete with the private sector.
    Now, when I hear ``public option,'' I do not hear ``free 
option.'' I am not here asking for free health care, a 
government handout. I am asking for rational health care. As a 
businessowner, I would gladly pay 8 percent of my payroll into 
a public option since that would give me two things: One, peace 
of mind that my employees would be covered by something backed 
by the government; and, two, more importantly, an ability to 
accurately budget per year my company's health care expenses. 
Right now, my premiums and bills will fluctuate between 6 
percent and 22 percent of payroll in any given year. An expense 
that large and unpredictable is what drives companies out of 
business, not a tax that they know they have to pay at the 
beginning of the year.
    Now, it may sound strange that I would be willing to pay a 
new tax but rest assured I am not a socialist. I am not here 
trying to undermine capitalism. Rather, the small mountain of 
money I send to you guys several times a year does not make me 
clamor for more government, but the unsustainable cost of my 
current health cost, the one thing that could probably ruin the 
company, makes me clamor for an actual option.
    The public option is less intrusive to me since I would 
have the option. I could take the public plan or I could take 
the private plan. With simply doing the exchange or by simply 
regulating the market, it seems like bigger government. You 
could have new rules, possibly required health care, some 
subsidized by the government, meaning that my tax money would 
go to subsidize some people's money going to the private 
insurance industry. On the other hand, my private money has to 
go to that same private insurance industry. Now, even somebody 
who has dropped out of macroeconomics says that that is a kind 
of frustrating thing to deal with.
    I understand that the issues are complex. Insurance blends 
technical problems with ideological differences and many of the 
details of the plan really can only emerge when it is 
functioning, making these details impossible to know now, such 
as how many people will take the public plan, if rates will 
actually go down.
    But not knowing every detail of the future should not stop 
us in the present from working for a better one. And something 
needs to be done for the future of small business health care. 
We should not lose sight of the fact that this is one of the 
few countries where somebody like me can start a business with 
no business knowledge and succeed. And while you guys cannot 
legislate entrepreneurial spirit, you can help to take down 
some of the hurdles impeding entrepreneurs from starting 
companies. Right now, health care is one of the biggest hurdles 
to either entrepreneurs trying to start companies or existing 
companies staying in business. And I think the public option is 
our best option for taking care of that.
    Thank you.
    [The prepared statement of Mr. Draper follows:]
   Prepared Statement of Mike Draper, Owner, SMASH, Des Moines, Iowa
    Chairman Rangel, Ranking Member Camp and Members of the Committee, 
thank you for inviting me to be here today and to testify on behalf of 
my business and small businesses across Iowa.
    My name is Mike Draper. I am 26 and own and operate SMASH, a 
clothing store and screen printing/design shop in beautiful downtown 
Des Moines, Iowa.
    Although I grew up in a small town outside of Des Moines, even the 
21-year-old me never would have guessed that the 26-year-old me would 
be back in Iowa living and working. I left the State for the east coast 
at 17 to study history at UPenn in Philadelphia, I spent a year and a 
half living in the UK and Germany, and in the UK I met a girl from 
London who I would convince to marry me.
    And let's just say that of all the people who were surprised I was 
moving back to Iowa, she and her parents were definitely in the top 5.
    More surprising was that I wanted to run a clothing store and 
screen printing shop. I had no experience in design, in printing, or in 
retail clothing, but I always say that if I had ever actually stopped 
to analyze my situation, I never would have started the business I 
started.
    After I graduated, I lived with friends while I traveled around 
selling shirts out of a bag on college campuses and busy street 
corners. One day selling shirts in Union Square I began to worry that 
what I had heard from so many people was true: You really can't do much 
with a history degree.
    But I worked constantly. I built a website to sell shirts. I bought 
screen printing equipment. And I realized that my home State of Iowa 
offered the affordable space and the niche market I needed to succeed.
    So in 2005 I moved back and opened a 1,100 square foot retail and 
printing space by myself and I grossed about $90,000 in sales. Now, 4 
years later, SMASH has 4,200 square feet, a dozen employees, and will 
gross over $1 million in sales this year.
    Like many businessowners, I have realized that business is often 
less about the idea, and more about finding solutions to the constant 
problems that come from dealing with other humans. The closest I ever 
came to a formal business education was a macroeconomics class that I 
dropped after getting a 42% on my first test that only covered supply 
and demand. But even without business training I have successfully 
maneuvered my way through small business taxes, building codes, 
trademark law, even immigration issues for a web designer from Denmark 
who went to college in Des Moines and now works at SMASH.
    But health care has always confounded me.
SMASH and the Challenges of Health Care
    Right after college, while I traveled and sold t-shirts, I went 
without health insurance. When I bought an individual policy in 2007, 
after 2 years of being uninsured, I thought I had become part of the 
chosen few, the insured. But my ``insurance epiphany,'' when I realized 
how odd our system is, came weeks after a minor surgery, when I got an 
unannounced $347 bill for ``miscellaneous hospital charges.''
    I laughed when I opened it, imagining what would happen if I 
started mailing out bills that said, ``miscellaneous t-shirt charges'' 
to customers weeks later.
    It dawned on me how little my individual policy covered: High 
deductible, high drug costs, no free doctor's exams. But there was 
nothing else I could afford.
    As SMASH added more employees, there were now more people 
inheriting my situation. As young moderns, none of us want to be tied 
to a corporate policy--we would rather have a flexible plan we can 
travel with. And so all of the employees at SMASH have individual 
policies that the company pays for.
    This most basic coverage makes up 8% of our gross payroll.
    What alarms me is that this is the most elementary coverage offered 
by our provider, Wellmark, and is really only intended to provide the 
most basic coverage in case of catastrophic accidents.
    If SMASH were to try and provide our employees with full family 
coverage, our costs would balloon to about 22% of our gross payroll, 
and still we would have plans inferior to those plans of larger 
companies.
    I can't run away from the cost of health care, either for myself, 
my family, or my employees. The way we do things now, where responsible 
employers offer coverage and others don't, creates an incredibly uneven 
playing field. I'd much rather be part of a system where all employers 
are contributing a fair share, instead of this game of shifting costs 
that we're playing today. Small businessowners like me are willing to 
contribute--73% said so in the Taking the Pulse of Main Street survey 
conducted by the Main Street Alliance last year.
    Once my wife took a job as a nurse, I moved my insurance to her 
family plan, but with our family growing, it becomes more likely that 
my family plan will soon go through SMASH. And as the SMASH employees 
age and add families, the 22% cost becomes more and more likely.
    I have seen being uninsured, being underinsured, now being 
``fully'' insured under my wife's plan, and I've spent over a year 
living under the UK's national health. I'm as aware of the problems in 
each as everyone here is.
Big Steps in the Right Direction
    The solution is much trickier, but I think the draft bill released 
by this Committee last week is a great start. The ``Exchange'' seems to 
address the need for basic regulation, transparent pricing, and 
coverage rules. It points out the major holes in our current system and 
gets to the heart of the matter: That we need competition. The Exchange 
will provide a more competitive, transparent marketplace that will 
offer real choices for individuals and small businesses. In the 
Exchange, we will actually be able to compare the insurance plans being 
offered because the benefit packages will be standardized and the 
differences in the plans will be disclosed.
    I'm also happy to see the provisions in the draft legislation to 
reform insurance practices to prohibit discriminatory coverage and 
rating policies. These changes are long overdue--I wish it wasn't 
necessary for the Federal Government to step in and pass laws to get 
insurers to stop these unfair practices, but if that's what it takes 
then I support you taking action as quickly as you can to put them in 
place. Reforms that prohibit exclusions based on preexisting conditions 
and discrimination in benefits, require plans to meet minimum medical 
loss ratios, do away with annual and lifetime limits on coverage and 
cost-sharing for preventive care, limit unfair rating practices, 
provide for guaranteed issuance and renewal of policies, and assure the 
adequacy of provider networks will go a very long way to creating a 
sane marketplace where policies are worth their premiums and where 
individuals and small businesses can be smart shoppers for the health 
care coverage they need.
    By creating a Health Insurance Exchange, the bill makes it possible 
for small businesses to have the affordable option necessary for 
employers and individuals to share the responsibility of providing 
quality health care coverage. I like the idea of the ``Exchange,'' but 
in my opinion, real competition is always more effective than 
regulation alone. The public option set forth in the bill will do more 
than anything to ensure competition, and is therefore the most 
important component to me. Having a public plan that will compete toe-
to-toe on a fair basis with private plans will guarantee that even in 
local insurance markets dominated by one or two private insurers, we'll 
have real choices and the leverage that comes from being able to vote 
with your feet and take your business elsewhere if you can't get the 
insurance coverage you need.
    I'm convinced that by encouraging real competition and restoring 
vitality to the market, a public health insurance option will really 
drive broad-based positive change in the private sector health 
insurance industry. According to the Commonwealth Fund, health reform 
that includes a public option has been estimated to save employers $231 
billion over 2010-2020, and $3 trillion for the Nation. Without the 
public plan option, those savings shrink from $3 trillion to less than 
$800 billion: We lose three-quarters of the savings. I don't know much 
about budget scorekeeping in Congress, but it seems to me like these 
are savings we can't afford to pass up.
    A public plan is also essential to encourage innovation in coverage 
and affordability in a competitive market. Our business has to be 
constantly looking for ways to serve customers better, more 
efficiently, at lower prices, and we are definitely driven by 
competition from other businesses. As a purchaser of health insurance 
coverage, I want my insurer to have to compete for my business the same 
way that I have to compete for my customers.
    I understand that the insurance issue is not only technically 
complicated, but also invites ideological differences on government 
involvement. But it seems to me that some of those differences are 
obscuring the real agreement on the need for a public health insurance 
plan. A number of recent polls suggest that somewhere around 70% of the 
public supports the creation of a public health insurance option and 
from what I've seen most of the small businessowners I know agree. In 
the survey I mentioned earlier conducted by the Main Street Alliance, 
70% of the responding businesses said they believe government should 
play a stronger role in guaranteeing access to quality, affordable 
health care. When asked to choose between a reform proposal with a 
public insurance option and one with expanded private market options, 
59% of the responding businesses chose the plan with a public option, 
compared to 26% that preferred a proposal with more private market 
options.
    The bill also includes a phase-in of eligibility for small 
employers to secure coverage through the Exchange and to gain access to 
the public health insurance option, with firms employing 10 or fewer 
workers eligible in year one and firms up to 20 employees eligible in 
year two. I realize that this phase-in is intended to be cautious and 
not create unintended consequences by moving too quickly. But from my 
viewpoint, we can't make access to the public plan option and the other 
private plan options available too soon. I would encourage the 
Committee to consider accelerating the phase-in for employers to gain 
access to the Exchange.
    Now I don't read ``public option'' as ``free option.'' I'm not here 
asking for free health care, all I'm asking for is rational health 
care.
    I and other small businesses in my neighborhood are not tired of 
health care premiums. We're tired of health care premiums going to 
companies whose sole goal is to turn a profit, with little or no regard 
for the impact of their policies and practices on small businesses like 
ours. With SMASH's insurer, Wellmark, I know that I am a minute number 
on a long balance sheet that can be dropped or dragged through court.
    With a public health insurance plan option offered through the 
Federal Government, I would have an independent Federal agency 
accountable to Congress--you all--on my side, and a system whose goal 
is not to maximize profits at all costs, but to actually provide real 
health coverage that meets the needs of my business. Which means at 
this point, apples to apples, if I had to choose between paying my 
premiums to the Federal Government or Wellmark, I'd rather send my 
premiums to the government.
    It may sound strange to hear a small businessowner like me say I'd 
rather send my premium dollars to the Federal Government than to a 
private insurer. When it comes to economic issues, the pile of money I 
send to Washington, DC makes me fairly conservative. But it is this 
conservative streak in me that wants the competition that a public 
option will bring.
    First of all, I understand that there may be additional taxes 
involved, but I don't mind paying taxes that are well spent. Right now, 
however, I see my tax money going to pay for high-cost health care that 
county hospital ERs are forced to provide for the uninsured, while 8% 
of my payroll already goes toward providing only the most basic, 
catastrophic coverage for a group of employees who are all single and 
in their 20s.
    That means I'm paying for two separate yet equally inefficient 
systems, and even someone who dropped macroeconomics can see that isn't 
rational.
    Second, I support the idea of shared responsibilities in the bill 
that require individuals and employers to play their part in assuring 
that everyone has health care coverage. I agree with the approach of 
giving employers an option of providing coverage for their workers or 
contributing funds on our worker's behalf. In my own case, I think 
paying 8% of my payroll to provide health insurance for my employees is 
fair, and the benefits package is likely to actually cover our health 
care costs with no preexisting condition exclusions.
    For a business, taxes are easy to take into account because they 
are a fairly static expense. What are not static are health care bills 
that cannot be budgeted each year. I have never met a business that 
went under because of their tax burden, but I meet small businesses and 
entrepreneurs all the time that can't make it because of their health 
insurance burden. If extra taxes will help to stabilize the insurance 
market and make it something I can actually depend on for care and 
realistically budget for, I am in full support.
    While 8% would not be any issue for SMASH, I'm glad to see 
provisions in the bill to establish a tax credit to help small 
employers bear the cost of providing coverage for their workers. A 50% 
credit will give a big boost to businesses with 10 or fewer employees 
with average compensation of $20,000. This, too, offers a great deal of 
help in improving the health insurance options currently available to 
small businesses.
    I also understand that requiring employers to provide health 
insurance puts another responsibility on me, but it's nothing new for 
small business. I already take care of withholding tax and unemployment 
tax for employees. If one of you came in to shop, I'd make sure the 
government got the sales tax you owed. These are the responsibilities 
that come with being at the top of the ladder. Right now, I have the 
unpleasant responsibility of knowing that the only health coverage we 
have is insufficient coverage, that one catastrophic illness could not 
only ruin one of my employees, but could put the entire company in 
serious trouble. When compared to that, I would gladly accept the 
responsibility of providing insurance coverage that I wouldn't have to 
worry about.
    Representatives of the Main Street Alliance look forward to 
continuing to work with you to assess the interaction of the various 
small business related provisions in the bill to ensure there is 
affordability across the range of small businesses, whether they 
directly provide coverage for their workers or contribute to helping 
workers buy their own coverage through an Exchange.
An American Solution
    I understand this is a complicated issue, but I think the U.S. is 
in a unique situation. We could now create a public-private hybrid that 
could work better than any system in the world, one that blends the 
stability of a government-backed system with the self-regulation of a 
market system.
    As we step back, we shouldn't lose sight of the fact that this is 
one of the few nations where people like me can jump into business and 
succeed with hard work. We should recognize that it is not just a free 
market that makes this possible, it is also our country's ability to 
provide things like affordable public education to give people the 
tools they need to succeed in business.
    Health care is currently a huge hurdle that is often too high for 
would-be entrepreneurs to surmount, and this creates a serious drag on 
a major part of our economic engine.
    While you can't legislate the entrepreneurial spirit, it is 
possible for you, Congress, to tackle the hurdles holding back many 
small businesses and the economy at large. This model of creating 
choice and competition is an opportunity to do just that.
    Adding a public option to health care would not only ensure care 
for the uninsured, it would provide a much needed injection of energy 
at the front lines of our market economy, making it easier for young 
people like me to strike out on their own and start their own business 
like millions of Americans before them and keep our country leading and 
prospering in the century to come.
    Thank you.

                                 

    Mr. STARK. Thank you, Mike Draper. Next, Mr. Peter Lee, who 
is the Executive Director for National Health Policy of the 
Pacific Business Group on Health from San Francisco, 
California. Welcome and please proceed as you would like.

STATEMENT OF PETER LEE, EXECUTIVE DIRECTOR FOR NATIONAL HEALTH 
   POLICY, PACIFIC BUSINESS GROUP ON HEALTH, SAN FRANCISCO, 
                           CALIFORNIA

    Mr. LEE. Chairman Stark, Ranking Member Camp, Members of 
the Committee, thank you very much for having me here today. I 
represent the Pacific Business Group on Health, which is a 
nonprofit coalition of some of America's largest employers that 
buy health care.
    America's employers recognize that we need to dramatically 
overhaul the health care system. The recognition comes from the 
fact that they face challenges on a daily basis providing 
coverage to over 160 million Americans.
    We appreciate what this Committee is wrestling with, what 
Congress is wrestling with, and what the Administration is 
seeking to do to craft reform that will change health care and 
make it more affordable.
    There is not a single employer perspective on health 
reform, no more than there is a single American perspective on 
health reform. There are, however, some core beliefs that 
employers share in common. And I have detailed those in more 
detail in my written testimony, but I want to go through some 
of those beliefs and highlight how they relate to the 
discussion draft that we are discussing today.
    First, employers believe that we must ensure that all 
Americans have health insurance, and we should do that by 
building on the current employer-sponsored individual and 
public program system. In many ways, the discussion draft does 
recognize the important role the employer-sponsored coverage 
plays in America and builds on that system. Having coverage for 
individuals for small businesses through exchanges across the 
country is going to be an important tool. With expanded 
coverage, employers are hopeful that the cost shift from the 
uninsured will be greatly reduced.
    Employers believe that we must address health care costs, 
which are driving individual Americans to bankruptcy, making 
our companies less competitive internationally, creating long-
term structural deficits that our children will have to bear.
    The discussion draft supports many of the delivery system 
reforms that we believe are essential to reign in out of 
control health care cost while fostering quality. Among the 
proposals that we think are important are building and 
supporting national rules for a more competitive, affordable 
insurance marketplace for individuals and small business, 
developing better performance measurements for providers, 
changing payment and outlining incentives for higher quality, 
and expanding investments for wellness and prevention.
    In particular, the discussion draft clearly recognizes the 
critical role that payment reform must play in creating better 
value for Americans. I applaud in the inclusion of the draft a 
range of payment reforms, including bolstering payments for 
primary care and changing the way we pay for care to move from 
volume to value.
    Part of changing payment though should include changing how 
payment decisions are made. Current payment policies for 
Medicare are too inflexible and quite honestly susceptible to 
focused interest of the recipients of payment. Congress should 
consider creation of a new entity with independent authority to 
implement broad direction that Congress provides.
    The discussion draft also recognizes that measuring the 
performance of health care is the foundation for quality 
improvement, giving consumers better tools and payment reform. 
Employers are part of a broad coalition called Stand for 
Quality, which makes a number of recommendations, many of which 
are in the discussion draft. We encourage the Committee to 
consider building those recommendations to make sure there is 
enough resources to develop new measures and to support 
consultative processes so when measures are put into use, 
consumers, purchasers and others are at the table.
    Employers strongly support the discussion draft proposals 
to expand our national commitment to comparative effectiveness 
research. Patients and consumers need better information to 
make decisions about what is right for the patient.
    The discussion draft also recognizes the need to promote 
wellness and prevention. Few issues are as close to the heart 
of the employer community; we support those significantly.
    I would note that nationally there is a lot of discussion 
about the 10-year bill for expending coverage of being $1 
trillion or $1.5 trillion. I would point out that those are big 
numbers and big issues, but over the next 10 years, we will 
spend $45 trillion on health care. The President is right that 
the real number we need to look at is how do we reduce health 
care costs across the board by $2 to $3 trillion. Your proposal 
includes many building blocks to put us on a path for reigning 
in costs, but we need to have mechanisms to measure our 
progress and hold both the public and private sectors 
accountable for reducing costs. We truly are on an 
unsustainable track in terms of health care costs.
    Part of reducing costs and promoting efficiency is aligning 
public and private programs. When we looked at the proposal to 
have a public plan, many employers were deeply concerned that 
that public plan would shift cost to the private sector. What 
we need to have is options that align payment models across 
public and private purchasers to ensure that providers are 
rewarded consistently but do not shift costs from one sector to 
the other.
    Health reform must be about making high-quality health care 
affordable for patients, employers and government. We look 
forward to working with this Committee and so many other 
Americans who share that goal.
    Thank you very much.
    [The prepared statement of Mr. Lee follows:]
Prepared Statement of Peter Lee, Executive Director for National Health 
  Policy, Pacific Business Group on Health, San Francisco, California
    Chairman Rangel and Members of the Committee, thank you for the 
opportunity to be with you today. America's employers recognize the 
need to dramatically overhaul our Nations' health care system. That 
recognition comes from the challenges we face on a daily basis 
providing health care coverage to over 160 million Americans. We 
greatly appreciate that this Committee, Congress and the Administration 
are seeking to craft reforms that will change how health care is 
delivered and make it more affordable.
    The Pacific Business Group on Health makes these comments as a 
nonprofit association of many of the Nation's largest purchasers of 
health care, based in California. PBGH represents both public and 
private purchasers who cover over 3 million Americans, seeking to 
improve the quality of health care while moderating costs. The Pacific 
Business Group on Health represents large and small employers in 
efforts to improve the value of health care. We help our large 
purchaser members ``buy smarter,'' and for many years we operated one 
of the largest small employer purchasing pools in the Nation.
    There is no more a single ``employer perspective'' on health reform 
than there is a single ``American perspective'' on reform. Employers 
hold a variety of positions on the big issues of financing and payment, 
as well as on issues such as the ``public plan'' and the role of 
government. There are, however, some core beliefs about health reform 
shared by virtually all businesses that we believe should guide the 
Committee on Ways and Means and reform discussions in general. Those 
core beliefs include:

      We must ensure that all Americans have health insurance 
by building on the current system of employer-sponsored, individual and 
public programs;
      We must address health care costs which are driving 
individual Americans to bankruptcy, making our companies less 
competitive internationally, creating long-term structural deficits 
that are breaking the banks of States across the country, and imposing 
unacceptable liabilities on our children;
      We must address the persistent differences between how 
public and private systems measure performance and pay for care. These 
differences lead to confusion for consumers and providers, create 
unacceptable price pressures on employers and engender disconnected 
incentives between public and private payers;
      Health care reform must support and encourage clinicians 
and hospitals in delivering better quality, more ``patient-centered'' 
care--which will entail doing a better job measuring what works, 
changing how we pay for health care and making better use of 
information technologies;
      We need to promote wellness and prevention, instead of 
focusing only on intervening after the fact; and
      All Americans--as engaged patients, caregivers and 
consumers--need to be given better tools and incentives to participate 
in getting the right care at the right time.

    Americans believe in value--we seek to get the best quality 
possible for our money. Yet, no one is getting good value for their 
health care dollar. Our health care system is broken. Quality of care 
varies dramatically between doctors and hospitals, but those 
differences are invisible to patients. Payments reward quantity over 
quality and fixing problems over prevention. Lack of standardized 
performance measures makes it impossible to know which providers are 
doing a good job, and which are not. Consumers lack information to make 
the choices that are right for them. Health reform must address these 
underlying issues and we are heartened that the proposals in the 
Discussion Draft recognize and address many of these problems.

Core Employer Belief: We must ensure that all Americans have health 
insurance by building on the current system of employer-sponsored, 
individual and public programs.

    The vast majority of employers continue to believe that reform 
should build on the employer-based system that works for millions of 
Americans. Employers see health benefits as a crucial tool that fosters 
a more productive workforce. The Discussion Draft affirms the role of 
employer-sponsored coverage by building on the existing system and 
seeking to expand coverage through small business in Exchanges across 
the country. Employers that offer coverage believe that the costs of 
insurance for their employees is substantially higher than it should be 
because of cost-shifting from hospitals and doctors seeking to recoup 
costs of caring for the uninsured and receiving underpayment by public 
programs (both Medicare and Medicaid). With expanded coverage, 
employers are hopeful that the cost-shift from the uninsured will be 
greatly reduced.
    Particular elements of reform--especially the possibility of 
employer mandates--will have support or opposition from the employer 
community in direct relation to whether the broader package of reforms 
promote meaningful improvements in the cost and quality of care.\1\ As 
well articulated in the Position of the HR Policy Association Regarding 
Reform of the U.S. Health Care System (April 2009), large employers 
support the voluntary nature of the Nation's employer-based system and 
would consider the potential employer play-or-pay mandate only insofar 
as it is well-crafted, part of a wide array of other reforms and fully 
considers ``the interplay of all elements of the package necessary for 
reform.''
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    \1\ A recent survey of senior health benefits executives for large 
companies identified strong support for government playing a role in 
making insurance products available for individuals and small 
businesses (with over 55% supporting this role). At the same time, 
those surveyed held a range of views, but with more than two times as 
many having a negative view of the ``play or pay'' requirement for 
employers (38% strongly negative; 19% strongly positive) and 
establishing a ``public plan'' (40% strongly negative; 21% strongly 
positive). Corporate Health Care Policy Forecast Survey, Miller & 
Chevalier/American Benefits Council, June 2009.

Core Employer Belief: We must address health care costs--which are 
driving individual Americans to bankruptcy, making our companies less 
competitive internationally, creating long-term structural deficits 
that are breaking the banks of States across the country, and imposing 
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unacceptable liabilities on our children.

    There is broad recognition that we must slow the rise of health 
care costs. In the Discussion Draft, several proposals have the 
potential of reining in out of control health care costs while 
simultaneously fostering higher quality care. Among the reforms 
proposed that are essential to reining in costs and fostering quality 
and access are those that support national rules to create a more 
competitive and affordable insurance marketplace for individuals and 
small businesses; developing better performance measurement; changing 
payment and aligning incentives for higher quality; and expanding 
investments in wellness and prevention.
    President Obama has repeatedly underscored that health reform that 
does not control costs is not health reform. Similarly, Peter Orszag 
has been eloquent in articulating that ``health care costs are the key 
to our fiscal future.'' There is much discussion in Washington today 
about whether the 10-year ``bill'' for reform is $1 trillion or $1.5 
trillion. These are indeed big numbers. But these costs need to be 
considered in the context of the projected national health expenditures 
for the next 10 years are expected to total $45.2 trillion which will 
be borne by taxpayers, employers, and individual patients.
    America's business community is looking at the scoring done by the 
Congressional Budget Office and shares the concern that we have not yet 
achieved the bottom-line savings needed. As I have noted, the 
Discussion Draft has in it many elements that can reform the delivery 
of care and make it more affordable. We believe costs are driven by 
inadequate prevention, poor chronic care coordination, and overuse of 
supply-sensitive care. To achieve sustainable cost control, the health 
system needs to overhaul how care is delivered and the incentives that 
today reward more not better care. Also, compared to many other 
countries one of the key reasons for our higher costs is that in 
America we pay more for the same services. While addressing many of 
these elements are part of the reform proposals, employers share the 
concern evidenced by the CBO's scoring that not only are we coming up 
short on paying for expanded coverage, we are not seeing how the 
reforms will achieve the $2 trillion to $3 trillion in savings from 
trend that are needed to create a sustainable health care system.
    We need to be serious about reducing costs while recognizing that 
we cannot restructure almost one-fifth of the Nation's economy 
overnight. As we put in place the reforms that will change how we 
deliver care, to be credible not just to the Congressional Budget 
Office but to the American people, we need to chart out the steps we 
will take in the coming years if--through private and public sector 
actions--we fail to bend the cost curve. As the Committee for a 
Responsible Federal Budget recently said, ``we believe that given the 
emphasis on crafting a plan designed to generate longer-term health 
care savings, the final bill should include a commitment to a certain 
level of longer-term health care savings with an enforceable budget 
mechanism to ensure the savings are realized. Such a mechanism could 
include automatic reductions in Medicare and/or new taxes if projected 
savings are not realized. A similar type of Medicare trigger has been 
ignored in the past, and a new budget mechanism would have to include 
real teeth and have the support of Congress to be effective.'' \2\ Any 
budget mechanism, however, needs to consider not ``just'' Federal 
spending, but the total health care expenditures of the Nation. 
Congress must recognize that its actions to reduce costs cannot merely 
shift costs to the private sector. If we cannot reduce current cost 
trends, the Nation must be ready to discuss solutions such as all-payer 
pricing or global budgeting.
---------------------------------------------------------------------------
    \2\ Committee for a Responsible Federal Budget, June 1, 2009. The 
concept of a budget mechanism was also recently supported by Health 
CEOs for Health Reform, a group of leaders representing providers and 
payers who made a series of proposals in ``Realigning U.S. Health Care 
Incentives to Better Serve Patients and Taxpayers'' and in ``Crossing 
Our Lines: Working Together to Reform the U.S. Health System,'' by 
Senators Baker, Daschle and Dole.

Core Employer Belief: We must address the persistent differences 
between how public and private systems measure performance and pay for 
care. These differences lead to confusion for consumers and providers, 
create unacceptable price pressures on employers and engender 
---------------------------------------------------------------------------
disconnected incentives between public and private payers.

    There is a need to align public and private programs on multiple 
fronts. The same measures of health care performance should be used to 
send consistent signals to providers and consumers to guide 
improvement, assist consumer decisionmaking and incent high quality and 
efficient care. The Discussion Draft recognizes the need to align 
public and private programs in a range of ways, including the efforts 
to align Medicare's measurement and payment practices with those of the 
plans in the Exchange.
    Public payers such as Medicare and Medicaid tend to pay 
significantly less for health care services than do private payers. 
Sometimes referred to as ``cost-shifting,'' the actual dynamics are 
more complicated, as evidenced by innovative research undertaken by 
MedPAC. From the perspective of many employers and purchasers of health 
care, they face bargaining situations with hospitals and doctors that 
are stacked against them: Medicare and Medicaid, with their below-
market fixed prices, result in providers seeking additional above-
market prices from private purchasers. In addition, the payment models 
used by Medicare have, historically, incented volume over value. 
Private purchasers then face the dual challenge of managing not only 
the value of the services they pay for, but also need to overcome the 
deeply-embedded incentives offered by public programs' use of the fee-
for-service system and lack of volume controls.
    Over time, we must redress this imbalance of payment models and 
payment levels. Our physicians and hospitals face a bewildering array 
of conflicting quality incentives, payment strategies, and oversight 
mechanisms. As large employers evaluate proposals for a ``public 
plan,'' they are deeply concerned that such a plan could lead to cost-
shifting or increased misalignment between public and private payments 
to providers. While policy options are complex and fraught with hazards 
in this space, our priority should be to align the payment models 
across public and private purchasers to ensure that providers are 
rewarded consistently for safe, high quality, and efficient care.

Core Employer Belief: Health care reform must support and encourage 
clinicians and hospitals in delivering better quality care--which will 
entail doing a better job measuring what works, changing how we pay for 
health care and making better use of information technologies.

    As noted earlier, the Discussion Draft includes an array of 
proposals to improve the delivery system such as better performance 
measurement; changing payment and aligning incentives for higher 
quality; and expanding investments in wellness and prevention. 
Employers view these as essential building blocks of reforming our 
health care system.
Promoting Measurement and Quality Improvement
    In the past months there have been many collaborative proposals 
developed to reform health care. Two groups, in particular, have come 
together to advocate for concrete ways that quality and value can be 
built into reform efforts.
    First, over 200 groups under the name ``Stand for Quality''--
representing an array of consumers, employers, clinicians and other 
providers, hospitals, health plans and more--have come together to call 
for dramatically increased Federal leadership in aligning priorities, 
developing performance measures to fill gaps, and engaging stakeholders 
in how those measures are used by the public sector (see 
www.standforquality.org). These recommendations call for the 
development of robust, independent systems for collecting and reporting 
performance results on patients' outcomes, cost and patients' views of 
care, and whether the right processes of care are being delivered by 
doctors, medical groups, hospitals, nursing homes, and other providers.
    Improving quality requires sharing information about what is 
happening inside our health care system with everyone who gets, gives 
or pays for care. There are a range of concrete policy options that can 
foster better measurement--which is the foundation for all efforts to 
improve the value of our health care system. I want to acknowledge and 
note my appreciation for the fact that the Discussion Draft embraces 
many of the Stand for Quality recommendations, including developing 
processes for setting national health care priorities, supporting the 
development of performance measures and funding quality improvement 
efforts at the point of care.
    I would encourage the Committee to build on its initial proposals 
by looking at the agreement reached by this diverse range of 
stakeholders. Additional actions should include increasing the level of 
support for developing measures in key areas such as functional status 
and resource use; promoting the use of standardized measures; and 
supporting consultative processes that assure that consumers, employers 
and providers can provide meaningful input to CMS in how measures are 
used for public reporting and payment.
    Beyond the common support for expanded measurement, employers 
strongly support the Discussion Draft's proposal to expand our national 
commitment to comparative effectiveness research so that patients can 
have better information to use with their doctors when deciding which 
treatment is right for them. We need an ongoing, independent and robust 
comparative effectiveness process that will assure that decisions about 
care are driven by the evidence and what is in the patient's interest.
    Your Discussion Draft also recognizes the importance of releasing 
Medicare data--referring to the new Assistant Secretary for Health 
Information being charged with making available Medicare datasets. 
Beyond that action, CMS should be directed to routinely make available 
the Medicare claims database to qualified ``Quality Reporting 
Organizations'' via HIPAA-compliant agreements. This would enable 
employer-sponsored and individually-sponsored health benefits plans to 
use aggregated public and private claims data to generate provider-
specific health care performance results which will ultimately lead to 
lower premiums and higher quality of care.
Reforming Payment
    Our health care system pays providers for the number of treatments 
and procedures they provide and pays more for using expensive 
technology or surgical interventions. It does not reward better 
quality, care coordination or prevention nor encourage patients to get 
the right care at the right time. As Dr. Abraham Verghese said so well 
in a recent Wall Street Journal article, we have ``a skewed 
reimbursement scheme set up by Medicare, . . . that pays generously 
when you do something to a patient, but is stingy when you do something 
for a patient.'' \3\ A second broad collaborative--the Center 
for Payment Reform (www.CenterforPaymentReform.org)-- has identified 
six core principles that should guide both public and private payment 
policies:
---------------------------------------------------------------------------
    \3\ The Myth of Prevention, Dr. Abraham Verghese, Wall Street 
Journal, June 20, 2009, W1.

    1.  Reward the delivery of quality, cost-effective and affordable 
care.
    2.  Encourage and reward patient-centered care that coordinates 
services across the spectrum of health care providers and care 
settings.
    3.  Foster alignment between public and private health care 
sectors.
    4.  Make decisions about payment using independent processes.
    5.  Reduce expenditures on administrative and other processes.
    6.  Balance urgency to implement changes against the need to have 
realistic goals and timelines.

    Your Discussion Draft clearly recognizes the critical role that 
payment reform must play in creating better value for Americans and 
reflects many of these principles. In particular, I applaud the 
inclusion in the Discussion Draft of an array of payment reforms, many 
of which seek to bridge Medicare and Medicaid and promote alignment 
with private plans. These include:

      Increasing payments for primary care in a range of ways. 
Fee-for-service payments do indeed need to be modified to promote 
primary care, better coordination and more efficient care. We need to 
rebalance the payment equation to better compensate providers engaged 
in preventive care, time spent coaching patients and coordinating care 
for those with chronic conditions; and relatively decrease payments for 
procedures and testing.
      Extending the Physician Quality Reporting Initiative and 
calling on that program to better integrate clinical reporting of 
performance through electronic health records;
      Establishing a robust set of pilot programs for 
accountable care organizations;
      Establishing a program to reduce payments for avoidable 
hospital readmissions;
      Moving away from today's quality-blind fee-for-service 
and ``pay for quantity'' approach toward support for accountable care 
organizations, bundled payments for post-acute care and medical homes.

    As these models are implemented, however, I urge you to build in 
accountability mechanisms to provide a check against providers' 
potential financial incentives to either seek to serve only healthier 
individuals (``cherry-picking'') or skimp on care, particularly for the 
most vulnerable, at-risk beneficiaries. It is critical that we build in 
the means to assess whether these models are enabling us to achieve 
better quality, more efficient, and more patient-centered care.
Revaluing Services--Considering Patient and Societal Value
    The Discussion Draft recognizes that CMS should be directed to 
assess and fix how payments may be misvalued. Getting valuation of 
services right is important for Medicare and because these values are 
often applied by private health insurance plans. The current relative 
undervaluing of primary care and care coordination functions bodes ill 
for the aging population that will need more support.
    Beyond the assessment called for in the Discussion Draft, CMS 
should be directed to establish a mechanism to develop and implement a 
multi-year, multi-sectoral payment policy review and approval process. 
This mechanism would be charged with developing an integrated approach 
to updating existing and emerging payment models to assure aligned 
incentives across providers, and in the context of any State-driven 
and/or private sector-driven trends and initiatives.
    This new mechanism should solicit input from external stakeholders 
through a formal multi-stakeholder advisory process that addresses all 
provider segments, including post-acute providers, through an annual 
notice and comment process. Under the current CMS processes, the 
overwhelming majority of comments are submitted by affected providers. 
While patients and their advocates and third-party payers can and do 
comment, the highly technical nature of the rules and policies, coupled 
with the limited impact of payment policies on any single patient or 
payer has inadvertently resulted in an unlevel playing field. As a 
result, CMS staff, in reviewing comments, often lack meaningful input 
from stakeholders outside of the provider community.\4\
---------------------------------------------------------------------------
    \4\ While this phenomenon is present in all payment systems, it is 
most apparent in the area of CMS' annual efforts to update the 
Physician Fee Schedule and resource-based relative value scale (RBRVS). 
The relative values of the services are determined by CMS using its 
rulemaking authority. In practice, CMS relies heavily on 
recommendations (provided through the notice and comment rulemaking 
process) by an outside committee housed by the American Medical 
Association (AMA): the Relative Value Scale Update Committee or the 
RUC. The RUC is made up of physicians that represent nearly every 
specialty. Many of the RUC's recommendations are based on expert panels 
and qualitative, subjective assessments of the physician work and 
practice expense components of the RVU value. In response to CMS' 
request for comments, the RUC offers its recommendations on values for 
new services, and recommends adjustments to values for existing 
services on a periodic basis.
    Given the cost of analyzing and proposing new or revised RVU 
values, great weight is given to the RUC's recommendations. (In March 
2006, the Medicare Payment Advisory Commission (MedPAC) noted that CMS' 
5-year review ``does not do a good job of identifying services that may 
be overvalued.'' They further stated, ``CMS has relied too heavily on 
physician specialty societies to identify services that are mis-
valued.'' Five-year reviews have led to ``substantially more increases 
in RVUs than decreases, even though many services are likely to become 
overvalued over time.'' (MedPAC, Medicare Physician Payment, March 
2006.) All too often the perspectives of other health care stakeholders 
are notably absent and the broadly dispersed ``public good'' of 
assuring valuation for physician services that meets patient-
centeredness and affordability goals is not a business priority for any 
one interest group.
---------------------------------------------------------------------------
    A means to ensure meaningful input from other stakeholders is 
urgently needed. As a discrete complement to CMS' regulatory 
decisionmaking process, we recommend establishing a federally chartered 
body that includes patients, third-party payers and provider 
representatives to inform CMS' annual update processes. A standing 
Consumer and Health Care Purchaser and Provider Update Committee (CHUC) 
would be charged with providing independent input to CMS in its 
decisionmaking role with respect to Medicare payment levels, across all 
provider sectors. The new advisory group should include patients, 
purchasers, providers and payers--with majority representation by those 
who receive and pay for care--and serve as a forum for broader multi-
stakeholder input, as well as collection and analysis of relevant 
information. This new group would be advisory only, but it could 
provide a needed and fresh perspective for CMS and for Congress.
Changing Payment Decisionmaking
    Current payment policies--beyond the regulatory process are also 
too inflexible and susceptible to the focused interests of the 
recipients of payment. Congress should consider creation of a new 
entity with independent authority to implement broad direction provided 
by Congress. Regardless of the specific structure adopted, new 
processes need to be put in place to assure that flexibility, 
transparency, and meaningful stakeholder input are in place to assure 
that changes to payment policies are considered in the context of their 
impact on patients, providers, and health care purchasers.

      Congress should set the broad goals and targets for 
Federal health care payments, but the specific decisions about payment 
should be made through independent processes that are guided by what 
serves the patient and helps society as a whole. The decisionmaking 
body should be structurally independent, with mechanisms in place to 
insulate it as much as possible from political influence in order to 
ensure evidence-based decisions and to engender stakeholder trust.
      Payment decisions should be guided by evidence and should 
balance the perspectives of consumers, purchasers, payers and 
physicians and other health care providers--but the perspective of 
those who receive and pay for care should have majority control instead 
of those who receive payments.
      Processes and rules for making payment decisions should 
be simple, standardized and align value (to the extent possible) across 
physician, hospital and other types of health care payments.
      Payment decisions should promote consistency across 
private and public payers.

Assuring Competition While Promoting Payment Reform
    While employers support payment reforms that encourage coordinated 
and integrated care delivery, we also recognize the need for policies 
that assure there are functioning markets--where informed patients and 
purchasers can fairly negotiate terms with independent providers. 
Health reform needs to assure there is an appropriate balance between 
coordination and competition.
    Aligning incentives across providers and sites of care is essential 
to the appropriate focus on ``end-to-end'' quality, affordable care. In 
many markets, providers have formed multi-provider organizations, 
ostensibly to advance their clinical and financial goals, forming 
multi-hospital systems, multi-physician organizations, and combined 
hospital-physician entities. In some cases, these collaborations have 
resulted in higher quality and lower costs for payers and patients by 
focusing on generating clinical and financial efficiencies. In some 
instances, however, these new organizations have leveraged their market 
power in ways that may increase costs to patients, payers, employers 
and other health plan sponsors, with ambiguous impacts on quality.
    Because of the concerns about potentially anti-competitive impacts 
of some forms of integration and coordination, there are a broad array 
of laws and regulations governing competition, anti-kickback, self-
referral, and related issues. Some argue that portions of existing law 
and regulations need to be ``loosened,'' as they inhibit providers' 
ability to coordinate care effectively. However, many others suggest 
that loosening existing laws and regulations is unnecessary to deliver 
more efficient care and could result in both higher costs and reduced 
choice for consumers.
    Given the complex interrelationship between competition and 
coordination, we support the recommendation of the Center for Payment 
Reform that there be established a framework that will assure that both 
goals are promoted. The Secretary of Health and Human Services should 
be directed to produce or commission a report to Congress that shall 
examine how policies and payment can best balance the need to both 
promote coordination and competition. In doing so, the Secretary should 
engage representatives of the Attorney General, the Federal Trade 
Commission, the Comptroller General, CMS' Office of Inspector General 
and the Agency for Healthcare Research and Quality as well as 
representatives of consumers, private purchasers and providers. The 
report should be provided within 12 months and should address, at a 
minimum, the following:

      Are new laws or regulations needed to guard against the 
provider-based entities having or exercising market power to the 
detriment of consumers' interest in higher quality, less costly health 
care?
      Do existing anti-trust laws and pro-competitive 
regulations need to be revised or amended?
      Are there existing State or Federal laws that have the 
affect of creating inappropriate barriers to healthy competition that 
need to be examined?
      What is the empirical research on health care markets and 
market competition that should inform policy development?
      What is the role of promoting transparency with respect 
to quality and price in fostering better market functioning?
      How can the regulatory and legal oversight promoting 
competition best be structured?

Core Employer Belief: We need to move to promoting wellness and 
prevention, instead of focusing only on intervening after the fact.

    There are few areas around which there is as much agreement in the 
employer community as in the importance of investing in wellness and 
prevention. The majority of America's employers are making these 
investments, with over 90% of large employers supporting wellness and 
chronic care programs. The importance of moving from a sick-care system 
to one that promotes wellness and prevention is clearly articulated in 
the Discussion Draft, which includes proposals for a Public Health 
Investment Fund and for the Secretary to develop a National Plan for 
Prevention. As a Nation, we need to get beyond the fragmentation that 
results in separate planning and strategies for health care delivery, 
public health, community prevention and planning, worksite wellness and 
other programs. As we move beyond this fragmentation, employers and 
consumers need to be at the table as priorities are shaped and 
strategies developed.

Core Employer Belief: All Americans--as engaged patients, caregivers 
and consumers--need to be given better tools and incentives to 
participate in making sure that they get the right care at the right 
time.

    Health care consumers must be able to compare the quality or 
efficiency of care offered by medical practitioners, clinics and 
hospitals or the various treatment options available to them to make 
good choices. Americans need tools and incentives to help them make 
good health care decisions. Some of the routes that your Discussion 
Draft supports in this area includes bolstering the Federal role of 
making sure that there is valid information consumers can use to 
compare quality and cost-efficiency of medical treatments and 
providers. Creating that information should allow for any users--public 
and private--to build on that information as long as patient privacy is 
protected.
    The Discussion Draft recognizes the importance of considering the 
role consumer incentives play by proposing that Medicare remove cost-
sharing provisions for Medicare beneficiaries. Medicare should join the 
private sector in going further. For example, Medicare should provide 
information and incentives for wellness and the selection of higher 
value providers. Private health plans are increasingly offering not 
just tools, but incentives for their enrollees to improve their health 
and make better choices among providers. Medicare should follow the 
same path, perhaps by requiring that restructuring the standard 
Medicare Supplement plans offer information and tools to facilitate 
patient choice.
    Similarly, Medicare should learn from the cutting-edge work of 
providers and private sector groups that are making sure that patients 
can fully participate in their own health care. One way that we can be 
sure that care is indeed patient-centered is for Medicare to support 
shared decisionmaking processes. This support can take the form of 
providing incentives to patients to get coaching and/or reducing 
payments to providers in cases where preference sensitive care (i.e., 
care for which there is more than one medically reasonable choice, with 
choices that differ in risks and benefits--such as treating chest pain 
from coronary artery disease or early-stage prostate cancer) was 
delivered in the absence of patient participation in decisionmaking.
Conclusion
    Health reform must be about making high quality care more 
affordable. The employer community will work with you to develop a 
coherent package of reforms that foster cost control, and improves 
health through health promotion, prevention of illness, and effective 
treatment of disease and injury. We look forward to working with this 
Committee and with so many other Americans who share this goal.

                                 

    Mr. STARK. Thank you, Mr. Lee. And next we have Mr. Gerald 
Shea, who is Special Assistant to the President, AFL-CIO. 
Proceed.

                 STATEMENT OF GERALD M. SHEA, 
          SPECIAL ASSISTANT TO THE PRESIDENT, AFL-CIO

    Mr. SHEA. Good afternoon, Mr. Chairman and Members of the 
Committee. We appreciate this invitation to talk to you about 
the experience of the AFL-CIO unions in bargaining health care. 
And I am going to restrict my remarks to the interplay between 
employment-based coverage, which, as you know, is the backbone 
of both coverage and financing for health care in this country, 
and the reform proposal before you because you have chosen a 
proposal that continues that role for employer-sponsored 
insurance.
    And my main message to you today is that going down this 
road I believe requires that you first and foremost look at how 
you stabilize employment-based coverage. Employment-based 
coverage has been remarkably resilient despite enormous cost 
pressures and it is testimony to how much employers want to 
provide benefits and how much employees value those benefits. 
But, frankly, it is in a pretty fragile situation. We have lost 
5 points percentage of people 18 to 64 who have health care. We 
have lost 5 percentage points from 2000 and 2007. The number of 
underinsured people in a 4-year span from 2003 to 2007 went up 
from 16 percent to 25 percent. This is a system that has done 
very well in providing health coverage but today, frankly, is 
eroding pretty rapidly. And so we judge the proposals in terms 
of how well they support and strengthen the employment-based 
coverage if we are going to continue that.
    And I want to congratulate you and your colleagues and 
other Committees of the House for having produced this bill. We 
think it is an excellent start. And, frankly, we think it 
really responds to the desires and the interests of the 
American people. And so we give you our hats off for that.
    In order to stabilize employment-based coverage, we need to 
do three things in our opinion. First and foremost, control 
costs. If we do not do that, we are not going to do anything 
else. Second, we think everybody needs to be included in 
coverage, included in financing responsibilities, and included 
in health status responsibilities. And, third, we think it is 
essential that we reform the health delivery system so that we 
really make it a more efficient--much more efficient structure 
than it is today.
    On the point of full participation, you have a proposal 
that has both an individual requirement and an employer 
requirement, we think that is appropriate. We think both are 
appropriate. And I want to make just a couple of comments on 
the employer requirement because I know that is controversial.
    I think there are a number of advantages to doing this, to 
requiring employers to participate. One is that you reduce the 
burden on the Federal Treasury for providing coverage. If you 
are going to get universal coverage, the more employer coverage 
that is available, the less you will have to fund in terms of 
support for the currently uninsured.
    Firms that opt to pay instead of play, using the common 
parlance here, will be putting money into the fund to pay for 
coverage and so you get money that way too. We think this is an 
important financing area. And, of course, it would also level 
the playing field among businesses because it would eliminate 
the free riders.
    A corollary to this requirement is that we think you should 
look, as you have looked at, providing some relief for those 
employers who in the midst of great industrial change have 
tried to do the right thing by their workers and maintain 
retiree benefits for those who are pre-Medicare. We think that 
is extremely important, and we appreciate the fact that it is 
included.
    In terms of the cost issue, the number one challenge, there 
is no question that the long-term answer to this is to change 
the delivery system and make it more efficient. My panel 
colleague just talked about saving $2 or $3 trillion over the 
next 10 years. That is a figure that comes from numerous 
studies as something that is in the realm of possibility 
depending on the design element.
    But those are long-term changes and in the short-term, we 
believe strongly that you need a public insurance option to 
introduce competition into the marketplace. A lot has been said 
about that. I will not elaborate on it further.
    But going to delivery system reform issues, your draft 
emphasizes and invests in quality and improvement 
methodologies. We think this is very important, and we think 
your draft could be strengthened frankly in this area along the 
lines that Mr. Lee has just talked about.
    And we also support the investment you make in the draft in 
the expansion of the health care workforce in primary care, and 
we would suggest that you look at the importance not only of 
the supply of the health workforce but the quality of the work 
we are asking them to do. Unfortunately, we have taken some of 
the great care professions like nursing, and we turned them in 
many places into lousy jobs. That can be corrected, and you 
have a perfect vehicle to do that because you have following 
examples that already exist in the health care system, the 
opportunity to promote the notion that all health care workers 
ought to be involved in producing quality care and break down 
some of these silos which make these jobs less than totally 
desirable.
    Finally, I wanted to talk about--more broadly about 
financing. I believe it is true what people say, that we ought 
to be able to finance health reform out of the money in the 
health system now. There is so much of it. But obviously that 
is not something we can do overnight, and I think that if we 
set our goal, as some people have, of saying we have to 
restrict our financing to the health system, we get ourselves 
into trouble very quickly. And the danger of this you see in 
the Senate Finance Committee deliberations today where taxing 
health benefits is being planned. You do not have to go any 
further than the front page of today's Washington Post to get 
yet more evidence of how strongly people oppose the idea of 
taxing health benefits. They already pay a lot of money in 
deferred wages or outright out of their pocket. They do not 
want to be taxed on top of that.
    But beyond the issue of payments and equity, there are 
tremendous problems with doing this in a fair fashion because 
you can have, and we have examples of this, similar workforces 
in similar kinds of health plans or health funds with very, 
very different annual cost based on health status, on 
geography, on age. Unless you can correct for those, you are 
going to wind up discriminating against those people who happen 
to be in a workforce that has a higher claims experience. And 
so we think it is extremely difficult for that.
    Just in conclusion, I will say that we look forward to 
working with you on the discussion draft, and we appreciate the 
time to talk to you this afternoon.
    [The prepared statement of Mr. Shea follows:]
                 Prepared Statement of Gerald M. Shea,
              Special Assistant to the President, AFL-CIO
    The AFL-CIO represents 11 million members, including 2.5 million 
members in Working America, our community affiliate, and 56 national 
and international unions that have bargained for health benefits for 
more than 50 years. Together, unions negotiate benefits for some 50 
million people in America.
    Our members have a significant stake in health care reform because 
unions represent the largest block of organized consumers in the 
Nation. In addition, unions also sponsor health plans through funds 
that are jointly-trusteed with management. Many union members work in 
health care, as well, so they have a dual interest in health reform.
    Even as unions continue to negotiate benefits for our members, 
American labor has long advocated for health care for everyone, not 
just those in unions or with stable jobs. For over 100 years, America's 
unions have called for universal coverage built on a social insurance 
model, an approach that has proven effective and efficient across the 
globe and one we have employed successfully for decades to provide 
income and health security for the elderly.
    The AFL-CIO led the lobbying effort to enact Medicare in 1965, and 
we have backed many legislative efforts since then to expand coverage. 
We continue to believe that a social insurance model is the simplest 
and most cost effective way to provide benefits for all.
    However, the condition of health care in America is too dire for 
those of us lucky enough to have good coverage to debate endlessly over 
what the best approach would be. It is time--indeed, it is past time--
to enact comprehensive health care reform. Today our members are ready 
to stand with President Obama and Congress and help pass the 
President's plan for comprehensive health care reform.
AFL-CIO'S VIEWS ON COMPREHENSIVE HEALTH CARE REFORM
    Today I would like to explain the AFL-CIO's views on what 
comprehensive health care reform should look like, and specifically our 
views on the historic tri-committee discussion draft unveiled in the 
House of Representatives last week.
    We start from the premise that we can fix our broken health care 
system by building on what works. For most Americans, that means 
employer-sponsored health insurance (ESI), which is the backbone of 
heath care financing and coverage in America.
    The AFL-CIO has advocated a three-point program to guarantee 
quality affordable health care for all--a program that consists of: (1) 
lowering costs; (2) improving quality; and (3) covering everyone by 
ensuring full participation of all public and private sector employers 
and making affordable health coverage available to everyone. All three 
of these objectives must be achieved together; none can be achieved in 
isolation. And we believe the tri-committee discussion draft will in 
fact help achieve all three of these objectives simultaneously.
    We caution, however, that one financing option under consideration 
in the Senate Finance Committee--the taxation of employer-sponsored 
health benefits--would go in the exact opposite direction by 
destabilizing the employer-based health insurance system.
OUR PRESENT COURSE IS UNSUSTAINABLE
    Whatever one may think about the way health care should be 
reformed, we can all agree that our present course is not sustainable--
for workers, for businesses, for the Federal budget, or for the economy 
as a whole. If we continue down the current path, health care costs 
will crush families, business and government at all levels.
    Our members are among the most fortunate workers. Thanks to 
collective bargaining, they generally have good benefits provided by 
their employers. Yet even well-insured workers are struggling with 
health care cost increases that are outpacing wage increases. And far 
too many working families find themselves joining the ranks of the 
uninsured or underinsured as businesses shut down or lay off employees.
    In April and May 2009, the AFL-CIO conducted our 2009 Health Care 
for America Survey, which showed that people need urgent relief from 
the pressure of rising health care costs that are bankrupting families 
and endangering their health.
    More than half of respondents said they cannot get the care they 
need at a price they can afford. Three-quarters were dissatisfied with 
their household's health care costs.
    Ann from Georgia (self-employed with two children) wrote: ``We have 
that HSA plan with supposedly low premiums. However, those `low' 
premiums only start low. Every year they get higher and higher. One 
year they increased 129 percent in just 1 year. Our health care costs 
have exceeded 35 percent of our income for 2 years. We are on the verge 
of canceling health care insurance. We would have already done this if 
we didn't have two children.''
    A third of those with insurance--and three-quarters of those 
without--reported that they forgo basic medical care because of high 
costs.
    Karen from Florida wrote: ``My insurance deductible equals 4 to 5 
months of take home pay each year. My insurance bill is split with my 
employer but equals 2 days of pay each month. How am I supposed to go 
to a doctor?''
    Iris from Florida writes: ``I am unemployed because I had to quit 
my job to care for my elderly mother. My children decided to pay [for 
medical insurance] for me. So what is the problem? The deductibles are 
so high that I cannot go to the doctor. And we keep paying $300 monthly 
just in case I have to go to the hospital. In the meantime, I cannot 
afford to go to the doctor.''
    As economic conditions have gotten worse, workers who lose their 
jobs have been losing their health care. Nearly a quarter of 
respondents said someone in their household lost coverage in the past 
year due to losing or changing jobs.
    Renee from Ohio wrote: ``It is pretty scary that millions of hard-
working retirees as well as those working may lose their insurance, and 
yes I am talking about the auto industry. My husband could lose his 
benefits, which he thinks he will. I don't know how my kids will be 
able to get their annual checkups. How can anyone get ahead in this 
country? I don't understand how it came to this. I just don't want to 
think about the future anymore.''
    Once workers lose their health care coverage, it is hard for them 
to get it back. One-quarter of those without health insurance said they 
were denied coverage in the past year due to ``preexisting 
conditions.''
    Kerry from New Mexico wrote: ``I am desperate for our country to 
finally do something for my family so a health crisis does not kill one 
of us or leave us completely financially devastated.''
    The data bear out the stories these workers are telling us. Between 
1999 and 2008, premiums for family coverage increased 119 percent, 3\1/
2\ times faster than cumulative wage increases over the same time 
period.\1\
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    \1\ Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 2000-
2008. Bureau of Labor Statistics, Consumer Price Index, U.S. City 
Average of Annual Inflation (April to April), 2000-2008; Bureau of 
Labor Statistics, Seasonally Adjusted Data from the Current Employment 
Statistics Survey, 2000-2008 (April to April). Accessed: http://
ehbs.kff.org/images/abstract/EHBS_08_Release_Adds.pdf.
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    Workers' out-of-pocket costs are going up as well, leading to more 
underinsured workers who can no longer count on their health benefits 
to keep health care affordable or protect them from financial ruin. 
Between 2003 and 2007, the number of non-elderly adults who were 
underinsured jumped from 15.6 million to 25.2 million.\2\
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    \2\ C. Schoen, S.R. Collins, J.L. Kriss and M.M. Doty, ``How Many 
Are Underinsured? Trends Among U.S. Adults, 2003 and 2007,'' Health 
Affairs Web Exclusive, w298-w309. June 10, 2008.
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    Skyrocketing costs are pushing more workers out of insurance 
altogether. The current number of uninsured almost certainly exceeds 50 
million. The Council of Economic Advisers estimates that number will 
rise to 72 million by 2040 in the absence of reform.\3\
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    \3\ Council of Economic Advisors. ``The Economic Case for Health 
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA_Health_Care_Report.pdf.
---------------------------------------------------------------------------
    Health costs are burdening American businesses, as well as workers. 
U.S. firms that provide adequate health benefits are put at a 
significant disadvantage when they compete in the global marketplace 
with foreign firms that do not carry health care costs on their balance 
sheets. The same is true for U.S. businesses in domestic competition 
against employers that provide little or no coverage.
    The present course is unsustainable for the economy as a whole, as 
well. Health care expenditures currently amount to about 18 percent of 
our GDP. The Council of Economic Advisers estimates that this 
percentage will rise to 34 percent by 2040 in the absence of reform.\4\ 
The Congressional Budget Office (CBO) projects that health care 
expenditures will rise to 49 percent of GDP by 2082.
---------------------------------------------------------------------------
    \4\ Council of Economic Advisors. ``The Economic Case for Health 
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA_Health_Care_Report.pdf.
---------------------------------------------------------------------------
    The present course is likewise unsustainable for the Federal 
budget. If we fail to ``bend the cost curve,'' health care spending 
will balloon our Federal budget deficit and squeeze out funding for 
essential non-health care priorities. Almost half of current health 
care spending is covered by Federal, State, and local governments. If 
health care costs continue to grow at historical rates, the Council of 
Economic Advisers estimates that Medicare and Medicaid spending will 
rise to nearly 15 percent of GDP by 2040.\5\ As then CBO Director and 
now OMB Director Peter Orszag has noted, health care cost trends are 
the ``single most important factor determining the Nation's long term 
fiscal condition.''
---------------------------------------------------------------------------
    \5\ Ibid.
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    To fix our long-term structural budget deficits, we have to fix 
Medicare and Medicaid, and to fix Medicare and Medicaid, we have to 
control health care costs in the private sector. There is no practical 
way to control public health care costs without addressing private 
health care costs as well. Private and public health care are delivered 
largely by the same providers, using the same drugs, the same 
treatments, and the same procedures.
    In short, the health of our family budgets, our Federal budget, and 
our economy depends on the success of health care reform this year.
BUILDING ON WHAT WORKS
    The AFL-CIO believes comprehensive reform can build on what works 
in our current health care system while creating new options for 
obtaining coverage and lowering costs for families, business, and 
government at all levels.
    For the majority of Americans, what works in our current health 
care system is employer-based coverage--the backbone of health care 
coverage and financing in America. Over 160 million people under age 65 
have health benefits tied to the workplace.
    Employer-sponsored coverage has proven remarkably stable in the 
face of exorbitant health care cost inflation. Its survival is 
testimony to the strong interest workers have in keeping coverage tied 
to the workplace--even at the expense of wage gains for the past 30 
years--and the interest of employers to recruit and retain talented 
workers through job-based benefits.
    In fact, it is hard to imagine successful health reform that does 
not include a substantial role for employer-based coverage. Building on 
the core foundation of employer-provided health coverage will allow 
working families to keep what they now have . . . or choose from a new 
set of options to maintain coverage. We think building on this 
foundation will also help minimize the disruption that results from the 
difficult changes that are a necessary part of any reform, and thereby 
maximize public support for reform.
    In order to build on this foundation, we must stabilize the 
employment-based system, which risks being destabilized by 
unsustainable cost inflation. We must reverse the steady erosion of 
employer-provided coverage in recent years. The percentage of 18 to 64-
year-olds with ESI dropped 5 percentage points from 2000-2007, and 
without prompt dramatic action the rate of decline is expected to 
increase sharply.\6\
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    \6\ Elise Gould. ``The Erosion of Employer-Sponsored Health 
Insurance.'' Economic Policy Institute. October 2008. Accessed: http://
epi.3cdn.net/d1b4356d96c21c91d1_ilm6b5dua.pdf.
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    We believe the tri-committee discussion draft will stabilize the 
employer-based health care system through the following specific policy 
proposals: (1) a requirement that employers assume responsibility for 
contributing to the cost of health care for their employees through a 
``pay or play'' system; (2) special assistance for firms that maintain 
coverage for pre-Medicare retirees, which will prevent further 
deterioration of the employer-based system; (3) a public health 
insurance option, which will inject competition into the health care 
system and lower costs throughout the system for employers and workers 
alike; (4) health care delivery reforms to get better value from our 
health care system and contain long-term costs; and (5) insurance 
market reforms, individual subsidies, Medicaid expansion, and 
improvements to Medicare, which will help make affordable coverage 
available to everyone.
PAY OR PLAY
    A key reform needed to stabilize the employer-based coverage system 
is the requirement that public sector and private sector employers 
assume responsibility for contributing toward the cost of health care 
for their employees. Employers should be required either to offer 
health benefits to their workers directly, or to pay into a public fund 
to finance coverage for uninsured workers--a proposal known as ``pay or 
play.''
    The tri-committee discussion draft outlines a reasonable and 
effective employer responsibility requirement that we believe would 
help shore up employer-based coverage. The proposal would ensure that 
workers could get affordable coverage either through their employer-
sponsored plan or through a national exchange with a contribution from 
their employer. And it would extend, on a pro-rated basis, an 
employer's responsibility for part-time workers, to eliminate any 
incentives for employers to move workers to part-time status to avoid 
the new requirement.
    We believe such a ``pay or play'' system has many virtues. It would 
bring in needed revenue from firms that opt to ``pay,'' which would 
hold down Federal costs associated with providing subsidized coverage 
for low-income workers in those firms.
    ``Pay or play'' would likewise hold down Federal costs by keeping 
employers from dumping their low-wage employees into new subsidized 
plans. In the absence of an employer responsibility requirement, 
publicly subsidized coverage for low-wage workers would prompt many 
employers of low-wage workers to discontinue current coverage to take 
advantage of available subsidies. The resulting increase in Federal 
costs could well doom health care reform.
    ``Pay or play'' would help stabilize the employer-based health care 
system in several ways. It would level the playing field so that free 
rider businesses could no longer shift their costs to businesses 
offering good benefits. A recent study found more than $1,000 of every 
family plan premium goes to cover the cost of care for the uninsured, 
most of whom are employed.\7\ ``Pay or play'' would encourage employers 
to offer their own coverage and penalize employers that do not. And it 
would minimize disruption for workers who already have health care 
coverage and wish to keep it.
---------------------------------------------------------------------------
    \7\ Families USA. ``Hidden Health Tax: Americans Pay a Premium.'' 
May 2009. Accessed: http://www.familiesusa.org/assets/pdfs/hidden-
health-tax.pdf.
---------------------------------------------------------------------------
    ``Pay or play'' would thus go a long way toward extending coverage 
to the uninsured, since most of the uninsured have at least one full-
time worker in their family. And it would be critical in making 
coverage affordable for workers who do not qualify for income-based 
credits or subsidies, especially if health care reform includes a new 
requirement that all individuals obtain coverage.
Arguments Against Pay or Play
    Opponents of an employer responsibility requirement raise the 
objection that ``pay or play'' would increase payroll costs for 
businesses. We believe this objection is misplaced.
    First of all, it should be emphasized that the overwhelming 
majority of businesses already provide health benefits that would 
likely meet the new requirements, so they would not see any new costs. 
In fact, they would see their costs go down as health care coverage is 
expanded--thanks to the elimination of cost shifting--and as other 
health care reforms take hold that drive down costs throughout the 
health care system.
    The only firms that might see an increase in costs are firms that 
do not currently offer health care benefits, or firms that offer 
benefits that are inadequate to meet a reasonable standard. The vast 
majority of firms that currently do not offer health care benefits are 
small firms, and they are mostly low-wage employers. Comprehensive 
health care reform generally would give small firms more affordable 
options for providing health benefits for their workers, probably in 
combination with additional subsidies for employers of low-wage 
employees.
    Opponents of an employer responsibility requirement warn that 
employers that have to pay more for health insurance would be less 
likely to raise wages in the short term. The widely endorsed economic 
view, however, is that such employers would still raise wages over the 
long term.
    Opponents of ``pay or play'' next argue that employers required to 
pay more for health insurance might eliminate jobs or hire more slowly 
as a result. But the same dire predictions have been made routinely 
about proposals to increase the minimum wage, with comparable increases 
in employer costs, and those predictions have not been borne out. 
Recent studies of minimum wage increases have found no measurable 
impact on employment.\8\ Economists have observed that employers faced 
with higher payroll costs from a minimum wage increase can offset some 
of those costs through savings associated with higher productivity, 
decreased turnover and absenteeism, and improved worker morale.\9\
---------------------------------------------------------------------------
    \8\ A. Dube, T.W. Lester, M. Reich, ``Minimum Wage Effects Across 
State Border: Estimates Using Contiguous Counties,'' Institute for 
Research on Labor and Employment Working Paper Series No. iiwps-157-07, 
August 1, 2007.
    \9\ J. Bernstein, J. Schmitt, ``Making Work Pay: The Impact of the 
1996-1997 Minimum Wage Increase,'' Economic Policy Institute (1998); D. 
Card, A. Krueger, ``Myth and Measurement: The New Economics of the 
Minimum Wage,'' Princeton University Press, 1995.
---------------------------------------------------------------------------
    The same would be true of an employer responsibility requirement. 
Any increase in employer costs would be offset by productivity gains 
and by a healthier workforce. The Council of Economic Advisers notes 
that the economy as a whole would benefit from more rational job 
mobility and a better match of workers' skills to jobs when health 
benefits are no longer influencing employment decisions.\10\ Finally, 
it should be noted that the majority of firms that currently do not 
offer health benefits compete in markets where their rivals likewise do 
not provide benefits, so they would not be put at a competitive 
disadvantage.
---------------------------------------------------------------------------
    \10\ Council of Economic Advisors. ``The Economic Case for Health 
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA_Health_Care_Report.pdf.
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Pay or Play and Firm Size
    Health care reform must make coverage affordable for small 
businesses that have difficulty obtaining coverage in the current 
market. However, the AFL-CIO believes the ``pay or play'' requirement 
should apply to firms regardless of their size.
    Smaller businesses will be allowed to meet the ``play'' requirement 
by buying coverage that meets fair rating rules through the new 
exchange, which would include the option of a public health insurance 
plan that makes coverage more affordable. We do support the inclusion 
of a small business tax credit, targeted at the smallest firms with 
low-wage workers, precisely because we believe an employer requirement 
should not exempt businesses based solely on size.
    If small businesses are exempted from ``pay or play,'' the number 
of employees is a particularly poor measure for the exemption because 
it is a poor predictor of a firm's ability to pay. A doctor's office or 
small law firm may have more capacity to pay than a larger restaurant 
or store. A carve-out for small firms with fewer than a specified 
number of employees also creates a potentially costly hurdle for firms 
nearing the threshold to hire additional employees. A better approach 
would be to apply the requirement based on payroll or gross receipts. 
Finally, we believe special treatment for such businesses should be 
phased out over time to eliminate disparities based on firm size.
    Also, any ``pay or play'' requirement should take into account how 
workers in certain segments of our economy, such as airlines and 
railroads, schedule their hours and the classification of workers as 
full-time or part-time should ensure that these workers are not 
inadvertently excluded from coverage.
Special Assistance for Companies That Maintain Benefits for Pre-
        Medicare Retirees
    We look forward to working with the committees to develop greater 
specificity on the proposal for a federally-funded catastrophic 
reinsurance program for employers that provide health benefits to 
retirees age 55 to 64. Such a reinsurance program would help prevent 
further deterioration of the employer-provided health care system, and 
is an essential component of any health care reform legislation.
    A reinsurance program is critically necessary to help offset costs 
for employers that contribute to health benefits for pre-Medicare 
retirees. The pre-Medicare population generally has higher health care 
costs, and employers offering them coverage incur enormous expense. But 
without that coverage, individuals in this age bracket have tremendous 
difficulty purchasing health insurance in the individual market, or 
they are able to do so only at a very high cost.
    We believe such a reinsurance program must have dedicated funding. 
In addition, in the longer term, we believe firms should be able to 
purchase coverage for their retirees through the exchange. This would 
help make coverage more affordable for firms that provide retiree 
health benefits.
PUBLIC HEALTH INSURANCE PLAN OPTION
    The AFL-CIO supports the creation of a strong public health 
insurance option to compete with private health insurance plans. The 
tri-committee discussion draft includes a strong public plan that would 
compete on a level playing field with reformed private health plan 
options in a new national exchange.
    We believe a public health insurance plan is the key to making 
health care coverage more affordable for working families, businesses, 
and governments, all of which are increasingly burdened by escalating 
health care costs. A public plan would have lower administrative costs 
than private plans and would not have to earn a profit. These features, 
combined with its ability to establish payment rates, would result in 
lower premiums for the public plan.
    A public health insurance plan would also promote competition and 
keep private plans honest. Consolidation in the private insurance 
industry has narrowed price and quality competition. In fact, in 2005, 
private insurance markets in 96 percent of metropolitan areas were 
considered highly concentrated and anti-competitive, which left 
consumers with little choice.\11\ A public health insurance option, 
coupled with a more regulated private insurance market, would break the 
stranglehold that a handful of companies have on the insurance market 
and would give consumers enough choices to vote with their feet and 
change plans.
---------------------------------------------------------------------------
    \11\ American Medical Association. ``Competition in Health 
Insurance: A Comprehensive Study of U.S. Markets.'' 2007. http://
www.ama-assn.org/ama1/pub/upload/mm/368/compstudy_52006. pdf.
---------------------------------------------------------------------------
    We also believe a public health insurance plan would be critical 
for driving quality improvements and more rational provider payments 
throughout the health care system. A public health insurance plan can 
introduce quality advancements and innovation that private insurance 
companies or private purchasers have proven themselves unable to 
implement. For example, until Medicare took the lead in reforms linking 
payment to performance on standardized quality measures, private 
insurers and payers were not making appreciable headway toward a value-
based health system. Just as Medicare is driving quality improvements 
that private plans are now adopting, a public health insurance plan 
could lead the way in developing innovative quality improvement 
methodologies, stronger value-based payment mechanisms, more 
substantial quality incentives, and more widespread evidence-based 
protocols.
    Because increased competition and quality reforms would help 
contain costs throughout the health care system, employers that 
continue to provide benefits directly would benefit from these savings, 
as would employers that purchase coverage for their workers through the 
exchange. And because premiums would be lower, spending on Federal 
subsidies for individuals who qualify for subsidies would also be 
lower.
    A public health insurance plan would also guarantee that there will 
be a stable and high quality source of continuous coverage available to 
everyone throughout the country. By contrast, private insurance plans 
can change their benefits, alter cost-sharing, contract with different 
providers, move in and out of markets, and change benefit or provider 
networks. A public health insurance plan would be a reliable and 
necessary backstop to a changing private insurance market, and a safe 
harbor for working families that lose their workplace coverage.
    A public health insurance plan available to everyone would also 
provide rural areas with the security of health benefits that are there 
when rural residents need them, just as Medicare has been a constant 
source of coverage as private Medicare Advantage and Part D plans churn 
in and out of rural areas every year.
    Clearly, the public supports a public health insurance plan option. 
A recent New York Times poll shows that the public health insurance 
plan is supported by 72 percent of voters.\12\
---------------------------------------------------------------------------
    \12\ New York Times/CBS News Poll on Health. Telephone Interviews 
conducted June 12-16, 2009. Accessed: http://graphics8.nytimes.com/
packages/images/nytint/docs/latest-new-york-times-cbs-news-poll-on-
health/original.pdf.
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DELIVERY SYSTEM REFORM
    Variation in Medicare spending across States suggests that up to 30 
percent of health care costs could be saved without compromising health 
care outcomes. Differences in health care expenditures across countries 
suggest that health care expenditures could be lowered by 5 percent of 
GDP without compromising outcomes by reducing inefficiencies in the 
current system.
    Experts estimate we waste one-third of our health care spending, or 
$800 billion, every year on health care that is no real value to 
patients. According to the Council of Economic Advisers, the sources of 
inefficiency in the U.S. health care system include payment systems 
that reward medical inputs rather than outcomes, high administrative 
costs, and inadequate focus on disease prevention.\13\
---------------------------------------------------------------------------
    \13\ Council of Economic Advisors. ``The Economic Case for Health 
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA_Health_Care_Report.pdf.
---------------------------------------------------------------------------
    We must restructure our health care system to achieve better 
quality and better value, and we must transform our delivery system 
into one that rewards better care, not just more care. We can start by 
doing the following:

      Measure and report on the quality of care, the 
comparative effectiveness of drugs and procedures, and what medical 
science shows to be best practices and use that information to create 
quality improvement tools that allow doctors to individualize high-
quality care for each of their patients;
      Put technology in place to automate health care data; and
      Reform the way we pay for care so doctors have the 
financial incentives to continuously improve care for their patients.

    The February 2009 economic recovery package, with its substantial 
investment in health information technology (HIT) and research on the 
comparative effectiveness of drugs and medical devices, marks a 
historic first step in the right direction.
    The tri-committee discussion draft builds on the investments of the 
economic recovery package by encouraging greater emphasis on primary 
care and prevention, and greater emphasis on innovative delivery and 
payment models, such as accountable care organizations and bundled 
payments for acute and post-acute care. The draft also makes needed 
investments in our health care workforce--with emphasis on primary 
care--to ensure access to needed care and better reward primary care 
providers.
    The tri-committee discussion draft emphasizes and invests in 
quality measurement and improvement methodologies. But we believe more 
can be done to foster innovation in health care delivery by building on 
the significant quality measurement and improvement underway within 
health care in recent years. The AFL-CIO has invested considerable 
resources and time working on system reform, as part of the broad 
collaboration of consumers, purchasers, physician organizations, 
hospitals, and government agencies at both the State and Federal 
levels.
    This strong collaboration between payers and providers has created 
breakthrough improvements in health care delivery. The process 
improvement techniques pioneered in other U.S. industries--for example, 
six sigma quality standards and rapid-cycle problem analysis, solution 
development and testing, and widespread diffusion in a short time 
period--have been shown to work and hold enormous promise, but Federal 
leadership in delivery system reform is indispensable.
    We must also put into place a system of broad consultation with 
consumers, purchasers, physicians, insurers and health care 
organizations in setting national priorities for health care quality 
improvement and in implementing standardized measures of quality 
throughout health care. With quality measurement as a foundation, 
reform can empower those who deliver care, pay for care, and oversee 
care to work with those who receive care to innovate and modernize 
health service delivery.
AFFORDABLE COVERAGE FOR EVERYONE
    Today we have a fragmented health care system characterized by 
cost-shifting and price distortions because as many as 50 million 
people have no coverage.
    According to Families USA, the uninsured received $116 billion 
worth of care from hospitals, doctors, and other providers in 2008, 
about $42.7 billion of which was uncompensated care.\14\ The costs for 
uncompensated care are shifted to insurers and then passed on to 
families and businesses in the form of higher premiums. For family 
health coverage, the additional annual premium due to uncompensated 
care was $1,017 in 2008.
---------------------------------------------------------------------------
    \14\ Families USA. ``Hidden Health Tax: Americans Pay a Premium.'' 
May 2009. Accessed: http://www.familiesusa.org/assets/pdfs/hidden-
health-tax.pdf.
---------------------------------------------------------------------------
    While our members generally have employer-based health coverage, 
stabilizing the employer-based health system will require covering the 
uninsured to make health care more efficient and prevent cost-shifting. 
We cannot cover everyone without bringing down costs overall, and we 
cannot control costs without getting everyone in the system.
    The good news is that, according to the Council of Economic 
Advisers, expanding health insurance coverage to the uninsured will 
increase net U.S. economic well-being by roughly $100 billion per year, 
which is substantially more than the cost of insuring the 
uninsured.\15\
---------------------------------------------------------------------------
    \15\ Council of Economic Advisors. ``The Economic Case for Health 
Care Reform.'' June 2009. Accessed: http://www.whitehouse.gov/assets/
documents/CEA_Health_Care_Report.pdf.
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    The most important policy proposal for extending health care 
coverage to the uninsured is ``pay or play,'' which I discussed earlier 
in my testimony. But the tri-committee discussion draft includes 
several other proposals that would also expand health care coverage, 
including insurance market reforms, the establishment of an insurance 
market exchange, individual subsidies, the expansion of Medicaid, and 
improvements to Medicare.
Insurance Market Reforms
    Ensuring access to health care coverage will require significant 
changes to the current private insurance market, in which people are 
now denied coverage or charged more because of their health status. 
Market reforms for everyone who buys coverage in the individual and 
group market will make coverage more fair, transparent, affordable, and 
secure.
    The AFL-CIO fully supports the prohibition on rating based on 
health status, gender, and class of business; the prohibition on the 
imposition of preexisting condition exclusions; guaranteed issue and 
renewal; and greater transparency and limits on plans' non-claims 
costs. While we would prefer a flat prohibition on rating based on age, 
we believe the proposal to limit age rating to 2 to 1 is a strong 
alternative. Any variation allowed above that limit threatens to make 
coverage unaffordable for older individuals.
Insurance Market Exchange
    The AFL-CIO also strongly supports the proposal to create a 
national health insurance exchange to provide individuals and 
businesses with a place to enroll in plans that meet certain criteria 
on benefits, affordability, quality, and transparency. We believe this 
will be a mechanism for simplifying enrollment and applying uniform 
standards.
    The tri-committee discussion draft establishes a mechanism that 
offers consumers a way to compare plans based on quality and cost. 
While the exchange will initially be open to individuals and small 
employers, we believe there should be a commitment to allowing public 
and private sector employers beyond the small group definition to 
purchase coverage through the exchange after the first 2 years that the 
exchange is operational.
Subsidies for Low- and Moderate-Income Workers
    Subsidies will be essential for making coverage affordable for low- 
and moderate-income individuals and families. We support the proposal 
to make subsidies relative to income, with more substantial subsidies 
applied to more comprehensive coverage for the lowest income enrollees. 
We also support ensuring that coverage is affordable by applying the 
subsidies to premiums as well as out-of-pocket costs.
Medicaid Expansion
    We strongly support extension of Medicaid coverage to all under 133 
percent of poverty, with sufficient resources to States to offset the 
new costs.
Medicare Improvements
    In addition to eliminating subsidies that give private Medicare 
Advantage plans a competitive advantage over traditional Medicare and 
deplete the Trust Fund, the tri-committee discussion draft makes needed 
improvements in benefits for Medicare beneficiaries. The draft closes 
the gap in prescription drug coverage over time, eliminates cost 
sharing for preventive services, and improves the low-income subsidy 
program.
FINANCING HEALTH CARE REFORM
    There are at least three key elements of health care reform that 
will also affect savings and revenues available for reform: A public 
health insurance option, delivery system reform, and an employer 
responsibility requirement. Though these policy proposals are 
absolutely necessary to improve the value we get for our health care 
spending, in the short run they will not be sufficient to fund reform.
    The Senate Finance Committee has said that all savings and revenue 
for health reform must come from within the health care budget. 
However, because health care reform is an urgent national priority that 
will produce benefits across our economy and improve our national 
budget outlook, we agree with the President that we should look beyond 
health care spending to obtain additional revenues. We support the 
major elements of the President's budget proposal for the Health Reform 
Reserve Fund, including savings in Medicare and Medicaid, limiting the 
itemized deductions for households in the top two tax brackets, and 
other modifications to reduce the tax gap, as well as making the tax 
system fairer and more progressive.
    One financing option under consideration in the Senate Finance 
Committee is a cap on the current tax exclusion for employer-provided 
health care benefits so that some portion of current health care 
benefits would be subject to taxes. We believe this is an 
extraordinarily bad idea.
Taxing Benefits Would Disrupt the Employer-Based System
    Capping the tax exclusion would undermine efforts to stabilize the 
employer-provided health care system. Employers would likely respond by 
increasing employee cost-sharing to a level at which benefits would 
become unaffordable for low-wage workers, or by eliminating benefits 
altogether. Capping the exclusion would also encourage workers to seek 
coverage outside their ESI group when this is economically 
advantageous, thereby complicating the role of employers enormously and 
giving them another incentive to discontinue coverage.
    Congress and the President have assured Americans that they will be 
able to keep the health care coverage they have if they like it. This 
approach makes enormous sense and generates broad public support. A cap 
on the tax exclusion would violate this basic understanding and 
threaten to disrupt the primary source of health care coverage and 
financing for most Americans.
    Until health care reform has been proven successful in lowering 
costs and making coverage available to uninsured workers through new 
private and public plan options, we should not make any changes that 
threaten the source of health care coverage for 160 million Americans.
Taxing Benefits Would Be Unfair to High Cost Workers
    The Senate Finance Committee is considering capping the tax 
exclusion for relatively high cost plans. This would be an unfair tax 
on workers whose benefits cost more for reasons beyond their control.
    The exact same plan could cost well under $15,000 in one company 
and more than $20,000 in another depending on factors that have nothing 
to do with the generosity of coverage. According to one study, premiums 
for the same health benefits can more than double when an individual 
crosses State lines.\16\
---------------------------------------------------------------------------
    \16\ Stan Dorn, ``Capping the Tax Exclusion of Employer-Sponsored 
Health Insurance: Is Equity Feasible,'' Urban Institute. June 2009. 
Accessed: http://www.urban.org/UploadedPDF/411894 
_cappingthetaxexclusion.pdf.
---------------------------------------------------------------------------
    The cost of coverage can be the reflection of many factors: The 
size of the firm; the demographics of the workforce; the health status 
of the covered workers and families; whether the industry is considered 
by insurers to be ``high risk''; geographic differences in cost; and 
whether there are pre-Medicare retirees covered through the same plan.
    Studies show that placing a cap on tax-free benefits would have the 
greatest impact on workers in small firms; firms with older workers and 
retirees, and workers with family plans that cover children. This is 
because insurance companies regularly charge higher rates for coverage 
for these workers.
    Under one proposal, over 41 percent of workers at a firm with older 
workers would be taxed on their health care benefits, but only 16 
percent of workers at a firm with younger workers would be taxed. 
Almost 30 percent of workers at a smaller firm would be taxed, but only 
17 percent of workers at a larger firm. Over 41 percent of workers with 
family coverage would be taxed, but less than 20 percent of workers 
with individual coverage.\17\
---------------------------------------------------------------------------
    \17\ Elise Gould. ``How Capping the Tax Exclusion May 
Disproportionately Burden Children & Families.'' Economic Policy 
Institute and First Focus. May 2009. Accessed: http://www.first 
focus.net/Download/GOULD.pdf.
---------------------------------------------------------------------------
    If workers have to pay more taxes because some of their co-workers 
have costly medical conditions, health coverage would be transformed 
from a workplace benefit that everyone supports to one that splits 
workforces between the healthy and the sick.
    Some argue that the existing tax exclusion is regressive, because 
higher income workers get a bigger tax advantage. But this is only one 
part of the story.
    A recent report points out that while households in higher tax 
brackets get a greater benefit from the tax exclusion in absolute 
dollar amounts, low- and moderate-income workers would be impacted more 
from capping the exclusion because their taxes would increase by a 
larger share than those of higher-income workers. The report found that 
workers with employer-provided health benefits who make between $40,000 
and $50,000 would see their tax liability increase on average 28 
percent, while those who make between $50,000 and $75,000 would see 
their tax liability increase on average 20 percent. By contrast, 
workers who make more than $200,000 would see an average increase in 
their tax liability of only one-tenth of 1 percent. In short, capping 
the tax exclusion would not make it more progressive.\18\
---------------------------------------------------------------------------
    \18\ Commonwealth Fund. ``Progressive or Regressive: A Second Look 
at the Tax Exemption 
for Employer-Sponsored Health Insurance Premiums.'' May 2009. Accessed: 
http://www. commonwealthfund.org /  / media / Files / Publications / 
Issue%20Brief / 2009 /May/ Progressive%20or% 
20Regressive %20A%20Second%20Look%20at%20the%20Tax%20Exemption / 
PDF_1269_Schoen _progressive_or_regressive_ESI.pdf.
---------------------------------------------------------------------------
    Taxing health care benefits would not bring down health care costs, 
either. It would just shift more of those costs onto workers. 
Economists say the tax exclusion leads workers to get too much 
coverage, but capping the tax exclusion would not do anything to 
address a key cost driver: The fact that 20 percent of the population 
consumes 80 percent of our health care spending. Taxing health benefits 
would not change that fact.
CONCLUSION
    The AFL-CIO applauds the work of the committees in outlining a 
strong, effective, comprehensive plan for guaranteeing quality 
affordable health care for all. We believe the tri-committee discussion 
draft would stabilize the employer-based health insurance system by 
simultaneously achieving the goals of lowering costs, covering 
everyone, and improving quality. We stand ready to work with all three 
committees to enact reform that achieves these goals. America's working 
families can wait no longer.

                                 

    Mr. STARK. Ms. Hansen, the President of the AARP, would you 
like to talk to us about AARP's positions?

        STATEMENT OF JENNIE CHIN HANSEN, PRESIDENT, AARP

    Ms. HANSEN. Well, thank you, Congressman Stark, for this 
wonderful opportunity to represent AARP. I thank Chairman 
Rangel and Ranking Member Camp, as well as the rest of the 
Committee, for the opportunity to address this really vital and 
critical topic at this time.
    Enacting legislation to give all Americans quality, 
affordable health coverage options is actually AARP's top 
priority this year. The draft tri-committee legislation marks 
substantial progress toward this goal.
    Today, I am really proud to represent nearly 40 million 
members of AARP, half who are over the age of 65 and therefore 
in Medicare and half under 65. Both age groups face serious 
problems in today's health care system and AARP really 
appreciates the tri-committee for including critical reforms in 
its draft that will help AARP members of all ages.
    For our younger members, the draft would get us closer to 
abolishing discriminatory insurance market practices that use a 
person's age to block access to health coverage or to keep 
prices too high to make a difference. To make insurance 
affordable for Americans age 50 to 64, AARP believes these 
individuals should be charged no more than twice what somebody 
under 50 is required to pay for quality health care. Why is 
this? Because older may mean wiser but it does not always mean 
richer. In fact, the income of uninsured adults, aged 18 to 24, 
is a little over $28,000 for the household and for the 50 to 
64, it is $30,000 for the household.
    But if insurance companies are allowed to charge people 
aged 50 to 64 more because of their age, and especially if it 
is more than twice what those under 50 pay, those who need it 
should be eligible for a subsidy in order to afford this 
coverage. There should also be strict limits placed on what 
these individuals are required to pay out of their own pockets.
    AARP is also concerned with the so-called ``hardship 
exemption.'' While this exemption would save those who cannot 
afford to pay for the required insurance policy, it would still 
leave them without affordable quality insurance. So the net 
result is they still are uncovered.
    The tri-committee draft requires everyone, individuals and 
employers alike, to participate in health care reform and AARP 
applauds the tri-committee for recognizing the importance of 
shared responsibility. One of the greatest difficulties faced 
by our older members is the extraordinary out-of-pocket costs 
for health care. In fact, Medicare beneficiaries right now 
spend about 30 percent of their income on health care costs and 
they face costs that are six times the costs faced by those of 
us who do have employer-sponsored coverage. This is a 
particularly stark reality for the nearly half of Medicare 
beneficiaries who have incomes of less than $22,000 per year.
    Prescription drugs are of course a big piece of Medicare 
beneficiaries' out-of-pocket expenses, which is why AARP has 
made closing the ``donut hole'' and improving the low-income 
assistance program's top priorities in health care reform. The 
tri-committee has led the way on both of these vital issues, 
including the closure of the ``donut hole,'' as well as the 
important improvements to Medicare low-income supports in its 
draft legislation.
    The draft also fixes Medicare's broken system for paying 
doctors. I think we have heard a lot about that, and we know 
that this is a whole system that has to be addressed. It also 
puts Medicare on a path to fiscal stability by revising payment 
systems that Peter Lee has mentioned, as well as Mr. Shea, to 
reward quality rather than quantity of care. It includes 
incentives to reduce costly and preventable re-
hospitalizations, which will help eliminate some of the waste 
in Medicare that is driving up the cost of health care and 
threatening Medicare's financial future.
    It strengthens our workforce, and we have just addressed 
that. And we know that it is already quite fragile and its 
ability to meet current needs is quite challenged now, let 
alone what will happen in the future.
    And it takes important steps to address racial and ethnic 
disparities in care that have been documented in research. Many 
challenges remain on the road to comprehensive health care 
reform but AARP and many of us who have been here to express 
those opinions, recognize that the differences that we happen 
to have cannot stop us from finding common ground and enacting 
comprehensive reform this year. We all know and have said that 
the status quo is unsustainable, and we cannot then afford to 
fail.
    So thank you all for your leadership, and AARP looks to 
continue to work with you all. Thank you.
    [The prepared statement of Ms. Hansen follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Chairman RANGEL [Presiding]. Let me thank you for your 
leadership in helping us to get to at least where we are today.
    And I call on Mr. Johnson, who is the Senior Vice President 
of Labor, Immigration and Employee Benefits for the Chamber of 
Commerce. We need you.

 STATEMENT OF RANDEL K. JOHNSON, SENIOR VICE PRESIDENT, LABOR, 
  IMMIGRATION AND EMPLOYEE BENEFITS, U.S. CHAMBER OF COMMERCE

    Mr. RANDEL JOHNSON. Thank you, Mr. Rangel and Ranking 
Member Camp and Members of the Committee. I appreciate this 
opportunity to testify. The Chamber is the world's largest 
business federation, representing more than 3 million 
businesses of every size and sector across the economy. I think 
more importantly I want to note that half of Americans do 
receive their health insurance voluntarily provided by their 
employers. And the Chamber is committed to improving the health 
care system by lowering cost, improving quality and expanding 
coverage.
    There are a couple of issues that I want to bring up in my 
oral statement. I also have a written statement which is a 
little longer. But I want to address process, the employer 
mandate, and the so-called ``public option,'' which has already 
been much debated here.
    As far as process goes, we understand a need for urgency 
but lets put it on the table. Only a few days ago, this bill 
was released. It is 850 pages long. We all enjoyed our weekends 
trying to get through it, but there are many parts that we 
still do not understand.
    It is clear that the bill is going to be rushed to the 
floor. Mark-ups currently have already been scheduled for next 
week and the week after, and there will not be adequate time 
for consideration or certainly deliberation by the Chamber's 
Employee Benefits Committee or my many members.
    I did work on the House Labor Committee 10 years ago when 
Mrs. Clinton submitted her bill for consideration to the 
Congress. She was much criticized for that process because it 
came up here almost as a fait accompli, but it was the subject 
of many hearings in many, many committees, including this one. 
And looking back on that, I would say it was a bit of a model 
of transparency as compared to the process we are faced with 
today.
    So we do hope that the process will be slowed down a bit. 
We know what the White House is saying and the schedule that 
the President has set for the Congress, but we do believe we 
need more time to consider a bill of this length.
    There are many good ideas. We would like to be able to 
support a bill as it goes to the floor, but it is going to take 
some work.
    With regard to the employer mandate, certainly that is our 
number one issue, along with the so-called ``public option.'' 
We oppose the pay or play mandate that is in this bill. I was 
astounded, frankly, when I read this weekend that it imposes an 
8 percent penalty on employers, let's call it what it is, it is 
a penalty or tax, if they don't participate in the so-called 
``play'' part of the mandate. What is 8 percent? Well, that is 
a lot of money. Quick back of the envelope, 8 percent on 
someone making $40,000 a year is $3,200. If you have 20 
employees, that is $60,000. That is a lot of money for a small 
business to pay in addition of course to the FICA taxes they 
are already paying.
    We realize that is based on the Massachusetts model, which 
has, by the way, been roundly criticized by both the left and 
the right. In the Massachusetts model, however, the penalty was 
about $300 per employee, not certainly 8 percent of payroll.
    We think that this sort of imposition on businesses for 
those who cannot afford it, and not all businesses can afford 
health care or pay this kind of penalty, is going to be one 
more incentive frankly, and I will say it, for businesses to 
move overseas.
    One of the worst aspects of this proposal is a very 
peculiar provision, which allows employees who are part of the 
employer plan to actually cash out and move to the so-called 
public option. And apparently, as we read the bill, this 
provision would say that the employer must in fact pay for that 
cash out. Obviously, an employer cannot plan on that basis, 
where employees move in and out.
    We are always concerned of course about the minimum 
coverage provisions defined in this bill, which is set by this 
ubiquitous board of all-consuming powers, which many others 
have talked about.
    The public option, much discussed in the first panel, I 
will not belabor it, I will just say it is called a ``public 
option'' for a reason. It is because one way or the other, it 
is going to have government support. Let's face it, if this 
plan goes bankrupt or does not have enough premiums coming in, 
the government is not going to let it go by the wayside and 
die. The government will step in and save it. It is not going 
to be taxed like private sector insurance companies are. It is 
a public plan, it is a government-supported plan, and that is 
why we call it a ``public option.''
    Many supporters believe that a public plan is necessary. I 
think our position is let's walk before we run. Let's see how 
the insurance market reforms work, combined with the gateway, 
et cetera, and other kinds of reforms in this bill and let's 
see how they work before we move to this so-called new sort of 
Medicare-like option applicable to the entire public.
    With regard to paying for reform, I know there are a lot of 
taxes on the table. It is no surprise that the Chamber is not 
too sympathetic to new taxes on our members. We have gone 
through a list of those in the written statement, and I will 
not go through those in my oral but each one of course is new 
money from the bottom line that employers like to use for 
hiring new workers, expanding, providing benefits voluntarily, 
which they already do, and creating work for American workers.
    Now, that does not mean the Chamber is opposed to health 
care reform. Our members are paying the money for increasing 
health care costs. We want to continue to do that. We want to 
continue to cover our workers, so we support reform. But the 
public plan, the employer mandate, is something we cannot 
support. Peter mentioned many improvements in the system that 
we can go along with that are in this bill. Other provisions, 
such as medical liability reform, we would like the Committee 
to look at. We are ready to work with this Committee and the 
other three in the Congress, the jurisdiction of the other two, 
but we would ask the process be delayed a bit. Let's take our 
time to get this 850-page bill right. And let's not do any harm 
before we move on and pass this legislation on to the 
President.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Randel Johnson follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. STARK. I just might comment, Mr. Johnson, the timeline 
when you were here and we did MMA, if you'll recall, this 
Committee has had six hearings and several bipartisan meetings, 
and the legislative proposal was released June 19th when we did 
MMA we got the draft on June 13th, that was pulled back, and on 
June 16th, we got the draft for a markup on June 17th. We have 
over a month prior to any proposed markup been having, and I 
say this because the Minority staff, unlike in 2003, the 
Minority staff has received information as the Majority staff 
has.
    So I only say as procedure, we have attempted to bring this 
out weeks and months ahead of markup consideration, and the 
staffs on both sides of the aisle I think have had--everybody's 
Father's Day was spoiled reading this thing. So I would just 
like to suggest in consideration for both the Minority and 
Majority staff who have spent untold hours, that the 
information has been out there a long time, and we hope that 
will help us come up with a better product. Without--however 
you feel about the product, I think the procedures, we've tried 
to be very transparent and get the information out as early as 
we can.
    Mr. RANDEL JOHNSON. Just a quick comment, Mr. Chairman. We 
do have a policy process at the Chamber, the Employee Benefits 
Committee, and we have a broad membership. It does take us a 
little bit of time to get a bill of this enormity out to our 
members and try and get feedback so we can figure out that 
we're in fact reflecting our membership's views.
    Mr. STARK. Thanks. Thanks for your consideration.
    Chairman RANGEL. Let me follow up on that. Not only have we 
had the hearings, but I wish before I get a chance to talk with 
you, we need the Chamber. It's important to the country, it's 
important to the Chamber, it's important to our economy, and I 
personally think it's important for competition to have a 
healthy workforce. Do you agree with all of that? Do you know 
the prices are soaring for employers as well as for individual 
employees? Some of the things that were laid out there, I would 
like to clear up.
    What I would want you to do as I go to Mr. Higgins and the 
Republicans is to make bullets of the things that you've said, 
the mandatory, the inability for small businesses and those 
things, because we're too close on this thing for you not to be 
able to get to your membership and to recognize that maybe 
there's some fine-tuning to be done. That's why this is a draft 
bill. But we have to be joined at the hip on this, and I am 
convinced in talking with the Chamber people and businesspeople 
that we can come together. So just bullet these things and 
we'll get back to you. What we can't cover today, we'll cover 
this afternoon, fair enough?
    Mr. RANDEL JOHNSON. Yes, Mr. Rangel. We have a conference 
call to the Chambers on Thursday, we'll be running through the 
provisions of the bill, a broad nationwide conference call, and 
we will certainly be----
    Chairman RANGEL. Terrific. Now, Mr. Higgins through no 
fault of his own did not get a chance to question the last 
panel. And so you may proceed.
    Mr. HIGGINS. Thank you, Mr. Chairman. A lot of the debate 
is centered around the so-called public plan or not-for-profit 
plan. The proponents of the not-for-profit say that it is 
advanced to drive competition, to improve quality, to contain 
and lower costs. The opponents of change, the defenders of the 
status quo, say that a not-for-profit will put private plans at 
a competitive disadvantage. It will lead to a single payer 
system. It will be like Canada. It will be a European style. It 
will be a massive Federal Government takeover of health care. 
These are scare tactics that are designed to confuse people to 
a point where they say, well, the system may not be perfect 
now, but we can't risk changing things.
    What I want to talk about is America. In America today, 
there are 298 million people. One hundred fifty-three million 
have employer-sponsored coverage. Fifteen million people have 
individual coverage. Eighty-one million in Medicare and 
Medicaid, and 46.7 million don't have insurance. Nine million 
of them are kids. In America, we pay 2.5 trillion dollars a 
year for health care, 20 percent of the American economy. These 
costs are expected to grow by 6.7 percent annually or up to 8 
percent. We have a potential liability of another trillion 
dollars to try to cover those without insurance.
    So as we focus on this public and private plan, if you look 
at all the studies that have been done, the Dartmouth study, 
contemporary and historical studies in the problems of the 
health care system in America, the Atul Gawande study in the 
New Yorker. It always cites the places that do it well. They 
cite specifically the Cleveland Clinic. They cite the Mayo 
Clinic. And guess what? Those places are delivering highest 
quality, low-cost care, and they just happen to be not-for-
profit. The doctors aren't tenured. They're salaried. They have 
1-year contracts. There is peer review. Doctors are doing what 
doctors are supposed to do and not dealing with insurance 
companies. You know, cardiologists, the national average salary 
for a cardiologist is $370,000 a year. At the Cleveland Clinic, 
the average is $336,000 a year. An oncologist, national average 
is $270,000 a year. At the Cleveland Clinic, it's $254,000 a 
year. There's a more generous compensation package for those at 
the Cleveland Clinic, including covering their malpractice 
insurance premiums.
    The point here is, if we're going to do a not-for-profit 
plan it should be designed to do one thing. It should be a 
countervailing force for a system that everybody agrees is 
unaffordable, unsustainable and unacceptable. Let's look at 
what works. Now I know from information I got this morning that 
the President and CEO of the Cleveland Clinic is here in 
Washington. The problem is, he's not here before this panel, 
and that's who we should be looking to for information about 
how to structure the fundamental piece of health care reform, 
and that's a not-for-profit, not for unfair competition, but 
for fair competition, an American system where we pay more per 
capita than anybody else in the world. And our outcomes, our 
health care outcomes, are unacceptable and getting worse.
    That's all I have, Mr. Chairman. Thank you.
    Chairman RANGEL. Thank you. The Chair recognizes Mr. Camp.
    Mr. CAMP. Thank you, Mr. Chairman. It was clear in talking 
to the last panel that many of them had not had time to read 
the bill. I presume that's the same with this panel. I don't 
know if any of you spent the weekend. It was just released 
Friday night. Have any of you had a chance to read the whole 
bill in its entirety? Well, good for you. Two of you have. 
Skimmed? All right. Well, I do think what we're trying to get 
at today is actually how the provisions in the bill will affect 
health care as we know it.
    And one of the things that the draft bill would require is 
that employers offer to pay for health insurance for full-time 
employees and their dependents, and if they don't do that, 
there's an 8 percent payroll tax. And I would say to Mr. 
Johnson, what impact will that have on the 14 million Americans 
currently unemployed? What will the potential of that payroll 
tax on health care do for the unemployed? And also for the 
prospects of economic recovery in general?
    Mr. RANDEL JOHNSON. Well, for better or for worse, there 
has been a lot of studies done on the so-called pay-or-play 
mandate. Now these studies, because they're not exactly on the 
legislation before us because the studies were done before the 
legislation was introduced on Friday. But invariably----
    Mr. CAMP. Can you speak into the mic a little bit more?
    Mr. RANDEL JOHNSON. Yes sir.
    Mr. CAMP. Thank you.
    Mr. RANDEL JOHNSON. There's been many studies done, 
Congressman, on the impact of the pay-or-play mandate on lower-
wage workers. Principally the pay part, a civil penalty, has an 
adverse impact on job growth and in fact will result in job 
losses and lower wages. Why is that? Because there's only so 
much money that employers have for the bottom line, and when 
they have to pay a substantial civil penalty, that payment is 
going to come from somewhere, and that's going to come from 
their operating budget, which is often taken out in terms of 
less job growth and adverse impact on workers in terms of their 
wages.
    Now this isn't the Chamber talking. It's a variety of 
studies that I have cited in my testimony. What exactly will be 
the 8 percent, the impact of what is in this bill? Well, I 
think it would be some interesting modeling, but it's certainly 
not going to be helpful to many workers who are going to lose 
their jobs because of that mandate. Will it result in some 
additional coverage? Hard to say. I mean, these are the--this 
is the tension that the Committee is dealing with, I 
understand. But they've got to look--I ask that the Committee 
look at the true impact of an 8 percent penalty on employers 
and the fact that this is real money.
    Mr. CAMP. There's also a new tax on employers in Section 
411 of the bill, who promise to write health insurance that 
meets certain government-approved levels of benefits. And if 
employers make an unintentional mistake that really doesn't 
bring them up to the level of coverage required by the 
government, they're subject to penalties as high as $500,000, 
even if those mistakes are unintentional. Does that seem like a 
punitive penalty on small business?
    Mr. RANDEL JOHNSON. Thank you, Mr. Camp, because I was not 
aware of that part of the bill, and I'll certainly bring it to 
the attention of our Chambers tomorrow. It seems like an 
awfully high penalty for an unintentional violation obviously. 
It's certainly in the aspects of employment benefits or on 
labor law generally, it's far in excess of anything we see in 
other employment laws.
    Mr. CAMP. Clearly there will be costs associated with this 
pay-or-play mandate, and I would ask you, Ms. Hansen, do you 
feel that this cost might cause employers to offset the costs 
by dropping retiree health coverage? Do you see that as a 
concern?
    Ms. HANSEN. Of course, our concern is continuity of 
coverage for individuals. So I think it depends on how the 
program eventually is structured as well as our ability to make 
sure that there's an affordability factor, again, whether it's 
the consideration for the employer, or then if it gets passed 
on to the employee, that there is some way that that person can 
still participate in coverage. So, the difference will be 
subsidy. And ultimately it's coverage that we're still looking 
for.
    Mr. CAMP. So the possibility of losing retiree coverage is 
something that would concern you a great deal because it would 
mean that continuity would be broken?
    Ms. HANSEN. Well, we've been watching how companies have 
chosen to go this route, so I don't think it's just this 
particular effort. It seems to have been a trend going 
regardless of this movement.
    Mr. CAMP. Certainly its health care costs have increased, 
and so you--certainly it would follow that if employer costs 
are increased even more that you might even see that problem 
exacerbated?
    Ms. HANSEN. Well, I do agree that it's really about how 
much cost is, whether it's borne by one party or the other, 
it's having it affordable.
    Mr. CAMP. All right. Thank you, Mr. Chairman.
    Chairman RANGEL. Okay. I want to get back to the business 
of the Chamber. It was so good seeing you at the White House as 
stakeholders and agreeing that the system is broken, that 
employers are doing more than their fair share, that the prices 
are soaring, that most industrialized nations are competitive. 
General Motors once said they pay more for health care than 
they do for steel. Employees can't afford to leave or lose 
their job for fear of losing their health insurance. It's a 
better, healthier competitive America when they're educated and 
when they have health care.
    Hey, this is Chamber type of talk. This is America type of 
talk. Half of your statement was knocking what we've done. I 
want you to help us to improve what we have done, because you 
can't challenge that we have mutual goals. You can challenge 
the process, but this is draft, D-R-A-F-T, proposal. And to be 
able to persuade you as the small businesspeople are persuaded, 
because quite frankly, from a political point of view, that's 
where I get my jobs, from the small businesses, they need this. 
They want to be able to afford to do this.
    When we had businesses here at one of our half-dozen 
hearings, they said you do what you want. We're going to take 
care of our employees. And the employees said that, hey, we got 
our policy. We enjoy it. Just stop the premiums. The whole idea 
that unions have to negotiate instead of for wages, most of 
those things are going for health care. So when we say 8 
percent, that was less than what they already pay. And I don't 
think you challenged the fact that having a competitor when 
you're throwing these hundreds of billions of dollars out there 
with people who could never afford health care, heck, your 
corporations are paying for the health care of the uninsured in 
higher premiums. And now for us to bring those people to the 
marketplace with the security that they can get insured, you 
know that has to bring down the premiums for your members, and 
for the small businesspeople who hope to be your members one 
day.
    So what it is that we've said that you now have bulleted 
that we can talk about but you can think there's a better way 
to do it? If you don't like the mandate, that means we've got 
to lead the whole for people to--that don't have the same 
consents for reform as you and I do to get a free ride? No. 
Everyone, the young and the ambitious and those that hope that 
they never get sick, has to be there in order to broaden the 
pool and reduce the premiums. So I'm disregarding your negative 
rhetoric because I have worked so hard with the Chamber to 
recognize that you need an educated workforce. It's not a local 
issue. And you've worked with me and others. You need a healthy 
workforce and not spend so much time in terms of providing 
paying for health care and spend more time with wages and being 
competitive with the foreigners. So just tick off those things, 
if done differently, you can say that's what I was talking 
about. Slow down the train and let's get on board.
    Mr. RANDEL JOHNSON. Mr. Chairman, first, I can assure you 
that we don't, as short as the time we had to review the bill, 
we don't come up here without gauging where our membership is 
before we testify. The reality of it is, the employer community 
spends $500 billion on health care now voluntarily. I suppose--
could they be required to spend more? Well, the Congress could 
make us spend more I suppose. We are already doing our fair 
share.
    Many of our members and the bigger companies----
    Chairman RANGEL. That goes unchallenged, so we strike that 
off. We want to make certain that you not get increased 
premiums for doing more than your fair share, because you're 
paying for people who don't have health insurance. You know it, 
I know it.
    Mr. RANDEL JOHNSON. I understand. And we also have many 
members who simply cannot afford to provide health insurance or 
pay an 8 percent penalty because they cannot.
    Chairman RANGEL. They can't afford to provide health 
insurance or pay the penalty, we're there to help them. It's in 
the bill. We'll go through that. We're just saying if you agree 
not to participate, you've got to pay something so that we can 
help your employees get insurance which 99 percent of large 
employers will maintain and want to do. I'm spending more time 
with the small businesspeople who need more help. There's no 
conflict with the CEOs in doing this. They're going to keep 
their plan. I want to reduce their premium.
    So mandate--we'll talk about that. But anybody would tell 
you, you've got to get everyone in the pool if you're going to 
bring equity to everyone else. And I really think the major 
players are going to be helped by doing this, and they don't 
have to be told what to do. We just want to make certain that 
no one gets a free ride.
    What were the other things that disturbed you about our 
behind the closet job that we've done?
    Mr. RANDEL JOHNSON. Well, the public plan option, which was 
much discussed at the first panel, is troubling to us, because 
in various reasons that were laid out. One is it does rely on 
Medicare reimbursement rates, which results in a cost 
shifting----
    Chairman RANGEL. What does it do?
    Mr. RANDEL JOHNSON. Relies on Medicare reimbursement rates. 
I believe that's right.
    Chairman RANGEL. Well, it bumps up the Medicare rates, but 
this is what the doctors are relying on. If they don't want to 
participate, they don't have to participate.
    Mr. RANDEL JOHNSON. I think many doctors feel they have to 
participate in Medicare because that's where the money is and 
that's where the patients go.
    Chairman RANGEL. If that's where the money is, that's what 
they're looking for, what do you want us to do, deny them the 
money? Where are they going to get the money if we don't assist 
50 million people to go out there and to compete?
    Mr. RANDEL JOHNSON. Well, Mr. Chairman----
    Chairman RANGEL. And not only that, we are including a 
whole lot of physicians, primary care physicians, to come in to 
help the country to provide basic health care. You support 
that. You have to. I'm submitting that we are going to agree to 
more. It may be the process, and you're entitled not to like 
it. We can make up for it. But I just want you to take off some 
of the things that happen in the dark of nightness that you say 
that I can't get on board here, because we've got to work it 
out.
    Okay. We'll pass on and we'll--you say you're having a 
conference call?
    Mr. RANDEL JOHNSON. We do one Thursday, and I guarantee 
there will be a lot of Chambers because a lot of people are 
starting to pay attention.
    Chairman RANGEL. Well, try to get it in an orderly way 
where you can get your questions, your objections so that at 
least we can tell you where we stand. But we're not going to 
leave this train without you. Okay. Who's supposed to be 
recognized? Mr. Herger is recognized for 5 minutes.
    Mr. HERGER. Thank you, Mr. Chairman. And I'd just like to 
point out, now we've been talking about this for a while now. 
This is the first hearing we've had actually since we've had a 
bill that's been presented. That bill was just presented on 
Friday, 850 pages worth. Of our six panelists here, only two 
have mentioned they had an opportunity to read it. So, Mr. 
Chairman, we do have some concern. We have some major concerns. 
And I don't think these concerns should be overlooked or made 
light of. These are major concerns that it isn't just the 
Chamber of Commerce that has concerns, small businesspeople and 
citizens all over this Nation have concerns of how we're going 
to pay for it and how we're going to do it. And bringing this 
up on a Friday right before a weekend, Father's Day weekend, 
and then just coming up the next week of panelists who were 
chosen before, again, I don't think we should be making light 
of this.
    I also have in front of me, it's not just the Chamber of 
Commerce. NFIB, National Federation of Independent Business, 
came out, a quote from them. They say NFIB opposes employer 
mandates that threaten the viability of our Nation's job 
creators, and an 8 percent pay-or-play mandate will inevitably 
harm job creation. Research shows an employer mandate could 
cost 1.6 million jobs, hardly what this country needs in these 
challenging economic times.
    Now, Mr. Johnson, in addition to requiring employers to 
offer and largely pay for health insurance, this draft Democrat 
bill would allow non-elected officials to mandate a minimum 
benefit package. And just as Mr. Draper, a small businessman, 
mentioned in his testimony, or alluded to, is it possible that 
this minimum benefit package would be so expensive that the 8 
percent payroll tax could be a cheaper and more predictable 
option for employers? And if so, what impact would this have on 
employer-sponsored health insurance that the majority of 
Americans are accustomed to and who currently like?
    Mr. RANDEL JOHNSON. Yes, Congressman. And if you look at 
the bill, and that was one of the areas I did get through, 
would it be cheaper? Unlikely the way they've spelled it out, 
which is this board apparently with the minimum benefits 
package would at least have to include hospitalization, 
outpatient hospital, professional services, prescription drugs, 
rehabilitation, mental health and substance abuse disorders, 
preventive services, maternity benefits, baby and child care.
    So--and then it says the board can add on to that. We don't 
know what the board is really going to do, and this is 
important, because it controls both what would be the adequate 
package for the purposes of playing instead of paying, and also 
who would benefit--what kind of companies could benefit to 
participate in the gateway. The bottom line could very well be 
that some companies will say, I'm not going to bother to figure 
this out. It's complicated. Or, Congressman, that my type of 
plan doesn't fit. I have a generous plan, but it doesn't fit 
the definition of this board, and so I'm going to walk away 
from this, and I'll just do the minimum. I'll do the minimum 
benefits package, or perhaps I'll pay the fine, and to heck 
with it, you know, I've had it. I've tried to do the best I 
can. The government thinks it's doing its best. It knows best. 
So, fine. I'll just do the minimum package and skip the hassle. 
And that will result in less coverage overall for some number 
of Americans. How many? It's hard to say, but that's one of 
these uncertainties we don't know because we haven't had 
adequate time to sort of vet the bill with our membership.
    Mr. HERGER. And of course the big thing we've been hearing 
from the President, we've heard from a number of my friends in 
the Democratic party have indicated that if you like what you 
have, you can keep it. But the bottom line is, even if Mr. 
Draper's employees like what they had----
    Mr. DRAPER. They don't.
    Mr. HERGER. And we see these rates--and they don't--if they 
see these rates, let's say they did.
    Mr. DRAPER. Okay.
    Mr. HERGER. Because most Americans like what they have. So 
you have some who don't. But let's say most of the Americans 
who work for small business who like what they have, Mr. Draper 
could very well be forced into taking this 8 percent because 
that's cheaper than perhaps the 10 or 11 percent or whatever it 
might be that you could be paying now.
    So, therefore, we would not be able to keep what we like. 
We'd be forced into a potentially Canadian-U.K. type system 
where we're rationalized. Do you see that as a concern?
    Mr. RANDEL JOHNSON. I think it's the very uncertainty of 
this sort of question that is beginning to alarm the American 
public which accounts for the recent poll in the Washington 
Post where it says most respondents are very concerned that the 
health care reform would lead to higher costs, lower quality, 
fewer choices, a bigger deficit, diminished insurance coverage 
and more government bureaucracy.
    It's these kinds of uncertainties about the bill and the 
impact of these kind of provisions I think are getting out and 
are troubling people, and that could be the result, 
Congressman, who knows. But it's an awfully big question to go 
forward without answering.
    Mr. DRAPER. In Des Moines we only have two choices, so it's 
hard to get fewer than that. I guess you could. You could get 
one.
    Mr. HERGER. Thank you, Mr. Chairman.
    Chairman RANGEL. The situation is, we have about seven 
votes on the floor. And so we have to, and we apologize for it, 
recess until 3:00 p.m. And for Members, that is 3:00 p.m., or 
if there happens to be another vote after that. So, Mr. Levin, 
if you would want to stay. So we hope all of you can stay with 
us until three and have lunch. We certainly will understand if 
your schedules cannot permit it, and the Committee stands in 
recess.
    [Recess.]
    Chairman RANGEL. We can't apologize enough to our dedicated 
panel for staying here while we probably did less productive 
work than you did during this break, but we certainly want to 
thank you for your dedication helping us out, and we'll start 
off, or continue rather, with Sandy Levin of Michigan.
    Mr. LEVIN. Thank you. Sir, let me, as we reconvene, try to 
follow up on what you and Mr. Chairman have raised and to talk 
at least for a minute or two with you, Mr. Johnson. In recent 
hours, much punctuated, we moved from the public plan as the 
focus to a discussion of the employer mandate, and I think in a 
sense that was a useful transition, so we talk about a number 
of these provisions.
    And in your testimony on page 4, you say that you adamantly 
oppose the pay-or-play proposal. And you call it a sword of 
Damocles. And then after you say employers are already doing 
their share and more, you say that those who can't--who don't 
cover, don't, because businesses that can afford to offer 
benefits already. And then you say further on, a smarter 
approach would be to focus on bringing down the costs of health 
insurance.
    Picking up the theme that our Chairman has put forth, I 
would like to encourage the Chamber to participate actively in 
the discussion, including the issue of an employer mandate. 
Because I think the reality is that there's going to have to be 
some requirement of coverage with perhaps some exceptions, and 
we left that open in the bill as to what if any exceptions 
would be made and what kind of credits would be given to 
employers, depending perhaps on size. So this is an issue that 
needs to be addressed. I think there will be a requirement in 
order to bring more people within insurance, but its exact 
shape remains to be determined. And so when you say here that, 
on page 4, that you adamantly oppose a proposal and it doesn't 
matter what's in it, you essentially withdraw your organization 
from a discussion of what the plan might look like. And I think 
what Mr. Rangel has said to you and others of us believe, that 
it would be better if we could have broader participation. So I 
don't know if you want to comment on that, but the issue of 
employer participation, look, we're talking about an employer-
based insurance system being maintained, and if that's true, I 
think almost certainly that will mean that more employers need 
to cover their employees.
    So I would hope that you might in future presentations not 
talk about a sword of Damocles and it doesn't matter how it's 
shaped, you oppose it, to saying that you have whatever you 
want to say. Does that make any sense to you?
    Mr. RANDEL JOHNSON. Yeah, it does, Congressman, and I 
will--obviously, I'm going to go back to my policy committee 
and we'll see where we go.
    Mr. LEVIN. Good. Mr. Shea, do you want to talk quickly 
about the issue of taxation of benefits, of health benefits?
    Mr. SHEA. Thank you, Congressman. I said we think this is a 
very bad policy because not only is it asking people to pay 
when they're already paying a lot of money, pay more, when 
they're already paying a lot of money, it is also inequitable 
because small firms, any size groups with large numbers of 
older workers, really retirees, high-risk industries, there are 
a lot of factors, or just health status, there are a lot of 
factors. And we've looked at plans side-by-side. So I got an 
example from one of the construction trades of two Western 
State plans, same trade, same age, and roughly the same 
demographics otherwise. The difference in cost in the two plans 
for similar benefits was one was 10 thousand and something, one 
was 16 thousand and something. And actually the one at 16 
thousand had higher copays and deductibles. The difference was 
claims experience. And what that means, as you know, is health 
status. Well, I don't see how the Congress is going to be able 
to go to their constituents and say we're going to do this, 
and, you know, some people are going to get hit--smaller firms 
are going to get hit harder. So that's a huge issue.
    The other thing is, I just--I started my comments by saying 
I don't think you can do this without going outside the health 
care system in the short term. In the long term, if we can 
capture some good percentage of that 30 percent of the annual 
expenditure that we waste, according to the Institute of 
Medicine, then we'll have a lot of money to fund reform. But 
that's going to take a few years.
    Mr. LEVIN. My time is up. It gives me 30 seconds, 15 
seconds, Mr. Johnson. Regarding bringing down cost of health 
care, and it's on page 7, when you get on that telephone call, 
talk more, if you would, with those on it specifically about 
what kinds of plans might bring down the cost of health care. 
Because Jerry, Mr. Shea, I hope it's not only a longer term. A 
number of us think we have to find some additional measures to 
straighten out, for example, physician reimbursement in the 
shorter term, and not only the longer term. And we would like 
your assistance on that, too.
    Mr. RANDEL JOHNSON. Well, and we're totally committed to 
doing this right away as soon as possible. I'm just talking 
about the effect. And by the way, while I'm on the subject, 
Congressman, thank you for your legislation on quality and 
delivery system reform. It's the kind of proposal which really 
is moving this whole discussion along, so I just wanted to 
thank you.
    Mr. LEVIN. Thank you, Mr. Chairman.
    Chairman RANGEL. Thank you. Mr. Sam Johnson of Texas.
    Mr. JOHNSON. Thank you, Mr. Chairman. You know, Mr. 
Johnson, during the first panel, we talked about what would 
happen if the health care choices commissioner loaded up the 
essential benefits package with a lot of mandates on coverage, 
my understanding of this bill is that the commissioner will 
have the ability to regulate both government-run and employer-
sponsored health insurance plans. One thing that's yet to come 
in the hearing is whether or not this health care choices czar 
could unilaterally decide to cover abortion services in this 
newly formed government-run plan. And I think the President 
said that's something he wanted to do.
    If that's the case, that would be an historic reversal of 
public policy, and if this government-run plan could be 
designed to cover abortion on demand and taxpayer funds are 
used, I think that the cost of health care in this country, if 
one bureaucrat in Washington had the power to decide what kind 
of health--type of health benefits your companies had to 
provide to its employees, if, for instance, they decided not 
only abortion but acupuncture and hair transplants and 
whatever, would employers decide to get out of the health care 
system?
    Mr. RANDEL JOHNSON. Well, without taking a position 
specifically on--I think you pointed to the broad authority 
this board has to add a long litany of required procedures or 
treatments, depending on who has the most--who has the ear of 
which politician on Capitol Hill and the board. So, it's 
opening a door to an analyst's list. And I think, Mr. Johnson, 
you agree, we've never seen a government program be reduced. 
It's always gotten expanded. And so at some point, an employer 
would say I'll just pay the fine and get out of this business 
instead of trying to figure out how to squeeze my plan, which 
is a very generous plan, into the square peg of this new 
mandated government board, you know, required health care 
benefits package.
    So it's a real, you know, unknown peg in a hole that we're 
concerned about, given how wide open this bill has left it to 
this mandated program.
    Mr. JOHNSON. No, I agree with you. I think they would get 
out. Mr. Kirsch, you cite the New York Times article as 
evidence that Americans are completely sold on a government-run 
health care plan. However, that same New York Times poll also 
found 63 percent are concerned their own health care would get 
worse under a government-run system. Sixty-eight percent 
believe a government-run system would limit their access to 
treatment and quality care, and 53 percent are concerned they 
would have to give up their own doctor under a government-run 
system. Sometimes with polls you got to get past the first 
question to find a real answer, and I wonder if you would 
comment on that.
    Mr. KIRSCH. I would love to. In fact, the whole thing about 
a poll is if you'd ask it as a negative question, you'll get 
that answer. So we actually did a poll back in January to find 
out what would happen in a real debate, and I think you'll see 
from the questions we asked, we didn't pull our punches. So let 
me give you some examples of the questions we asked. The first 
one was, ``a public health insurance plan will force people 
into lower quality care, including long waiting times and 
rationing of care,'' which is the argument that we hear 
oftentimes from folks on your side of the aisle, versus ``a 
public health insurance plan that would provide people the 
choice of an affordable plan that includes at least the same 
benefits as Members of Congress get, including a wide choice of 
doctors.'' That argument wins by 38 points.
    Let me go on. We hear this cost shifting argument: ``Like 
Medicare and Medicaid, the new public health insurance plan 
will reimburse doctors and hospitals at much lower rates, 
causing many doctors and hospitals to shift costs to people who 
buy private insurance.'' The other argument was: ``A public 
health insurance plan will be able to control overall health 
care costs for everyone by using its purchasing power, like the 
Veterans Administration does now, to drive competition and 
lower the prices paid for health care service and prescription 
drugs.'' People favor that argument by 45 points.
    Let me do one more that we also hear from people who oppose 
the plan make. ``Establishing a government health insurance 
plan will mean that millions of people will lose their private 
health insurance coverage because employers will drop their 
private insurance and dump people on the public plan,'' an 
argument that Members on your side of the aisle have made 
oftentimes today, versus the argument ``under the current 
system, millions of people are already losing their health 
coverage every year, having a choice of public or private 
health insurance plans will make sure that Americans always 
have an option for quality, affordable health care.'' Americans 
side with that argument by 47 points.
    So we did this poll to find out in a real debate in which 
Americans hear both sides of the arguments, where will people 
come down. We thought we might win these by a little, may lose 
some of them. We won every one of them, mostly 30 to 40, almost 
50 points. And so the first question is what Americans want 
choice isn't complicated. People like a choice of a public or 
private health insurance option, and the choice should not be a 
Member of Congress' choice. It should be a choice that each 
person makes.
    Mr. JOHNSON. Well, I think you got the Member of Congress 
thing backward. We don't get free health care by any stretch of 
the imagination.
    Mr. KIRSCH. This isn't free. People have to pay based on 
what they can afford.
    Mr. JOHNSON. Thank you, Mr. Chairman. We're out of time. I 
yield back.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. Thank you all for 
waiting, because we need to hear from you, the things you've 
got to tell us. But particularly Mr. Draper. These other folks 
are here representing organizations and they're paid for 
sitting here and so forth, but yours doesn't look like quite 
that circumstance, and----
    Mr. DRAPER. Our lobbying budget is very small.
    Mr. MCDERMOTT. And before I came back to Washington this 
last week, I stopped and talked to two people I know in Seattle 
who run small businesses. One is ``Cupcake Royale,'' a woman 
named Jody Hall, who was down at the White House testifying on 
behalf of small business, and the other one was Molly Moon, who 
runs an ice cream store. And they have employees about like 
you, 10, 12, 14 people.
    And what I'm interested in hearing from you is what is a 
small business? How should we do that? Should it be by volume 
of people that they employ, or should it be on the basis of 
their income, or what would you use? And then second, I see in 
your testimony you say the most basic coverage makes up 8 
percent of our gross payroll. So is that too much to ask of a 
small business? Now I know you don't represent the thousands 
and thousands of small businesses, but I'd like to hear how you 
decided that you could spend up to 8 percent of your payroll on 
health care.
    Mr. DRAPER. I mean, we didn't have much of a choice on 
spending up to 8 percent of our payroll on health care, because 
that's the cheapest plans we can get. I think one thing is that 
somebody who's in their twenties kind of looks at employer-
sponsored health care as kind of old fashioned and that you're 
tied to this company for life. You need to stay with them. If 
you leave, you have to try to get COBRA. Once you leave, you 
have to try to get another company to pick up your health care.
    So it makes it kind of inefficient if you want to move 
around and kind of do your own thing. And so the employees at 
SMASH didn't want us to even shop for a health care plan 
through the company. Everybody wanted individual plans that 
then the company subsidizes. So everyone is in their twenties, 
single, and their individual plan is about $200 a month, which 
comes out to about 8 percent of payroll.
    Mr. MCDERMOTT. What does that cover? Could you give me----
    Mr. DRAPER. An individual plan through Wellmark under Blue 
Cross and Blue Shield is just really rudimentary. It's just 
basic. It's not dental, it's not vision. It's pretty high 
deductible. I think they say you get one free doctor's visit, 
but it costs $10. And the copays kind of depend on what you get 
done. So, if I go in for sinus surgery which was $12,000, you 
end up paying about $1,500 of that surgery, which is only 10 
percent, but when the national savings rate is below zero, I 
don't think the average person has $1,500 laying around. As a 
small businessperson, I have just money coming out my ears, so 
it's not a problem for me.
    One of the things that I look at is the difficult thing and 
why I say it fluctuates between 8 percent and 24 percent is 
that there are the hidden costs, and if you actually use care, 
you have to pay for it. And so even if you're paying $200 a 
month, if you have several problems that year, you may pay even 
more in actual hospital bills than you do in premiums. And so 
our company has agreed to pay those bills for our employees. 
Just because I know that somebody has to pay them. And if one 
of the employees is in financial trouble because of bills, that 
puts the whole company in trouble. I mean, they're not easily 
replaceable, so if one person goes bankrupt we can just get rid 
of them and bring in somebody else.
    I don't have a problem with the 8 percent if I knew that 
then they could go--if I paid 8 percent, I'd be fine with it if 
I knew that they could get full coverage at an affordable price 
through the exchange.
    Mr. MCDERMOTT. So you're saying that if they--since you're 
a small business and you I think you say you have 12 people----
    Mr. DRAPER. Yeah.
    Mr. MCDERMOTT. So if we set the limit at 20 and said 
anybody under 20 is a small business, that those people could 
go into the exchange and get their insurance and the subsidies 
that might go with that, and you would pay 8 percent, seems 
like a reasonable deal to you?
    Mr. DRAPER. Yeah. I mean, that would be fine with me just 
because our costs are set. I wouldn't be fine with it if, you 
know, it's about $600 for an individual--for a family policy 
through the individual market. So if I was paying 8 percent and 
then they went onto the exchange to get a family policy and it 
was the same price as it is now, that would irritate me. So 
it's a little tough to see exactly--it's hard to compare in a 
hypothetical situation. But if paying 8 percent did lead to a 
drop in health care prices, I would support that. And I don't 
think 8 percent is necessarily too much to ask, and I don't 
think it's too much of a responsibility for small business just 
for the fact that I already pay for my employees' withholding 
tax and unemployment tax. If you guys came in the shop, I would 
pay the sales tax you owed. These are just some of the 
responsibilities you have to deal with when being in a small 
business and being at the top of the ladder. And I don't mind 
paying taxes if they're going to something efficient, I know 
they have a purpose. It's only the taxes that are unnecessary, 
like what I pay now, which is for private health care, but I'm 
also paying taxes subsidizing people without health care to go 
to the ER.
    Mr. MCDERMOTT. Could I stop you? I see my time is almost 
up. I want to ask one question. Some people are saying that we 
should not make a small business five people if the five people 
have incomes of $100,000, a small lobbying firm here in D.C., 
they shouldn't be eligible for the small business thing, how 
much do you pay--what's your average salary in your business?
    Mr. DRAPER. It probably comes out to $45,000 a year. It's a 
base of $38,000 plus bonus, so that's kind of what it averages 
out to. But then there's lower paid employees that are just 
hourly. If they're one of our employees, they would essentially 
be in the mix. So I think you're pretty much going to have to 
do something that's a mix of number of employees versus 
payroll. You don't want people just starting sham fake 
businesses so they can get out of getting health care and just 
pay an 8 percent fee. But I think if you do a mix of employees 
and payroll, it should be pretty simple.
    Mr. MCDERMOTT. Thank you very much.
    Chairman RANGEL. Mr. Ryan.
    Mr. RYAN. Thank you, Mr. Chairman. Ms. Hansen, let me ask 
you--you took Bob Novelli's job or Bill Novelli's job, or?
    Ms. HANSEN. No. Actually, I'm a volunteer. The President's 
role in the organization----
    Mr. RYAN. Gotcha. Gotcha. Okay. I was just trying to 
remember. Bill retired, did he not?
    Ms. HANSEN. He went to Georgetown.
    Mr. RYAN. Yeah. Right. Great. He's a good guy. I want to 
ask you about AARP, your position on these issues, and just 
sort of your sense of the future. I've been very impressed with 
the--I think you called it your Divided We Fail campaign with 
the elephant and the donkey.
    As you know, the current unfunded liability for Medicare is 
$38 trillion. Medicaid, which does affect the over 65 
population, it's a tougher number to crunch because of the 
State involvement and Federal--some estimates come in at about 
$20 trillion of unfunded liability. Are you concerned that 
we're creating a new entitlement here that will rack up a 
similar unfunded liability?
    Ms. HANSEN. Well, I think framing it as a new entitlement 
as compared to looking at the basis of coverage----
    Mr. RYAN. You don't see this as a new entitlement?
    Ms. HANSEN. I think it's a choice of a health care program 
that would cover people. So I personally, from my role, am not 
calling it an entitlement. I wouldn't call it that personally.
    Mr. RYAN. Just to say, if you qualify for it and you get 
it, that's an entitlement. Such as if you're under 400 percent 
of poverty, you go in the exchange, you get the subsidy. 
Therefore it is by definition an entitlement. Just for the 
record.
    Ms. HANSEN. Well, I think there's--my understanding, and I 
may be wrong, but I think that people are actually going to pay 
for that as well, so it's not just a free--it's only if you----
    Mr. RYAN. Well, people on Medicare pay part of their 
premiums as well, so--and there's copays in Medicaid. So, yeah, 
we're not saying it's 100 percent, but it's subsidized. So the 
point I'm trying to ask is, is AARP concerned because they had 
this great impressive campaign that we have pending insolvency 
of Medicare and Social Security, are they not concerned that 
we're adding to the list of new programs and liabilities?
    Ms. HANSEN. I think AARP is concerned about solvency and 
economic stability for the future, yes, we are concerned about 
that, because besides the fact that our members are 50 and 
above, our members are parents and grandparents and great 
grandparents. So we are very much concerned about economic 
security for the future of this country.
    Mr. RYAN. So every year we delay fixing just Medicare and 
Social Security, we go about 4 trillion, 3 to 4 trillion in 
debt to those programs, the sooner we act, the more likely we 
can prevent those in and near retirement from having effects to 
their benefits. Most of the plans that some of us on this side 
of the aisle have put out plans to make those programs solvent. 
They don't affect people over the age of 55. The more delay 
that occurs, the less likely changes will not affect people 
over the age of 55. So my--let me ask it this way. If it is 
clear that this new benefit creates a new unfunded liability 
for the Federal Government on top of the already existing ones 
which AARP has put an impressive campaign out there to fix, 
will AARP come out against this and have a problem with this?
    Ms. HANSEN. No. We're on record for wanting some real 
change in the existing program itself.
    Mr. RYAN. Are you on record for the public plan?
    Ms. HANSEN. We--the board of directors actually met within 
the past 2 weeks before any document was seen. We came up with 
five core principles, and the principles, I'll read them----
    Mr. RYAN. Don't go through all of them, no offense, because 
I've got a 5 minute thing. Does this bill satisfy all of your 
five principles?
    Ms. HANSEN. As it's come out right now, the plan that the--
--
    Mr. RYAN. The Tri-Comm plan.
    Ms. HANSEN. The Tri-Comm does seem to house the core 
principles.
    Mr. RYAN. So as far as you know, AARP, this bill satisfies 
your principles?
    Ms. HANSEN. We're just saying--we're saying elements of the 
bill certainly are supportive of the issues we care about.
    Mr. RYAN. Mr. Johnson, real quick. If the actuaries are 
right, and when I say the actuaries, Lewin, CBO, HSI, all of 
them from varying degrees show us slippage, meaning private 
sector dumps some people on the public plan, 8 percent payroll 
tax. That means a payroll tax eventually goes to 23 percent, at 
least for those firms that make this decision, as Mr. Draper 
mentioned he would make. What do you think the effects of a 23 
percent payroll tax on labor in America are going to be to our 
economy?
    Mr. RANDEL JOHNSON. Well, it's--it would be devastating. 
We're already paying of course the tax and we have this 8 
percent proposal, and 23 percent, I mean, that's a 23 percent 
jump on wages that you have to pay with no attendant increase 
in productivity. So that will result in lower job growth or 
elimination of jobs because you've got to make up for that loss 
at the bottom line somehow otherwise. I mean, it's pretty 
elementary economics I think, Congressman.
    Mr. RYAN. Thank you. My time has expired.
    Chairman RANGEL. Mr. Becerra of California.
    Mr. BECERRA. Thank you, Mr. Chairman, and to all the 
panelists, thank you for your great patience and all of your 
very important testimony. I'd like to begin by asking a little 
bit about this whole notion about what will happen if we have 
this new marketplace for options.
    Mr. Draper, you're a businessman. You have folks who work 
for you. You mentioned how you thought you could live with a 
plan that worked to reduce costs so that you could then as an 
employer feel comfortable making some contributions. Let me ask 
a question. Would it be your intention to dump your employees 
into any particular plan?
    Mr. DRAPER. What do you mean, like steer them toward one 
particular plan?
    Mr. BECERRA. People continue to use this word ``dump'' as 
if we're going to take a flock of American consumers and just 
drop them onto a particular plan in a marketplace where, my 
understanding is, the choice will be the consumer's, not the 
employer's, not the health insurance company's choice, not even 
a public insurance plan's choice, but who it will serve. The 
choice will be that of the consumer, your employee. So let's 
say you decide you no longer want to offer health insurance, 
first I would ask if--because it sounded to me like you would 
be willing to provide some contribution, but if you decided not 
to, do you think you would want to then dump your employees 
onto any particular plan?
    Mr. DRAPER. I mean, not really. We already have the 
cheapest plan we can get, so I'm not sure what other plan we 
would dump them onto.
    Mr. BECERRA. And the point here is that, one, you're 
willing to make a contribution, so you're willing to try to 
help them get a plan. But the way this new program would work 
is that your contribution would make it possible for your 
employees then, if you were to not offer a plan directly, to 
take your contribution, use it to then be able to go into that 
marketplace and shop for any number of plans that would be out 
there, a competitive menu of plans that would be provided by 
private insurers and a public insurance option that would be 
out there. And whether somebody would attempt to dump employees 
into this new marketplace, ultimately the choice wouldn't be 
the employer's about where they would end up.
    Mr. DRAPER. Yeah, that's true.
    Mr. BECERRA. The choice would be the employee's or the 
consumer's about which plan they would select.
    Mr. DRAPER. Yeah. And, I mean, I think it doesn't--it 
wouldn't have as much of an impact on us, because we already 
buy individual policies for the plans. And so we already do 
what the exchange is doing, and that they get to pick out 
whatever individual plan that they want. I think one of the 
biggest problems you have now is that it's kind of like when I 
watch old people at Walgreen's trying to enlarge their own 
photos, in that it seems easier because, well, you have control 
over it, but they don't know how to operate the machines. It 
saves Walgreen's some money because they don't have to do it 
anymore. But it takes them longer and gets them a worse product 
if they do it themselves.
    I don't read plans professionally. I mean, it's not what I 
sit around doing. Most of my time is spent thinking how can I 
generate more money to send in taxes to the Federal Government. 
And I think that's probably what you guys want me to be doing 
rather than spending time sifting through plans.
    The problem we have now is that they're written so 
complicated that it's hard to understand exactly what your 
deductibles are. So I wouldn't want, you know, just my 
employees to be shopping through the complicated plans we have 
now in the same way I wouldn't want the employees investing my 
money for me. It's just--I don't have faith that they'll be 
able to do it. My dad is an insurance attorney, so he actually 
reads through our plans for us, but not having that kind of 
crutch makes it really hard. So I think on the one hand you 
need the exchange to really simplify, like people were saying 
earlier, have a standard for how to compare plans one to the 
other, which we don't have now.
    Mr. BECERRA. Well, the good thing is, it sounds like what 
you do is you give your employees a choice of what plan they 
want to take.
    Mr. DRAPER. Yeah. They can get any plan they want, and we 
just, through my dad's recommendations, we'll recommend to them 
this one is a good plan.
    Mr. BECERRA. And you have goals this health care reform 
proposal would in essence build on that model that you 
described----
    Mr. DRAPER. Yeah. I think it matches up with what I said 
earlier. Most young people want to be able to buy a plan that's 
not tied to a company. They want to just buy a plan that they 
can take with them for life. And so it appeals to us more less 
than if we had a huge company plan. It would be more of a 
shift, but right now it's not that big of a deal for us.
    Mr. BECERRA. Thank you. Mr. Shea, I was wondering if you 
could comment on the last series of comment and answer that was 
given about a job loss that might occur if we were to move 
toward a more cost-effective form of health care.
    Mr. SHEA. Well, the ball game here is cost. And if we don't 
figure out a way, with all due respect, if you don't figure out 
a way with our health control costs, we can't do any of this 
stuff. That's really what we've got to focus on. But in terms 
of sort of what people could afford, you know, we have probably 
5, 6, 7 million people who are in multi-employer plans. These 
are people who work in the culinary area and transportation and 
janitorial and building and all kinds of trades. You know, in 
the building trades, I looked at this. The vast majority of 
those employers who pay into these funds and provide good 
benefits have under 10 employees.
    Now the problem for those employers is they're providing 
good wages and good benefits, and they have to compete against 
people who don't provide benefits. And that's the economic 
distortion that having everybody pay into would play. But then 
the other thing is, just in terms of I just think you need to 
simplify this, at least for my mind. Most employers now provide 
coverage. They want--all employers want to, I think, most do. 
Those who don't are either in the lobbying firm that doesn't 
want to pay even though they make a lot of money, and those 
people ought to pay.
    And then there's the people who are probably small, but 
certainly low wage. And in your plan, as I read it, you're 
going to provide substantial subsidies, tax system subsidies, 
for those people. So it seems like you've asked them to do 
something but you've given them support in being able to do it. 
And you eliminate this economic distortion.
    Mr. BECERRA. Thank you very much. Thank you, Mr. Chairman.
    Chairman RANGEL. Mr. Nunes for 5 minutes.
    Mr. NUNES. Thank you, Mr. Chairman. I have just a quick 
question by show of hands. Of the six of you that are up there 
at the dais now, how many of you have health care coverage, 
health insurance? You all--all six of you have health 
insurance. How many of you would like to trade your insurance 
in for Medicaid? Anyone?
    Mr. DRAPER. I don't know the details on Medicaid. So it's 
just hard for me to say that I would trade for Medicaid, 
because I don't know how it works.
    Mr. NUNES. I'm pretty sure that you probably wouldn't have 
a lot of constituents that are on Medicaid.
    Mr. KIRSCH. Actually, in New York, Medicaid coverage is 
better than private coverage.
    Mr. NUNES. In California it's not. But for the record, none 
of you----
    Mr. KIRSCH. But it is in New York.
    Mr. NUNES. For the record, none of you wanted to trade in 
your own health insurance for Medicaid.
    Mr. KIRSCH. I would actually have no problems. Given New 
York, given the excellent benefits and coverage in New York in 
Medicaid would be better, and I actually get coverage now 
through a State employee plan that my wife's part of.
    Mr. NUNES. So one of you would like to trade in your health 
insurance for Medicaid. Five of you would not. What was that, 
Mr. Draper?
    Mr. DRAPER. I'd be willing to try.
    Mr. NUNES. You'd be willing to try? You probably wouldn't 
have to try for very long.
    Mr. DRAPER. Put me down on the record as a maybe.
    Mr. NUNES. Okay.
    [Laughter.]
    Mr. NUNES. We'll have you down as a maybe. So that leaves 
four of you who don't want to, of which I think three of the 
four are supporting the plan, which, you know, basically what 
we're going to do with this plan is we're going to put more 
Americans onto Medicaid. And as you may or may not know, 
Medicaid in California is completely imploding, and there are 
specialists who will not see Medicaid patients, and I haven't 
found a constituent yet in my district that likes being on 
Medicaid.
    And so I can't for the life of me figure out why if we're 
doing so-called comprehensive reform on health care that we are 
leaving, not only leaving Medicaid alone, which is a $20 
trillion unfunded mandate, but why we would be expanding 
Medicaid to put more and more Americans onto Medicaid.
    Mr. Draper, you said that you had--your business last year 
was a million dollar business.
    Mr. DRAPER. Yeah. This year it will be a million dollars. 
Last year it was probably $820,000.
    Mr. NUNES. And you had--you said you had 43 employees 
today?
    Mr. DRAPER. No, we have 12.
    Mr. NUNES. Oh, you have 12 employees? Okay. I misunderstood 
you. Okay. So of the 12 employees, how many--do you offer 
health care coverage to all 12?
    Mr. DRAPER. Yes, we do now.
    Mr. NUNES. And of those--and, what, just a private plan?
    Mr. DRAPER. Yeah. They each get an individual plan that 
they can purchase and then the company pays them back for it, 
and we also pay for any bills beyond their insurance.
    Mr. NUNES. So 100 percent, there's no--they don't pay 
anything on their own? You pay 100 percent of the health care 
coverage?
    Mr. DRAPER. Yes.
    Mr. NUNES. Okay. So of that, you know, one of the plans 
that myself and Mr. Ryan have talked about is actually giving 
refundable upfront tax credit for your employees to have so 
that they'd be able to go out and purchase health care on their 
own and get to the question that you asked about or the 
comment, you talked about portability. You would like to have 
portability coverage for your employees so that if they left 
your work, they'd be able to go somewhere else.
    Mr. DRAPER. Yeah.
    Mr. NUNES. So, I mean, do you see a problem with the plan 
that some of the Republicans have of giving basically a 
refundable upfront tax credit to your employees to go out and 
choose their own health care plan?
    Mr. DRAPER. Yeah, I mean, I've said before that I don't see 
a problem with regulation, but I just don't think that only 
regulation is going to help us. When I talked to Grassley 
yesterday, and they said, what we really want to do is just 
regulate. A headline in my mind said, from the people who 
brought you bank regulation comes health care regulation. And I 
worry that if it's only regulation that you'll have the people 
from the insurance companies regulating themselves and things 
won't actually get that much better. And it's tricky for me to 
see how just regulation is going to make rates go down.
    Mr. NUNES. But we're--well, our plan calls for----
    Mr. DRAPER. I would support a tax break, but I don't 
understand if that's actually going to get them any better 
health care.
    Mr. NUNES. Well, for a family of four, for example, under 
our plan, we'd have--they'd get $5,700. And if they were 
making--I don't know what your employees' average wage is, but 
let's say that you had an employee that was making less than 
$20,000 a year. They'd get $11,000 a year to go out and pick 
their own health plan, any health plan they want. And I would 
imagine that $11,000, is that more than the plan that you offer 
today?
    Mr. DRAPER. Per employee? Just a second. Let me think.
    Mr. NUNES. It probably is.
    Mr. DRAPER. Yeah, it would be more than the average.
    Mr. NUNES. So one of the things that I'd like----
    Mr. DRAPER. If you were going to get a family plan, though, 
it would be about $700 a month.
    Mr. NUNES. So--yeah. So less--yeah. Under our plan, we 
would give the person in your company that's making less than 
$20,000 a year, $11,000 to go get their own health plan, which 
would be better than the health plan that you offer. And I 
appreciate--I mean, I think it's good that you came here to 
testify, and I appreciate your openness and honesty. But the 
one thing that we want to make sure we do and try to get across 
to the American people is that pushing more people to 
government-run health care is not necessary. We can have 
universal coverage for all Americans if we're willing just to 
take time and to come up I think with better legislation, Mr. 
Chairman, than the current legislation that we have now. But I 
thank you for having the hearing.
    Chairman RANGEL. The Chair recognizes Mr. Doggett. And 
before any of you get in trouble, don't apply for Medicaid, 
because it's for the poor. And I'd like to assume that you've 
beaten that barrier, so Medicaid won't be available for any of 
you, I hope. Let me call Mr. Doggett and thank him in advance 
for the great contributions he's made to the Committee on 
health care.
    Mr. DOGGETT. Thank you, Mr. Chairman, and thanks to each of 
our witnesses for the insights you've offered. Mr. Draper, I 
had a small businessperson from Austin, Texas contact me and 
say the bureaucracy of the health insurance companies makes the 
government look efficient. As a small businessman, I want to 
make it clear that I totally disagree with the United States 
Chamber of Commerce. Something has to be done. Health insurance 
is the biggest expense I have next to payroll. I've not been 
able to give raises for several years because the money 
budgeted for raises was used up on higher health insurance 
premiums.
    I tried to let my staff know that the $200 a month raise 
that they would get was taken by Blue Cross. Is that similar to 
the experience that you hear about? That was from Mark Siefken 
in Austin, did you hear that from some of the folks in your 
area?
    Mr. DRAPER. Yeah. For us it comes out to about a 1 percent 
raise for everybody every year that goes to health insurance. 
So, it's kind of a good news/bad news situation. The good news, 
you got a raise. The bad news, it goes to Wellmark. And for us, 
though, the only tough spot that we're in is that everybody we 
employ is under the age of 27 and single. And so right now, 
even an inefficient system is still pretty affordable for us, 
because we don't have much demand.
    But within the next 6 years as, you know, everyone starts a 
family, then our rates will go up from about 8 percent to 26 
percent if we are shopping in the same market that we're in, 
and we'll have to totally redo again to figure out, well, we 
can't stay in the individual market. We have to go through 
somebody else, and you spend time looking for that. And so 
that's kind of the tough spot that we're in. And companies that 
do employ people who are older with families are the ones that 
have it a lot worse than we do.
    Mr. DOGGETT. And rather than rely on some State regulatory 
agency that may well be owned by the regulated, you believe in 
the competitive system and that one type of competition that 
should be there is the option for your employees to look at a 
public plan?
    Mr. DRAPER. Yeah. And, I mean, I look at things a little 
differently coming from Iowa in that almost everybody in Iowa 
goes to public schools like I did, you know, government runs 
efficiently. When Cedar Rapids flooded, everything's been more 
or less cleaned up and gotten back to normal. So there isn't 
the serious antipathy to a government-run plan as there may be 
on the east coast. And so for me, I can't imagine how would you 
get a company--anything that runs as inefficiently as the 
health care company, even the government.
    Mr. DOGGETT. It sounds like my constituent in Austin. And 
it is amazing that some of the people that are always up here 
criticizing how inefficient government is are so fearful of an 
efficient plan of the type we've had with Medicare that has 
inspired confidence with millions of people across this 
country.
    Ms. Hansen, I know you're very familiar with, and I 
appreciate the support AARP has offered. You mention it in your 
testimony, for legislation that I have advanced last Congress 
and again this Congress to try to help the poorest of our 
seniors with their prescription drug bills. Isn't it correct 
that we still have several million seniors who are not able to 
get the full access to prescription drugs they need under the 
Extra Help program?
    Ms. HANSEN. There are many people, millions of people who 
haven't taken advantage of it. So it's an opportunity for us to 
continue to make sure that people enter the program they are 
qualified for.
    Mr. DOGGETT. And to the extent we work from the bottom up, 
from helping those most in need with extra help, we actually 
can take steps to close the donut hole in coverage there, 
because the more people we cover through Extra Help, the less 
they're exposed to that donut hole.
    Ms. HANSEN. Without a doubt. I think it's a real 
opportunity to help that fragile group. But at the same time, 
as I mentioned earlier, since our membership is everyone, the 
middle-income population is hurting quite a bit, given the fact 
that Medicare beneficiaries right now, as you know, pay 30 
percent of their revenues, and that's high.
    Mr. DOGGETT. Let me just ask Mr. Shea one question here as 
my time expires. The notion that we ought to tax employer-
provided health insurance to pay for the serious shortcomings 
in our system seems to me to be a tax on the type of insurance 
coverage that every American would want. That the policies that 
would be taxed are those that might provide dental coverage or 
have lower copays, that type of thing. Is that the case, that 
these policies that some over in the Senate propose to levy a 
tax on, are good policies that most Americans would want?
    Mr. SHEA. They certainly are. And as I said before, the 
price of those policies varies by the health condition of the 
group or the age of the group or where the group is. And so 
it's--how you apply a tax across that is unfathomable to me.
    But the other point I would make here is, you know, if you 
want to throw a hand grenade into the discussion in the 
American public about health reform, you know, the figures from 
some of the Washington Post stuff this morning, you go out and 
advertise that what you're going to do to solve this problem, 
this problem is high health costs. That's how people define the 
health care problem around the country. They can't afford it 
even if they have insurance. If you go out and tell them our 
solution to the high health cost problem is we're going to tax 
your benefits, they--I don't know what they're going to do in 
the voting booth, but they certainly would look at you like 
you've got to be crazy.
    Mr. DOGGETT. I couldn't agree with you more. Thank you. 
Thank you, Mr. Chairman.
    Chairman RANGEL. The Chair would like to recognize Ms. 
Brown-Waite.
    Ms. BROWN-WAITE. Thank you, Mr. Chair. I would like to 
address Ms. Hansen for a moment. First of all, my name is Ginny 
Brown-Waite. I often get called Jennie. So when I saw your 
name, I thought now this is a woman I can relate to.
    I just have a couple of questions. I'm concerned that AARP 
may not be doing its homework, and let me tell you why. As you 
know, as you may know, I have the highest number of people on 
Medicare of any Member of Congress. During the stimulus bill, 
we realized that the money that was going for health IT in 
hospitals was actually coming from the Medicare trust fund Part 
A. Are you aware of that?
    Ms. HANSEN. No, not directly as to where it's coming from. 
I thought the stimulus was an add-on.
    Ms. BROWN-WAITE. No. The money for the health--for the 
health IT for hospitals came from the hospital trust fund. I 
contacted AARP and alerted them to this, and first they denied 
it. And then they called back and acknowledged it. But they 
said we're still supporting the bill.
    I think that Americans are beginning to wonder about AARP 
when they would support things that obviously raid a trust 
fund, namely Part A, for the hospitals. That is I believe 
scheduled to be paying out more than it takes in before the 
raid, it was scheduled for 2017. When I talk to AARP folks at 
home, they were appalled at this.
    So I have to ask the question, and bear in mind, not only 
do I have those who are 65 on Medicare, but I also have a lot 
of people who are 55 to 64 who fall in that difficult-to-get 
insurance gap. I could understand AARP supporting a bill that 
helped them that didn't bankrupt the country.
    But I have to ask, why would AARP be interested in making 
sure that, for example, those under 25 are covered and those 
who may be illegal aliens, I just have--I think that the 
American public is starting to question AARP and where they're 
going. So I really would like to hear from you on that, and 
then I'd also like to ask you about Medicare Advantage.
    Ms. HANSEN. Yes. If I could answer the first question. I 
think we have been on record as supporting health information 
technology, and then we have actually had the support of all of 
our colleagues under the Divided We Fail banner. And I think--
I'm a nurse by background, and so I also have run a program 
that has used IT on behalf of our elders. And one of the things 
that researchers show that Medicare beneficiaries, about one in 
five in a given year will likely go to a hospital, to your 
point that hospital care is critical. But oftentimes it's 
because medications are not well used or they come back from a 
hospital within 30 days. A lot of it is about information that 
was not appropriately recorded or transferred correctly. And so 
what has been shown, for example, in the Veterans Hospital, 
using IT, that their medication error rate is only 1 percent.
    Ms. BROWN-WAITE. Correct. I don't think we disagree about 
the use of IT. I think we disagree about should AARP have 
supported something that will cause the trust fund Part A to 
become insolvent even sooner.
    Ms. HANSEN. Right.
    Ms. BROWN-WAITE. I mean, I don't think anybody questions 
health care IT.
    Ms. HANSEN. Right. But I think my followup point is, when 
you minimize mistakes through IT, they don't have to go to the 
hospital, and therefore you save money actually on Part A just 
because the mitigation of unnecessary hospitalization saves 
money in the trust fund.
    Ms. BROWN-WAITE. It may very well, but initially, the cost, 
the total $16 billion, came out of the trust fund. So when I 
tell seniors this at home, they are appalled that AARP would 
support something such as this. This is a very comprehensive 
bill, and I think that AARP needs to be very, very cautious 
what they are supporting. There are many good parts to the 
proposal, the 800-some page proposal. There are some good parts 
to it, and I think we need to work together in a bipartisan 
manner to make sure that, you know, what eventually we will all 
be voting on is something that is going to benefit the 
uninsured.
    I have a question, a quick question, though, about the 
Medicare Advantage plan. According to CBO proposals, the 
proposal to cut Medicare Advantage payments by $160 billion, as 
this bill would do, would result in about 3 million seniors 
being forced out of Medicare Advantage plans. I know that AARP 
even has a Medicare Advantage plan, and there's a very high 
satisfaction level. Do you have any concerns about how AARP 
members in various Medicare Advantage plans will be affected by 
this bill, including those who may be in your program?
    Chairman RANGEL. Response in mail.
    Ms. HANSEN. I will do that. Thank you.
    Chairman RANGEL. The Chair recognizes Mr. Blumenauer.
    Mr. BLUMENAUER. Thank you, Mr. Chairman. I'm sorry Mr. 
Nunes is not here. I'm mystified by his line of inquiry to 
people asking people with insurance whether they would like to 
sign up for a program designed for poor people without 
insurance. Now, admittedly, there are some States that--New 
York--that have a fairly generous program. But it seems to me 
to be sort of a disingenuous question. Would you like to have 
the insurance program that we have for the poorest people in 
America, people who couldn't afford private insurance, people 
who would have difficulty even in the subsidized form that 
we're talking about here, and the Republicans offering a tax 
credit that would not help them at all? It's bizarre. So it 
seems to me that we ought to--I'd love to have a further 
discussion of this Committee about the merits of Medicaid for 
poor people and compare how they would be treated under our 
program where it would be expanded so they wouldn't be left 
out, and over time if they were able, they could transition 
into the exchange. But it is a false choice to somehow ask you 
with private insurance if you want to have insurance that was 
designed for the poorest people in the United States who have 
no other access. But he's not here, so I----
    Mr. NUNES. Actually, I am here, if you'd like to----
    Mr. BLUMENAUER. Good. Then I look forward at some point----
    Mr. NUNES. If you'd like to yield.
    Mr. BLUMENAUER [continuing]. Having this debate when you 
have time to yield to me. I wanted to just sort of put that as 
part of the record.
    Mr. NUNES. So you don't want to yield to me to answer your 
question?
    Mr. BLUMENAUER. I don't have time now. I didn't see you 
here, and I didn't want to interrupt you while you were 
questioning. I'd like to finish my line of inquiry. But I'll 
come back and we can debate this.
    Chairman RANGEL. Well, I will give you time to explain why 
you asked them whether or not----
    Mr. BLUMENAUER. Okay. Thank you. Then I will yield.
    Chairman RANGEL [continuing]. Program for the poor.
    Mr. BLUMENAUER. Okay. I will yield. Mr. Nunes, do you want 
to ask me a question?
    Chairman RANGEL. Why did you ask them whether or not they 
would want to join a poverty program?
    Mr. NUNES. Because the bill that you guys have introduced, 
Mr. Chairman, expands Medicaid. And in my opinion----
    Chairman RANGEL. I'm asking, why would you ask these people 
who are not poor?
    Mr. NUNES. Because they are here supporting the underlying 
bill, and they are supporting putting more people to Medicaid.
    Chairman RANGEL. They are. Poor folks.
    Mr. NUNES. And it is my goal in this country, I don't 
believe that poor folks in this country need to have Medicaid.
    Chairman RANGEL. That's good. Okay.
    Mr. NUNES. I think that poor people in this country should 
have universal access to coverage. And we have a plan that we'd 
love to share with you that would give them access to that.
    Chairman RANGEL. I understand. And I want you to understand 
his question was that he does not believe that poor people 
should be entitled to Medicaid. What that has to do with you 
who are not poor, I don't know, but I hope you got an answer, 
and this answer will not be taken out of your time. You may 
proceed.
    Mr. BLUMENAUER. Thank you, Mr. Chairman. And I do look 
forward to a spirited debate about how poor people are going to 
be helped with a tax credit, how poor people are going to be 
helped to jump into the private market. In times past, the 
reason we've had Medicaid is because the private market 
couldn't deal with them. It's not going to be any cheaper. In 
fact, one of the reasons that we restricted a little bit under 
this plan is that it will be a little less expensive over time. 
But I welcome that debate with my Republican friends about 
their vision of taking away Medicaid and giving a tax credit or 
forcing them into a private market that they can't afford now. 
I welcome it.
    I do have one question for Ms. Hansen. You didn't get to it 
in your testimony. We both are very interested in getting more 
efficiency out of the Medicare system now, and in your 
testimony you talk about a transitional benefit and what that 
could do. Would you care to make a comment about the 
transitional benefit that you didn't have time to refer to in 
your testimony?
    Ms. HANSEN. Thank you, Congressman Blumenauer. We thank you 
as well as Congressman Boustany for jointly supporting this, 
the Medicare transition benefit, and that is it actually 
relates to the Congresswoman's question about hospital care. 
And so I'd like to tie that back together, that the 
efficiencies of doing things right and correctly the first time 
with giving some support to people upon leaving with evidence, 
there is researched information published in journals showing 
that there are cost savings to be able to be incurred in which 
case the patient, the elder would not have an error happen 
after a hospitalization because somebody would be there.
    Generally we're speaking about a nurse in this research, 
that the cost savings to help people take their medications 
safely and know what to do, allows them to then perhaps not 
become a statistic, which is shown in Medicare data that within 
30 days one out of five people goes back into the hospital. 
This particular piece of legislation would help address that, 
and I also would then come back to say that this makes such a 
big difference on both Part A, Part B and Part D. Savings would 
be incurred.
    Mr. BLUMENAUER. Thank you. Mr. Chairman, I appreciate your 
courtesy. I would hope that we would be able to look, one of 
the areas that I hope we can strengthen in our draft is the 
transitional benefit. We have some legislation that we've 
introduced that I personally think we should look at, because 
we may be able to strengthen transitional benefit in the draft. 
I think it would save more money over time and help people that 
we want to help. Thank you. And I yield back.
    Chairman RANGEL. Mr. Thompson.
    Mr. THOMPSON. Thank you, Mr. Chairman. I appreciate the 
opportunity to question the witnesses. I'd like to talk a 
minute about, or ask you some questions about the idea of 
preventive health care. I'm one who believes that this is very, 
very important and that it will go a long way in accomplishing 
what many refer to as bending the cost curve of health care.
    And so, to that end, I'd like to know if you think it's 
important that we have a minimum benefit standard in order to 
achieve good coverage and should preventive health care be part 
of any minimum coverage we insist that these plans offer.
    Mr. KIRSCH. Well, certainly, yes. And one of the really 
good things about the benefit package you've done, is you have 
prevention with no out-of-pocket costs. One of the encouraging 
things, actually, that many large businesses have done, is move 
to that. Understanding that financial barriers to prevention 
actually raises costs and you want to get folks in the system.
    The other thing that's really good about the legislation is 
it includes major investments in developing more primary care 
practitioners, because we need the folks actually able to 
deliver that preventive care so----
    Mr. THOMPSON. As far as it impacts health outcomes, is this 
something that we can expect to see better outcomes and better 
prices?
    Mr. KIRSCH. Absolutely. And, you know, the old adage, an 
ounce of prevention is worth a pound of cure. It's not just 
true for each person, it's true for the health care system as a 
whole.
    Mr. THOMPSON. Anybody disagree?
    Mr. RANDEL JOHNSON. If you are going to mandate a package, 
I certainly think that wellness programs, preventiveness, ought 
to have first dollar coverage and be part of that. At the 
Chamber we're very much, our members are very aggressively 
pursuing wellness programs, Safeway is a very, Steve Burd, the 
CEO of Safeway has a very strong program in that area. Great 
payoffs, it just takes a while to get the payoff until the 
program runs its course. But, sure, I think----
    Mr. THOMPSON. Through the long-term impacts, but there are 
certainly short-term impacts, cost savings as well, if you 
catch your problem, especially for a child, it's a lot cheaper 
to treat that, than to treat a child in a hospital. Kids' 
hospital costs are more expensive, etc.
    Mr. RANDEL JOHNSON. And we have a conference coming----
    Mr. THOMPSON. Even the Chamber agrees. On a roll here. I'd 
like to ask the AARP witness, why is it that AARP believes that 
we should eliminate the cost sharing for preventive care? Why 
do you all think that's important?
    Ms. HANSEN. Well, there's evidence in research right now 
that the barrier of that first payment oftentimes precludes 
people from having prevention. And so the ability to minimize 
this, and that they've even shown this with certain 
medications. There are some programs that have decided to 
design their insurance so that they will even cover some 
chronic disease medications. So, it's a different way to think 
of prevention. It's not just, say, the well checkups, or the 
mammography, but it also is about some areas of first dollars 
that make a difference for people to get over that threshold, 
to use a service and then you do save money on the back end.
    Mr. THOMPSON. So, the more folks you get in on that front 
end, the more you save, the more expensive and this is even for 
older folks, not just youngsters in the front end of the 
service.
    Ms. HANSEN. That's true for, yes, for different ages.
    Mr. THOMPSON. And the AARP has been very supportive of 
remote patient monitoring and telehealth as a means by which 
to, on the threshold on remote monitoring to stay out of 
hospitals and save moneys. Can you elaborate on that a little 
bit?
    Ms. HANSEN. Certainly. I think oftentimes it's the rural 
areas, like Davis, that have really shown the effectiveness 
that this, the ability sometimes to deal with even part of the 
workforce shortage right now, the ability to have a large 
center like UC-Davis, have all the specialists there and have a 
smaller clinic that's further away to be able to use this for 
both diagnosis and consultation. That's for the providers. But 
for patients to have their blood pressure numbers checked 
through the phone system and so that your doctor's office has 
this information, these are areas that are, that we think are 
up and coming.
    Mr. THOMPSON. Thank you. Mr. Chairman, I asked questions of 
the last panel about the telehealth, as well, and everybody 
seems to be in agreement that it not only helps people, but it 
saves money. And I have a letter here from a coalition of folks 
that, Health IT Now, who are in strong support of the health IT 
that we've worked so much on and also on the expansion of 
telemedicine.
    And they point out that the estimated cost savings to 
Medicare from widespread adoption of telehealth services range 
between $2 and $4 billion. And I'd like to submit this for the 
record and I'd even be willing to use these savings to fund 
some of the telehealth ideas that I've been pushing to the 
Committee.
    Chairman RANGEL. Without objection. Mr. Johnson, you should 
feel, for any time you hear these things that people like to 
just wave you in and say, count you in. Let's see, Mr. Roskam, 
Illinois.
    Mr. ROSKAM. Thank you, Mr. Chairman. I'd like to yield 1 
minute to Mr. Nunes.
    Mr. NUNES. Thank you, Mr. Roskam. I want to make sure, Mr. 
Chairman, that I reiterate my point that it's not necessary in 
this country to have people on Medicaid. It's not necessary. 
And I thought it was rather ironic that the folks that have 
health care that are testifying today, in fact, all but one, 
didn't want to be on Medicaid. And you point out that, you 
know, you'd be poor, you'd have to be on Medicaid.
    The point that I'm making and I want to make it perfectly 
clear to this Committee, is that we don't have to have Medicaid 
in this country. We are spending enough money now to where we 
could give, on the plan that we have, up to $11,000 for that 
individual that's now on Medicaid, to go choose their own 
health plan on an exchange or wherever it may be. That's the 
money we're spending today. We don't have to add any money to 
the budget, and I want to make sure that I clarified this point 
because, you know, I think that it's an important point for 
Republicans to say that we believe we have a better plan. We 
believe that people don't have to be on Medicaid. We think 
there's a better option and a better way. And I thank Mr. 
Roskam for yielding his time.
    Chairman RANGEL. Well, he can keep his minute because I 
don't think that you made your point. You're on the Federal 
plan, I'm on the Federal plan. Would you want to turn in your 
Federal plan for Medicaid? That's a stupid question for me to 
ask you. And I just thought your point is well taken, we should 
eliminate Medicaid, we should follow the Republican guidelines. 
I just thought your question, the way you were trying to make 
your point was not relevant, but you want another minute, I'll 
give you another minute.
    Mr. NUNES. Well, I thank the gentleman for allowing me to 
continue to explain this. What the plan that we have, that we 
put out there----
    Chairman RANGEL. Talk about Medicaid, mister. For the 
minute, talk about why you don't want Medicaid and how relevant 
it is for them to be against having Medicaid.
    Mr. NUNES. Because I believe that Medicaid is poor quality 
health coverage. And we have to improve it. The doctors in my 
district do not want to see Medicaid patients. Under the plan 
that we've put out, we give $11,000 for anyone that's on 
Medicaid, to allow them to go pick a plan just like you and I 
have. That would be a minimum plan to what you and I have. I 
think that we should give the plan, similar to what we have, to 
even people that are on Medicaid. And I believe we have the 
money to do that.
    Chairman RANGEL. Your point's well taken and the time that 
we've taken away from you will be duly restored.
    Mr. ROSKAM. Thank you, Mr. Chairman, for your courtesy.
    Ms. SCHWARTZ. Excuse me, Mr. Chairman, before we move on, 
could I just make a point of, maybe, information? Maybe Mr. 
Nunes didn't get through all of the 800 pages. Because, in 
fact, this bill says, after 5 years, anyone on Medicaid, which 
is the program you object to, will be able to go into the 
exchange and choose any private or public option. So, in fact, 
it does address your interest and you may want to take a look 
at those particular provisions because it does, in fact, allow 
individuals to go into the exchange.
    Mr. NUNES. If the gentlelady----
    Ms. SCHWARTZ. Just pointing out information, and I yield 
back.
    Chairman RANGEL. Please. Please.
    Mr. ROSKAM. Thank you. Thanks, Mr. Chairman. Mr. Shea, 
question for you. On page 2 of your testimony, and you've made 
it very clear during your answers, I just want to read a 
sentence, ``. . . we caution, however, that one financing 
option under consideration in the Senate Finance Committee, the 
taxation of employer-sponsored health benefits, would go in the 
exact opposite direction by destabilizing the employer-based 
health insurance system.'' I agree with you and I accept that 
premise.
    It seems like Mr. Johnson is also making that argument in a 
different context, but it's the same argument. And what he's 
saying is, look, if you put this tax burden, or if you put this 
liability, or this mandate on business, there's going to be a 
consequence to it. You're arguing, and I'm paraphrasing, if you 
tax this employer-based system, you're going to have less of 
it, let's not do that, let's build on it.
    Mr. Johnson is saying, if you put this mandate on small 
business, or big business, or whoever it happens to be, you're 
going to get less of it. Why can you make the argument and why 
is he denied the argument?
    Mr. SHEA. Thank you, Congressman. I really think there are 
two different things and I will explain by saying, it's 
destabilizing because this is an important structural element 
of how we now put together employment-based coverage.
    Mr. ROSKAM. Agreed.
    Mr. SHEA. So, if you take out part of that structure, and 
you can listen to me, but you can listen to lots of employers. 
I sat at this table a month or so.
    Mr. ROSKAM. Agreed.
    Mr. SHEA. Lots of employers would say that. Employees, some 
people, young people might want to go out and get their own 
thing. That's very different from saying that all employers 
should pay financially to cover people with health care.
    Mr. ROSKAM. Okay. Then, let me make his argument maybe a 
little bit better than he made it. We're competing all over the 
world right now. We've got worldwide American companies that 
are competing with nations and so forth. Why are we putting 
this disproportionate burden, in this sense, on American 
companies? I think that, I'm kind of calling you out. I think 
you're arguing in the alternative and----
    Mr. SHEA. Well, I, you know, if somebody wanted to put it 
on the table, the social insurance system, which spreads the 
risk all over the population, gives you much lower costs, as 
all of our industrialized competition has, we'd be for that. 
We've been for that for 100 years. We're saying that what we 
have here is employment-based coverage. It does load costs onto 
the payroll, which puts American companies at a disadvantage, 
but what alternative would you offer?
    Mr. ROSKAM. Well, I think there's a whole host of 
alternatives and in 30 or 40 or 50 more seconds, I'm not going 
to get through them. Let me make one other point, though. And 
I'm happy to, I'm not trying to be clever, but there's, I 
represent the western and northwestern suburbs of Chicago. A 
lot of building trades. I am hearing from building trades' 
members who are very, very concerned about what they're hearing 
from this plan. Their attitude is, look, got a good plan here, 
we got a good thing going and we've successfully negotiated 
what some people would characterize as Cadillac plans. The rank 
and file building trades members that I'm hearing from are 
communicating to me, as their Congressman, be very careful that 
that isn't in jeopardy. The yellow is on, my time is up, and I 
yield back.
    Mr. SHEA. I'd like to continue the conversation.
    Mr. POMEROY. Thank you, Mr. Chairman. Excellent panel. Mr. 
Draper, I, in particular, want to commend you. Your testimony 
was excellent. You have a silk screen business?
    Mr. DRAPER. Thanks. And, yes.
    Mr. POMEROY. I feel enormous pressure to enact health 
reform in light of knowing that. Are you going to go pick one 
of these? I spent all day in the Ways and Means Committee, and 
all I got was this lousy shirt. We've got to give you----
    Mr. DRAPER. We do have a shirt, though, that says, 
American, Only the Insured Survive.
    Mr. POMEROY. Very good, very good.
    Mr. DRAPER. I did that when I was uninsured.
    Mr. POMEROY. Let me ask you about, we have only 5 minutes, 
so we have to kick this one around pretty quickly. How's the 
status quo working out for you?
    Mr. DRAPER. I explained it a little earlier, but I think 
it's, for us right now, it's okay, because everybody who works 
in the company is single and below the age of 26. The problem 
that we get into, that a lot of other businesses are in now, is 
that, as people age and we have to try to get family policies, 
then we either have to, if we stay in the same market that 
we're in now, it'll go from about $200 a month to about $700, 
$800 a month, which would mean we'd have to try to take time 
and renegotiate to figure out how to do it to get into a plan 
with somebody else.
    And so, my biggest concern is, for right now, I think what 
we have is inefficient, but it's not as crushingly inefficient 
as it will be for us in about 6 years.
    Mr. POMEROY. Even with coverage in place, and because of 
the young, single status of your workforce, affordable 
coverage, coverage you've been able to manage in your cost 
structure, the uncertainty, in fact, well, I said uncertainty, 
I meant actually, certainty, of rapidly rising health care 
costs, meaning rapidly rising health insurance premiums is a 
great concern to you.
    Mr. DRAPER. Yes. I mean, they go up each year. The bigger 
concern is, though, that you can't adequately budget how much 
it's going to be every year because your cost goes up if people 
get sick, which I've always found ironic, that you buy 
insurance but you still pay for health care. And so, that's the 
biggest problem.
    And we've agreed to pay our employees' bills, not because 
I'm the nicest guy in the world, but just because I know that 
somebody is going to have to pay them. And it's easier for the 
company to pay the bills and take the hit than to rely on the 
individual. Because if one of the individual employees has to 
start paying their own medical bills, if they go into personal 
bankruptcy, then the whole company is in trouble. And so, we 
kind of have to take that burden upon ourselves.
    And the tricky thing about that is, you can't budget for 
it. I've never met a business that went out of business because 
they didn't realize they had to pay income tax. And they said, 
well, duh, things just went really bad, there's this thing 
called income tax, and it just hit us like a freight train. But 
people do go out of business because of insurance. Because 
insurance costs are unpredictable. And anything that's 6 to 24 
percent of your payroll, you do not want to be tied to that as 
an unpredictable indicator.
    Mr. POMEROY. Point very well made. Let's see if we can find 
some agreement across the spectrum ends of this panel. I'd like 
Mr. Kirsch and Mr. Johnson to give their thoughts on the role 
cost containment needs to play in this reform bill. The, 
basically, we spend a lot of time talking about the insurance 
layer, but what about underlying costs drivers and what must 
this bill do to address some of those? Mr. Kirsch, first, and 
then Mr. Johnson.
    Mr. KIRSCH. Absolutely. As we say, if we're going to fix 
the economy, we have to fix health care. Which means we have to 
have a system which is retooled to deliver better quality at 
lower costs. And we can do that. As we've seen and as Mr. 
Higgins was talking about before, there are so many examples 
where paying for things that work, finding the right kind of 
incentives for providers, having good information out there, 
can create a health care system that provides better value. And 
one of the reasons we think we need structural changes to do 
this, and the kind of structural changes that you've put in 
multiple ways through the legislation is to drive a delivery 
system that focuses on value as opposed to just paying for 
services, oftentimes, that aren't what we need to pay for.
    Mr. POMEROY. Thank you. I see my yellow light is now on. 
Mr. Johnson, quick response on the same question.
    Mr. RANDEL JOHNSON. Yes, I don't disagree with any of that. 
I agree with it.
    Mr. POMEROY. I thought I could get you guys to agree.
    Mr. RANDEL JOHNSON. I think the gateway idea, the exchange 
idea, is, it opens up a kind of a website for people to shop 
around for the best plan possible, is, depending how it's 
structured, is acceptable to the Chamber and something we'll 
want to work closely with the Committee on. I think, obviously, 
comparative effectiveness, quality initiatives, so there's the 
cost control, it's obviously the most difficult part of this 
entire debate.
    Mr. POMEROY. But it would be irresponsible to put $100 
billion into the status quo without trying to do something that 
structurally is addressing these cost drivers. Would that be a 
fair statement?
    Mr. RANDEL JOHNSON. Yes.
    Mr. POMEROY. Thank you, Mr. Chairman.
    Chairman RANGEL. Mr. Johnson, you keep agreeing. When you 
put in your objections, you make certain right next to it, you 
put in what you support, right?
    Mr. RANDEL JOHNSON. I always do.
    Chairman RANGEL. Okay. That would be great.
    Mr. RANDEL JOHNSON. Thank you.
    Chairman RANGEL. Mr. Pascrell left and he will be 
returning, so it's my pleasure to ask Ms. Berkley of Nevada to 
inquire.
    Ms. BERKLEY. Thank you. Thank you, Mr. Chairman. And thank 
you all for staying and helping to educate us on an issue 
that's obviously very important to all of us and to millions 
and millions of Americans. It's been very interesting sitting 
here. My experience with Medicaid in the State is completely 
different from my colleagues. People are most anxious to sign 
up, but we don't have enough money for it and the reason the 
doctors aren't that crazy about taking Medicaid patients is 
because they don't get reimbursed. And doctors, like anyone 
else, want to get paid for their services.
    So, it's not a matter of people not wanting to be on 
Medicaid, so many people want to be on Medicaid that it's 
constantly a challenge. I know there may be some patients that 
don't like Medicaid, but most of my Medicaid patients don't 
like dying without any health care, so I just have a different 
point of view.
    I've learned also, and this came as a big surprise, that 
our public plan is going to be taking care of hair transplants 
and abortions and cosmetic surgeries. I'm sure that's going to 
be a boon to the plastic surgeons in Las Vegas and they can 
fully embrace this.
    And as far as AARP is concerned, there have been a number 
of instances where I disagreed with the official position of 
AARP, but your job, as you know, is not to please Members of 
Congress, but your membership, and I think AARP does an 
outstanding job with that.
    Let me ask you a couple of questions. Right now, Las Vegas 
is really suffering. We are having an economic meltdown of 
monumental proportions. I'm having major layoffs in my major 
business, which is the gaming industry. I've got mega-gaming 
corporations that are laying off people by the thousands. They 
are losing their health insurance and they can't afford COBRA. 
I also have a large number, half of the people that were 
employed in Las Vegas, before this economic meltdown, were 
employed by small business and the number one problem that they 
had is providing health care for their employees.
    I see the public option as a way of helping all of these 
people and I'm just wondering if you have any alternatives to 
that that you'd like to share with me but when it comes to a 
crisis situation, I've got it, and I've got to provide health 
care. Right now a third of the people I represent have no 
health care insurance. That's crisis proportions, as far as I'm 
concerned and I'll stop so you can speak and if anybody, Mr. 
Kirsch, would you like to start?
    Mr. KIRSCH. Well, yeah, she reinforces exactly what you've 
said and it is a crisis in people's lives, it's a crisis in a 
deeply personal way that one health care problem can lead to 
not only personal suffering for them or a family member, but 
financial bankruptcy. And to have a system like you all have 
proposed, which makes health care affordable, has good benefits 
and meets people's needs, doesn't have the false calculation 
that if we don't cover something it saves money, it just shifts 
the cost onto the worker, forcing people like Mike, who are 
responsible to pick it up. We need to have health care that's 
affordable based on incomes and be sure that it does that so 
that you can really afford it, based on your income. And to 
have a new entry in the system called a health insurance option 
that will drive down costs and care about the public's health 
first, as opposed to a corporate bottom line, is exactly the 
kind of reforms that we think make great sense and are so much 
welcome here.
    Ms. BERKLEY. Mr. Shea.
    Mr. SHEA. Thank you, Congresswoman. We still talk about 47 
million uninsured. There's no question that we're over 50 
million as a result of the economic situation. And a lot of the 
people who lost coverage are people who had, with their job, 
good coverage. And so, the pain is just enormous.
    And so, the public plan is just a sensible approach. It 
gives us, while I have the microphone, I'll mention I was never 
asked whether I opposed Medicaid. I was asked whether or not I 
wanted to switch to Medicaid. I have no reason to switch to 
anything, the plan that I have. But Medicaid obviously plays a 
very important role for very low income people.
    And this bill would, Medicaid, people with children who are 
very poor have Medicaid. People who are very poor who don't 
have children, don't have Medicaid because they don't 
categorically, this bill would change that and that's an 
important addition in terms of the coverage for very poor 
people.
    Ms. BERKLEY. I appreciate the distinction because I think 
the lumping in, the Medicaid thing, kind of shocked me when 
that came up. I didn't know how it was fitting in.
    Mr. SHEA. But let me make one other point, which is, I made 
it before, but it's really the concern that's my daily 
experience. And that is, to try to get some competition into 
the insurance market. We don't have any competition in the 
insurance market based on our experience for negotiating 
benefits every year for 50 million Americans.
    There is no competition and when you look at the numbers in 
terms of the monopoly situation, we don't have organizations 
that are representing people and aggressively fighting for them 
with providers and saying how can we reduce these costs. We 
have people who make cozy deals with providers in the private, 
that's what we have. That's what the private insurance industry 
does. Everybody makes a lot of money, everybody's fat and 
happy. Except the people who are paying the bills. That's the 
problem we have to solve.
    Chairman RANGEL. With health insurance going into the, 
having the public health option competing with the private 
sector, lowering the price of the premiums for employers that 
have been doing the right thing all along, hey, that's a great 
selling point. We'll have our conference call. You're going to 
leave here on this bill, I'm telling you.
    Mr. RANDEL JOHNSON. Well, we can take out a few things and 
then start from there.
    Chairman RANGEL. We got to do it. Mr. Tiberi.
    Mr. TIBERI. Thank you, Mr. Chairman. Mr. Shea and Ms. 
Hansen, I kind of want to direct my questioning toward you. In 
my district, Ms. Hansen first, a third of the seniors have 
Medicare Advantage and like it. Obviously, you're an 
organization that represents seniors. My mom, who's, my mom and 
dad are on Medicare. My mom has had an issue over the last 
several years where she's had doctors literally, her doctors, 
stop covering Medicare patients. Literally. Including her. 
Where she's had to go get a new doctor. We've read about, even 
in the New York Times, the distinguished gentleman's hometown 
newspaper, where Medicare, many doctors have declined new 
Medicare patients.
    And so, what many of us on this side of the aisle are 
concerned about, and I know from a central Ohio perspective, we 
have doctors and hospitals complaining every single day about 
health care, about insurance companies. But even more so, about 
Medicare fee-for-service and more so about Medicaid. And I 
think that's where some of the concern on this side of the 
aisle has been, is that, in fact, I had a family in my office 
the other day from Columbus, Ohio, complaining about, in 
Children's Hospital, the wait to see pediatric specialists is 
months. Because of the lack of doctors going into pediatric 
specialties.
    And this bill specifically doesn't deal with pediatric 
specialties. We deal with primary care, but we don't deal with 
specialties. And the assumption is, all these specialists make 
a lot of money. Well, in Children's Hospital in Columbus, and 
in Cleveland and in Cincinnati, they can't get enough 
specialists.
    But my point to you, ma'am, Ms. Hansen, and then I'll have 
a question for you, Mr. Shea. A real life example. But Ms. 
Hansen, as an organization that represents people who are 50 
years old and older, what do I tell my, the 30 percent of 
seniors who like what they have, and believe under the 
President's proposal they'll be able to keep what they have 
when in actuality, they may not?
    Ms. HANSEN. Right. Well, we too are concerned about this 
transition that would potentially occur. But I think what we do 
support is that there should be value and quality for what you 
do get, relative to the Medicare Advantage program. So, I think 
the fact that----
    Mr. TIBERI. But if the patient's happy with it, isn't that 
a good barometer?
    Ms. HANSEN. Well, if they're happy with it, is one thing 
that is certainly a barometer. But another barometer is the 
level of quality that actually gets delivered. So, we support 
people getting plans, hospitals, providers, getting paid more 
for a level of high quality.
    Mr. TIBERI. Would you be opposed to the Majority's plan if 
it reimbursed at today's Medicare rates?
    Ms. HANSEN. I'm sorry. I couldn't hear.
    Mr. TIBERI. Would you be opposed to the Majority's plan if 
the public plan reimbursed doctors and hospitals at Medicare 
rates.
    Ms. HANSEN. I think that my understanding is that that is 
part of the potential proposal.
    Mr. TIBERI. Would you be opposed to that if it reimbursed 
at today's Medicare rates?
    Chairman RANGEL. I would be.
    Mr. TIBERI. Okay.
    Chairman RANGEL. Because they can plan increases, Medicare 
rates.
    Ms. HANSEN. Well, I think the other point that you also 
bring up about having physicians being paid appropriately, 
that's something that I said in my oral opening statement that 
there needs to be a re-anchoring so that the sustained growth 
rate issue that causes specialists in general doesn't cover 
your pediatric specialists because it's not Medicare. But the 
ability to cover that is important.
    Mr. TIBERI. Thank you. Mr. Shea, you represent, obviously, 
a perspective. My dad's a retired union official. I have family 
members who are steelworker retirees, AFL-CIO, UAW, teachers. I 
have my best friend who is a teacher, a union employee. I have 
heard from them the concern with respect to the public plan 
that ultimately, and my question to you is this. Ultimately, if 
the public plan ends up allowing employers, either through a 
collective bargaining negotiation or on their own to ultimately 
change a current benefit, meaning, if an employer decides, you 
know what, I'd rather pay this 8 percent penalty and allow my 
employees to go into a public option, or the other view that 
the lack of competition will ultimately force private health 
care to disappear and all that will be left is a public option.
    As somebody who represents union members throughout 
America, many of whom collectively bargained for their health 
care benefit, is that something that if that happens, you all 
would be concerned about?
    Mr. SHEA. Well, we'd be concerned about any major 
disruption in the market, but job number one, as I've said 
repeatedly, is controlling costs. And we see the function of a 
public plan as being controlling costs. Our experience in 
sponsoring health funds, which we do, and our experience in 
dealing with employers is, we see no sentiment for wanting to 
dump or put people into a public plan.
    It probably would be advantageous for some people, but all 
the employers, there's a very strong connection, be it a good 
idea or a bad policy, there's a very strong connection between 
people who work, and getting health care at work, it is local, 
it's there for them. They have a problem, they have a human 
resources group to go to, or a union business agent to go to, 
to say, can you help me out with this kind of problem. They 
like that local connection. So, there is really a strong, even 
if there were a cheaper plan, there's a strong reason why 
people would want to maintain----
    Mr. TIBERI. And most of your members enjoy their plan?
    Mr. SHEA. Yes. And most of the people who are on the plans 
would tell you, you know, we're going out of business as a 
result of the cost. That's the problem.
    Chairman RANGEL. Mr. Pascrell, welcome back.
    Mr. PASCRELL. Mr. Johnson, thank you for your good faith 
testimony today. Some things I do agree with you. And some 
things I have questions about, so. You said that businesses are 
already doing their fair share and more. I would not disagree 
with that. This package that's in front of us, which is, maybe 
it'll be different in a week from now. Who knows? But this 
package takes steps to make it more affordable for businesses 
to continue doing their fair share. And you know quite well 
that in the last 8 years, insurance costs for small firms has 
increased 130 percent. In just 8 years.
    We achieved the affordability in the package that's before 
us right now by providing businesses with more choice through a 
public insurance option and by eliminating the cost shifting 
associated with the uninsured by insuring universal coverage 
through shared responsibility. And that's what many of the 
questions have been focused on, first panel, second panel. 
That's what we're looking for.
    The second point is that you stated that the Massachusetts 
pay-or-play requirement failed to produce revenue. I believe 
that's what you said. Did you say that? In your written 
statement, yes, I'm sorry. Put on your mic, please.
    Mr. RANDEL JOHNSON. Much less than expected.
    Mr. PASCRELL. Yeah. And I would agree with that, by the 
way. But that was not the goal of the Massachusetts plan. The 
goal of the Massachusetts plan was to shore up employer 
provided insurance in Massachusetts. That's what the 
legislation said. And in that respect, it's been an 
overwhelming success, wouldn't you say? In that respect.
    Mr. RANDEL JOHNSON. Perhaps in that, you know, the 
Massachusetts plan has come under so much attack from both the 
left and the right, perhaps in that individual area, I can't 
disagree with you because I can't really respond to it.
    Mr. PASCRELL. Okay. Third, you commented on one-size-fits-
all. One-size-fits-all plan designed, if it was designed that 
way, implying that employers currently have the ability to work 
with their employees and their insurance companies to choose 
among endless insurance options. I would encourage you to ask 
Mr. Draper or any small employer in this country, several of 
them were here today but did not testify, and they will tell 
you that the only choice they have is between the cheapest plan 
offered to them, you mentioned it, Mr. Draper, that usually 
fails to fit their specific needs, or laying off valued 
employees, or cutting their salaries, whatever a boss usually 
does.
    Now, I'm going to give you a chance to respond. You claim 
that the business community joins most Americans in opposing a 
public plan. That's what you said. But as you've heard from 
many panelists, that doesn't mean that they're right, but many 
of them believe that they've already spoken, that the public is 
not on your side on this issue. They overwhelmingly support 
having that choice.
    Now, what are your thoughts about the three things I've 
just stated?
    Mr. RANDEL JOHNSON. Well, to get the last first, but I 
think those polls will show, for example, the Kaiser poll asked 
that question but then, and I think The Washington Post polled 
it too, but once they go on and there's a qualification or 
clarification saying, however, that public plan option may have 
the result of driving private sector plans out of the market 
and therefore leave that public option as the last one 
standing, then the support falls away, markedly. That's the 
Kaiser poll.
    Mr. PASCRELL. But how come the response is never, look at 
the savings we're going to have in the delivery system, we're 
going to be more efficient, we're going to attempt to end 
recidivism, we're going to attempt to look at the procedural 
process, but you don't disagree with that, do you?
    Mr. RANDEL JOHNSON. Well, I do.
    Mr. PASCRELL. Oh, you do disagree with that?
    Mr. RANDEL JOHNSON. Well, no. If you're talking about the 
public plan, what follows----
    Mr. PASCRELL. Well, let's now forget about the public plan. 
Let's look at the whole possibility of reducing costs through 
different practices than you've been involved in. I mean, we 
have anecdotal evidence, people go to the hospital, they're 
there 15 to 17 hours, and their bill is $26,000. They go 
through the procedures and nothing is wrong with them, that's 
legion. In normal hospitals across the United States of 
America, and they never see what their bill is. They never get 
a bill.
    Mr. RANDEL JOHNSON. Right. And then they go back a second 
time and they----
    Mr. PASCRELL. Yeah.
    Mr. RANDEL JOHNSON. Right, no, I agree, that's----
    Mr. PASCRELL. What would just the process of giving 
everybody a bill to see what it cost them in the hospital take?
    Mr. RANDEL JOHNSON. A greater transparency is something we 
certainly would support.
    Mr. PASCRELL. That would bring religion to the whole 
process wouldn't it? Thank you, Mr. Johnson.
    Chairman RANGEL. Ms. Schwartz, I wanted to take this 
opportunity to thank you for the great opportunity that you 
made toward this bill. Okay, well, we have to get them on the 
list. Would you yield to Mr. Boustany? Well, we'll have Mr. 
Davis here. When I passed over him, he was not here. We adjust 
this to Mr. Davis and then we'll go right back to Ms. Schwartz, 
okay? Mr. Davis, you're recognized for 5 minutes.
    Mr. DAVIS. Thank you, Mr. Chairman. I'm the picture of 
flexibility and when I have the opportunity to speak, I 
appreciate the opportunity. I just have been a small 
businessowner, myself. I would comment that small 
businessowners aren't forced only into the cheapest choice. I 
ran a company for 12 years and we carried a Cadillac plan. It 
was when the public approach, or semi-public approach came to 
Kentucky, that we had to search for options because costs went 
through the roof and there was no competition.
    And contrary to the statements, there's no way to reduce 
costs and delivery systems without reengineering the overall 
center for Medicare services processed to move into insurance 
reform and deal with liability. And I can just say that from a 
business finance consultant going through processes, having 
seen that.
    But the one thing I'd say, though, is the small business 
issue, I think, is at the crux. I apologize, Mr. Draper, 
because we have some obstacles in the form of human beings 
between the two of us. Like the name of your company. When I 
was in the Army, there was an operation named SMASH that had a 
probably different product than what you're selling there. I'm 
sure you're quite innovative in the technology approach. But I 
can relate to your situation, very much, dealing with health 
issues. I learned a lot about the mandates, how each new one 
complicated my processes and increased my costs.
    And frankly, the ability and the flexibility we had in 
provision of care. You said you have 12 employees now? And the 
way I read the tri-committee bill, in subtitle (B) Credit for 
Small Business Employee Health Coverage Expenses, pages 153 to 
155, you and your business would not qualify for the small 
business tax credit. You say your average employee's salary is 
$45,000. The ceiling in this bill is $20,000. And it's for 
fewer than 10 employees.
    And did you know these factors would disqualify you for the 
tax credit?
    Mr. DRAPER. Are you saying for the tax credit of $11,000 
that Nunes was talking about?
    Mr. DAVIS. The small business tax credit that's referred to 
in subtitle (B).
    Mr. DRAPER. A tax credit only for people making under 
$20,000.
    Mr. DAVIS. Right. You would not qualify for the full tax 
credit.
    Mr. DRAPER. Yeah, I knew that.
    Mr. DAVIS. And yet, you'd still have to comply with either 
providing qualifying coverage or, the question is, how do you 
feel about that discrepancy, or that inequity, considering 
you've got two more employees and your multiplier impact in the 
community in terms of creating further taxpayers by the churn 
of the income is going to be vastly greater than a company with 
$20,000 average income?
    Mr. DRAPER. Yeah, I mean, from a personal standpoint, I 
don't think we should give money away, you know, to anybody. 
So, I think it should be everybody for themselves. From a 
business standpoint, I know that the only way our business will 
succeed is if we're competing in a steady market. You don't 
want a lot of ups and downs. And that's why I support the 
public plan because I think it would at least stabilize it. So, 
you don't have somebody who loses coverage who has to go off of 
coverage, who goes through financial crisis. I think that's 
what's dangerous for the economy. I support being required to 
have health insurance, in the same way that in Iowa I'm 
required to have car insurance. The car insurance requirement 
is easier to get past because it's a one to one collision. And 
that, when somebody hits you and they don't have car insurance, 
you have to pay for it. And you see that directly.
    What people don't see with health care is that when 
somebody goes to the hospital ER, I still have to pay for it 
through my tax revenue. So, while I don't like to be required 
arbitrarily to have health insurance, if everyone is required 
to have health insurance, I can get behind that. Because then 
I'm not paying out of one side for the private and out of the 
other side for the public. And so when people talk about 
numbers and statistics, I'd like to see how much government 
money, even in Iowa or nationally, goes in to medicine for 
people who go into ERs. What percentage of income is that? And 
therefore, what percentage of my taxes are going to the ERs? 
And I think that's kind of the unknown cost of what we have 
now.
    Mr. DAVIS. Well, do your employees like the coverage that 
you're able to give them right now?
    Mr. DRAPER. I mean, the coverage that we have to give is 
fine. I didn't say that we had to get the cheapest option, I 
just said, we have the cheapest option.
    Mr. DAVIS. If they had to take less coverage for you to 
participate in support of this public plan, would you be 
willing to do that?
    Mr. DRAPER. If they had to take less coverage?
    Mr. DAVIS. Yeah, to reduce, to basically reduce access to 
benefits. To be able to comply?
    Mr. DRAPER. I mean, the way that I read it, you don't have 
to.
    Mr. DAVIS. How about waiting periods for services they can 
get on 24 to 48 hour notices? Would they support a 6 to 8 week 
waiting period for that equity?
    Mr. DRAPER. I mean, it depends on what the service is for. 
But why do you need the waiting periods?
    Mr. DAVIS. Well, that's a good question. But this is the 
inevitable outcome of the system that we're talking about.
    Mr. DRAPER. But I don't think it's inevitable. I mean, I 
think it's inevitable if you have a single payer option in a 
country like Canada. But if you are able to blend public and 
private in the United States and come up with your own unique 
option, you can come up with something that's better than what 
they have in other countries. I mean, we shouldn't set the bar 
for ourselves so low.
    Mr. DAVIS. I don't think we're setting it low. Actually the 
question I'm coming back to, we're both businessmen here. And I 
appreciate your coming in. But, if the bill were enacted, the 
reason I was asking about how you would choose simply this, is 
that you deal with a capacity issue in your business. If you 
had limited revenue or your revenue was suddenly reduced by 20 
percent, there is only things that you could do with that in 
terms of capacity to serve your customers. The inventory you 
could carry and needless to say, if you have limits on cash or 
waiting time, goes out to get product to customer or you're not 
potentially able to serve them, and that, without dealing with 
these capacity issues, that ultimately is what's in this.
    Mr. DRAPER. Yeah, I mean, I think there's a lot of 
unknowns, but it's hard to say that revenue is going to go down 
by 20 percent just arbitrarily because the theory is that 
everybody has to get health insurance.
    Mr. DAVIS. No, no, no. I'm speaking in your business 
itself.
    Chairman RANGEL. Ms. Schwartz.
    Ms. SCHWARTZ. Thank you, Mr. Chairman. That was sort of a 
spirited discussion. So, I was actually sort of enjoying it. 
But thank you for the opportunity to follow up. I think the, 
following up on the previous questions, I think the real 
question I have for you, and I'll ask particularly Mr. Kirsch 
and Mr. Draper, too, to speak to this is, would we be better 
off if we actually make some of the changes, the changes that 
are in this legislation? I think, but the particular interests 
I think that many of us have is that we recognize and it's been 
said by a number of the panelists, that we have to contain 
costs.
    That particularly, for something for government, and our 
ability to sustain and our commitment under Medicare, and we 
plan to, and our economic competitiveness for both large and 
small businesses, we need to both contain costs and improve 
quality and get better outcomes on health care. And that we 
have to help all Americans get affordable, meaningful coverage. 
We think that's a goal we can meet, as Americans, and that we 
should. And I appreciate all of you agreeing with that goal.
    Now, there are obviously some disagreements as to exactly 
how we get there, but I think recognizing the reality, I think 
one of the reasons we've spent so much time on small 
businesses, is that, and Mr. Draper's situation in particular, 
is that the group that has the greatest difficulty right now in 
obtaining coverage are people who, as individuals and as small 
business. Because they don't have the ability large companies 
have to negotiate rates with insurance companies. Or to maybe 
do some of the innovative wellness and prevention programs, you 
can spend extra dollars on that. You may even have more dollars 
to spend on health care coverage and getting really good plans 
and the union shop, they might actually have negotiated some 
very good benefits.
    But the fact is, right now, it is very hard without some of 
the protections and opportunities that are going to be provided 
in this bill to be able to get affordable, meaningful coverage. 
So, I wanted to ask both Mr. Kirsch and Mr. Draper about some 
of the market reforms and protections, making sure that when 
you buy insurance you don't have to be 27 and healthy to be 
able to buy an affordable policy. That if you have preexisting 
conditions, if you're older, if you're a woman, if you're in a 
business that actually has some high risks, that you will be 
able to buy affordable coverage.
    The legislation that we're talking about today does that. 
It actually says to the insurance industry, large or small 
employers, in the exchange, we're going to actually comply with 
these changes. We're going to set new rules. And make it more 
affordable. We're not pushing anyone into a public option. So, 
my question for you is, would it be helpful to, do you think, 
to business and to individual Americans to be able to buy 
affordable insurance that's meaningful? And it is going to take 
a few dollars to get this up and running, but in the long run, 
I think we can do some of the quality changes that we want to 
talk about with the next panel, that we actually will improve 
quality and reduce costs for all of us. So, that's kind of the 
bottom line. But Mr. Kirsch, would you just briefly speak to 
that?
    I feel like we've gotten away from that as we talk about 
possibilities that no one really thinks is going to happen.
    Mr. KIRSCH. Right. And you're absolutely right. There will 
be, as I said in my testimony, one question that individuals 
and employers and basically every American is going to ask, 
will at the end of the day, will I have a guarantee of good, 
affordable coverage?
    And your legislation does that. It says, you're not going 
to have to worry about denying preexisting conditions, charging 
more because you've had a health history. We think one thing 
you could do better is you're still allowing people to be 
charged more because they're older. There's no reason to do 
that because you're making affordability based on income, which 
is the right way to do it.
    But let's get everybody in a system, and for small 
businesses, the legislation is incredibly important. Because 
what you've done, you're putting small businesses, which are 
now subject to incredible vagaries of the market. One employee 
gets sick, rates go through the roof. In an exchange, costs are 
predictable with benefits for individuals and small businesses.
    Ms. SCHWARTZ. I've heard from small businesses in this 
matter, just to answer your comment, who have seen rates go up 
40 percent from one year to the next. Someone's gotten sick and 
they're in a small policy. Talk about unpredictability for 
small businesses. You have 10 employees or, and suddenly you 
see increased costs, not just of 10 percent but of 40 percent, 
that's pretty unsustainable and maybe unsustainable from one 
year to the next, let alone over a long term.
    So, as you move forward and you may keep some of your 
employees for more than just a few years and they may actually 
get older, and even if they're younger, they may actually, 
someone finds themselves quite sick, having, understanding that 
they're going to have a commitment for ongoing care. I think 
that's really important. They won't lose coverage, they won't 
be charged more for their health status. I assume that would 
help you be able to grow the number of jobs in your business 
and grow your company.
    Mr. DRAPER. Yeah, I mean, I support the plan, not because I 
work for a group that hired me to support the plan. I support 
it just because I read through it and think that it makes 
sense. And that one thing the exchange does is, the oddest 
thing about our free market insurance is that it's not a 
market. You can't compare prices between doctors, between 
surgeries. You have eliminated the only thing that makes a free 
market, which is price comparison. And so, the system we have 
now is just so backward and inefficient, that I think you need 
to reform part of the exchange but a public option is also 
necessary because in a place like Iowa, everything is 
controlled by two companies. There's no actual competition.
    Ms. SCHWARTZ. There's no real competition.
    Mr. DRAPER. So, I think everything working together with 
regulation and competition, it would come out better in the 
end.
    Ms. SCHWARTZ. And maybe some transparencies, you can 
actually compare apples to apples in an exchange, for example.
    Mr. DRAPER. Yeah.
    Ms. SCHWARTZ. All right. Well, thank you very much and 
thank you all for your testimonies.
    Chairman RANGEL. Mr. Boustany.
    Mr. BOUSTANY. Thank you, Mr. Chairman. I have a question 
for Mr. Shea and Ms. Hansen, in particular. You know, we're 
talking about a government option. But there are a lot of 
details that will go into a government option that have not 
been fleshed out and I have a lot of concerns about. Now we're 
going to put the Secretary in charge of creating an insurance 
product. The Secretary is going to have to provide for 
reserves, which will be taxpayer money to back up that 
insurance product. Of course, it will collect premiums and do 
all these other things.
    So, you're basically building an insurance company from 
scratch. You're going to have to either contract out with 
insurance expertise or build it in-house, a very expensive 
proposition. You also have to build out a provider network. And 
the question I have for the two of you is, what happens if 
physicians, by and large, choose not to participate in the 
government option?
    I mean, currently, a lot of physicians are backing out of 
Medicare and Medicaid because of low reimbursement. And all the 
bills being proposed, including this one that we're talking 
about today, are going to utilize Medicare reimbursement or 
near Medicare reimbursement. So, what if physicians choose not 
to participate and you have no provider network?
    Mr. SHEA. I really think that's an important issue. Because 
one of my fears is, if we wind up with a public insurance plan 
that is very weak, physicians are simply going to say, I'm not 
interested. There's no compunction on me, I don't have to, it's 
not like Medicare, I'm not going to tie this to Medicare. We've 
got to have some rules that require, I think, require providers 
to participate in this.
    Mr. BOUSTANY. So, you would have the Secretary require all 
physicians?
    Mr. SHEA. I'm not saying how it would be done, or all 
physicians, but you have to have some sort of a structure so 
that if a public plan is going to be at all meaningful, they 
have to have a supply of providers. Of course, they have to pay 
fewer rates for that. And this whole issue of rates which we've 
been discussing is really, really important. And we've lumped 
together in a way that I don't think is useful.
    Medicaid rates are largely too low. In Massachusetts, when 
they passed the plan, part of the deal was, to get the 
physicians on board, was to raise the Medicare rates. That 
improved everything for everybody. Medicare is a situation 
where they do their rates based on cost.
    Mr. BOUSTANY. Actually, they're not really based on cost.
    Mr. SHEA. Well, let me get, it's their calculation of cost. 
What has happened is that we've build such an expensive health 
care system----
    Mr. BOUSTANY. When you say, you talking about CMS' 
calculation?
    Mr. SHEA. Yes.
    Mr. BOUSTANY. Yes. Okay.
    Mr. SHEA. We've built such an expensive system, that a 
calculation of minimum costs doesn't cover actual experienced 
costs. So, I think you could justify the Medicare rates. I 
think it would be wrong to go Medicare rates because it would 
be too big a shock to the system.
    Mr. BOUSTANY. It would be a problem. I've had 20 years 
clinical experience as a physician and also sat on the board of 
a community hospital and saw the intense financial pressures 
because of reimbursement rates not covering costs. It's a 
serious problem. And I would submit that it is a serious 
problem about physician participation, based on my knowledge of 
physician behavior.
    And so, for Ms. Hansen, I would say, I know my colleague, 
Mr. Ryan, talked about Medicare. I'm hearing from a lot of my 
Medicare constituents who are very concerned about the ongoing 
debate and whether this will accelerate the insolvency of the 
Medicare trust fund because it's going to put more pressure on 
the government in terms of fiscal outlay to create this 
government option.
    So, you have to have concerns as a leader at AARP in this, 
also knowing that physicians, many of them across the country, 
and in specialties and in primary care, are backing out of 
covering Medicare patients. So, we have a stressed Medicare 
system and we're now talking about creating a new government 
program, call it an entitlement because it's going to be an 
open-ended requirement for funding at the end of the day. So, 
I'd like to hear your comments on this.
    Ms. HANSEN. Well, I think the ability to make sure that 
there is a good provider network, you're absolutely right. I 
think right now there are concerns, Medicare or not. I think 
that even the commercial market is finding some challenges 
there. So, I think that one of the areas that AARP is 
supportive of is making sure that physicians are going to be 
paid appropriately and we have supported having legislation to 
fix the SGR.
    Mr. BOUSTANY. Do you support coercive measures by the 
Secretary of Health and Human Services to push physicians into 
providing care for a government program?
    Ms. HANSEN. We have not discussed that. Our principle is 
making sure that providers are rewarded for quality as well as 
appropriate reimbursement.
    Mr. BOUSTANY. Thank you. I yield back.
    Chairman THOMPSON. Thank you. Mr. Etheridge.
    Mr. ETHERIDGE. Thank you, Mr. Chairman. And I'll, I want to 
thank each of you, you've been very good for sticking around 
for a long time with the schedule we have today. Let me ask Mr. 
Draper just one quick question of you. I ask it from having 
been in business for 19 years and had responsibility for 
helping with human resources and a host of other areas in 
providing, and at one point, responsible for health care so I 
know the challenges you face, number one, in paying for it and, 
number two, in making sure you have it for your employees as 
different plans change from year to year and costs go up.
    But you mentioned in your testimony that the most basic 
insurance coverage offered to you is catastrophic coverage. And 
of course, I think that's one of the issues that most people 
fear in this country is that whatever their plan is, they'll 
have a catastrophic issue and history has proven that by and 
large that's what throws people in bankruptcy. They run into a 
huge medical cost and then they tend to lose what they have. 
So, my question is, is catastrophic coverage enough for you to 
feel that you and your family would be protected from 
bankruptcy due to the medical costs and to feel confident that 
you would have access to routine medical care if you needed it 
within the plans that you now have?
    Mr. DRAPER. Now, personally, I have a family plan through 
my wife, and so the catastrophic coverage from the employees, I 
think, I mean, it covers catastrophic coverage, you want 
catastrophic coverage just so you don't develop a brain tumor 
when you're uninsured, then you'll never get insured. So, you 
have to have some basic insurance. I think the reason why 
people go into bankruptcy is because even if they have the 
catastrophic coverage, the deductibles each year are so high, 
and the savings rate for people is so low that $10,000 is 
enough to send somebody into bankruptcy. A $10,000 bill in a 
year. It may not make sense for anybody who has saved money or 
has money but for the people right on the edge, that's the 
problem. So, I don't think that catastrophic coverage will 
prevent people from going into bankruptcy.
    Mr. ETHERIDGE. Thank you. I'll get that on the record. Mr. 
Johnson, let me ask you one question because in looking at the 
testimony that you put in, you indicated support for exchange 
and inclusion of both nongroup and small group markets, which 
would cover small businesses and others. And in that, I think 
you said you indicated that the Chamber of Commerce supports 
the concept of an exchange as advanced by the President and of 
course, I think you have indicated here that, and many of those 
views are components of a reform legislation, and now you've 
long advocated that position of pooling.
    So my question is, do you support the concept of an 
exchange to allow for pooling? And would you, and who should be 
allowed to go into that exchange?
    Mr. RANDEL JOHNSON. Well, we do support the concept of an 
exchange. Exactly how it's constructed and should be, I'm not 
quite sure. We are concerned, this goes to your question, 
Congressman, we are concerned about the Board apparently having 
a gateway power to define who goes into the exchange and who 
doesn't and we aren't certain what that level would be.
    It would appear to be that the government would be 
empowered to have, to define, who meets that favored criteria. 
Since we don't know what that criteria is, that's an issue to 
us. But I think that's something we could work on.
    Mr. ETHERIDGE. But your point is that concept makes sense.
    Mr. RANDEL JOHNSON. Yes, it does. And the Senate Health 
Committee, we said the same thing in the Senate Health 
Committee testimony and I think that's a key part of all these 
bills, that we can work on together.
    Mr. ETHERIDGE. Okay, thank you. And I yield back, Mr. 
Chairman.
    Chairman THOMPSON. Thank you. Mr. Davis.
    Mr. DAVIS. Thank you, Mr. Chairman. Let me, if I can, and 
I'll direct this question, I guess, to Mr. Kirsch, Mr. Shea, or 
Ms. Hansen. One of the things we're wrestling with, and I 
recognize that this is a little bit beyond the scope of the 
hearing, but one of the things we're wrestling with is 
obviously how we pay for all of this. And just to take 
advantage of your expertise while we're here, I want to spend a 
minute or so asking you about one option that's the subject of 
debate. And that's the plausibility of taxing for some 
individuals, the value of the benefits provided by their 
employers.
    Does anyone on the panel favor taxation? I suppose, 
frankly, no one's advocating a full scale taxation, but 
taxation beyond a certain level. Who on the panel favors a 
partial taxation of employee benefits? Just by a show of hands, 
so I can see that. Does anyone on the panel favor a partial 
taxation of benefits provided by employers?
    Mr. Kirsch, you're nodding your head no. And just tell me 
for the record why you don't favor such an option.
    Mr. KIRSCH. Well, first of all, we don't think it makes 
sense to have health care be more expensive for people when the 
big problem is how much health care already costs. So, we don't 
think it makes sense to tax people who are fortunate to have 
good benefits, which basically means they have things like 
maybe dental care or vision care or a larger network or lower 
out-of-pocket costs. We want everyone to have that. We don't 
want to make it more expensive. And then, in addition, if you 
look at what actually happens, when you try to set a value, if 
you even buy that premise, there are huge geographic 
variations, there are variations based on business size, on age 
and health status of workforce, so it's wrong in the first 
place and there's no way to arrive at a number that's 
equitable.
    Mr. DAVIS. So, again, just to make sure I fully understand 
this, some people have argued that well, if you set, say, a 
reasonably high cap. Let's say you set $16,000 a year and only 
tax benefits above that. Some have argued that that would have 
the effect of only taxing people with so-called Cadillac plans. 
You disagree with that.
    Mr. KIRSCH. Let me actually put on another hat. That until 
this job, I was a small businessowner. It was a nonprofit small 
business, but we had employees in several offices in New York 
and because costs in New York City are so much higher than in 
Rochester, we are paying, I think $18,000, $19,000 for a family 
policy in New York City that had lower benefits than the same 
policy in Rochester that was like, $12,000.
    If you live in New York City, which has high health care 
costs, it has nothing to do with the benefit level, just 
happens to be an expensive place to live. Why would we tax 
those people?
    Mr. DAVIS. So, in other words, someone making, someone who 
has a $16,000 benefit, the face and profile of that person 
might not be a CEO but it could be someone who's making $70,000 
or $80,000 a year, correct?
    Mr. KIRSCH. Well, in New York City, you know, we paid 
higher salaries than upstate but maybe we paid someone $60,000 
for what we paid $45,000 in Rochester. At $60,000 a year you're 
not going to be able to afford $18,000 a year, or have to pay 
taxes on it, it's crazy.
    Mr. DAVIS. And I'm assuming that some people have higher 
value plans because their health situation leads to obtain 
higher value plans. Is that a fair assumption?
    Mr. KIRSCH. Yes. I mean, basically if they've been sick or 
are older, their plan is going to cost them more. Not because 
it's worth more in terms of the benefits, just, it's going to 
cost more.
    Mr. DAVIS. Mr. Shea.
    Mr. SHEA. We agree with everything that Richard said and I 
have spoken on this before, but let me add one other thing 
which is that if you look at the companies that have a lot of 
early retiree costs, pre-Medicare retirees, and they are 
continuing to provide them benefits because the industry is 
changed, they've bought the people out, they didn't want to 
just dump them off because, you know, it's hard to get 
insurance. Everybody knows that 55 and up. The costs, I've 
looked at some of the numbers in the union plans, the costs 
increase because of that retiree, can be enormous. So, $20,000 
a year? Not because of Cadillac benefits, I mean, they're good 
benefits, but because there are a lot of retirees in the plan.
    Mr. DAVIS. Let me slip in a question, my final 30 seconds. 
I thought, I didn't agree with where Mr. Boustany was going but 
I think his question is an appropriate one. What is beyond the 
extra 5 percent, beyond Medicare, that goes to doctors 
participating in the public option, or accepting people who are 
participating in the public option? What's an appropriate 
incentive for the government to offer doctors? Are there some 
ideas you can throw out? Because I think that the concern's a 
valid one, that just as some doctors are not accepting Medicare 
and Medicaid, they won't accept public option patients beyond 
the extra 5 percent the Medicare recipients get, or the doctors 
covering Medicare recipients get, what are some appropriate 
inducements to offer doctors so they will accept in the public 
option? Ms. Hansen.
    Ms. HANSEN. You know, when I said the word, quality was 
there, and I think looking at the performance of producing good 
outcomes on behalf of their patients, practicing with the areas 
that show some evidence that this is what should occur, so 
there should be bonuses, perhaps, as one way to reward the 
effective practice of care for people.
    Mr. KIRSCH. And that's a great answer. One of the things we 
think is very important that the public option can do, is be 
able to do that kind of innovation and payment systems and so 
our policy is that should not be tied to Medicare. Starting 
with Medicare is ok as a basis, as a way to help you get 
started. We want, though, the public option to do the kind of 
innovative reimbursement systems, the right incentives, that 
Jenny's talking about so that we actually can improve care and 
control costs. And so that doctors want to be in a system that 
provides the right kind of incentives for them doing good care.
    Mr. DAVIS. Thank you, Mr. Chairman.
    Chairman RANGEL. The Chair recognizes Mr. Ron Kind.
    Mr. KIND. Thank you, Mr. Chairman. I'm going to be brief. 
The panelists have been above and beyond the call of duty, 
shall we say, with your patience, your testimony today. One of 
my main focuses with health care reform is trying to address 
the needs of small business and family farmers. Mr. Draper, I'm 
looking at you right now. And in the past, I've introduced 
bipartisan legislation. I think very good and reasonable 
bipartisan legislation, both the House and the Senate called 
the Shop Act, which very simply would establish a national 
exchange or national purchasing pool for small businesses to be 
able to join along with tax credits and incentives to make it 
more affordable.
    Because a small group market clearly failed. Too many small 
businesses and family farmers, if you're talking about the 47 
million uninsured, most of them are working Americans, either 
in small businesses or on farms that can't afford coverage 
because of the lack of a good small group market. A lot of that 
Shop Act proposal, the principles are contained in this draft 
discussion right now.
    The tough decision we have to make is where do we draw the 
line as far as exempting small businesses and family farms from 
the mandate of providing coverage for their employees. What's 
the reasonable line that can be drawn? What factors should be 
considered? Mr. Draper, I want to get your thoughts on this. 
One, there are a variety of options we can look at. One is 
based on gross sales, or gross revenue for that business or 
farm. Another is based on the size of the payroll for that 
small business. The other is based on an adjusted gross income, 
where you back out all the input costs and you're left with 
basically net profit at the end of the year.
    Mr. Draper, I'd be interested to get your thoughts on where 
we should exempt, what level should we exempt small businesses 
from having to provide health care coverage for their workers?
    Mr. DRAPER. Yeah, I mean, that's one of the many things 
that makes me glad I don't have to write this bill. It's tricky 
because you could set it at a certain amount, say, income that 
they'd be exempt. And so, for 4 years they'd be paying 8 
percent, but then say you have a recession like this year. 
Company's income goes down, suddenly, 30 percent of the 
companies that were paying in now aren't paying in, there's a 
budget shortfall, so it's tricky to draw the line. I mean, I 
would, I'm more for requiring everybody to have health 
insurance, no matter how we do it. Just for the reason that if 
you require everybody, the theory is the rates will go down.
    If you require everybody to have health insurance and the 
rates go up, obviously that will be frustrating, but this is 
one of the things that in order to move forward into the 
future, you've got to kind of do something and just because you 
don't know exactly what's going to happen doesn't mean you 
should stop trying to do anything. So, I don't know where it 
would be to draw the line. You may just want to require health 
care for everybody and not try to worry about, you know.
    Mr. KIND. I appreciate that response. But just to be clear, 
there will be shared responsibility, so if the business isn't 
required to provide coverage, the individual will still be 
required to obtain health coverage and that is how we're going 
to try to work with them to make it affordable for low-, 
middle-income families so they can go into the market and 
purchase health care on their own.
    But my question, and Mr. Shea, maybe you want to jump in 
here, is if we are going to exempt small businesses, many of 
whom are really operating on a tight margin and having the 
requirement of providing coverage themselves could put them 
over the end and they wouldn't be able to stay in business, 
what should be the calculation that we use? Mr. Shea. Do you 
have?
    Mr. SHEA. I'm not going to be very helpful to you, 
Congressman. I think, like Mr. Draper, the best approach is to 
put everybody in and then subsidize those people who really are 
at the low end who warrant it. But once you start keeping some 
people out, you're going to get distortions. You're going to 
get gaming. So, I think you put everybody in. And the other 
reason I say that is just something that hasn't been mentioned 
here.
    Most of the people who don't provide coverage, who are low 
margin, small employers, are competing against other low 
margin, small employers. So, if you put all of those people in, 
it's not like you're going to give some people a disadvantage, 
you know, everybody is going to be in the same situation. And 
if you have enough subsidy so that we don't lose wholesale 
jobs, and I think that's just something you've got to design 
in, I think it'll work.
    Mr. KIND. Mr. Kirsch.
    Mr. KIRSCH. Yes. I agree. I think shared responsibility 
means we make it affordable for all small employers and they 
pay in a reasonable way. And I think the analogy here is the 
minimum wage. I mean, we don't say to some small businesses, 
you don't have to pay a minimum wage. We say, a basic 
requirement of being in business is to contribute to long-term 
retirement through Social Security, and to pay at least a 
minimum wage. And so, let's now do the same for health care, 
but let's make it affordable.
    The problem right now is, as you know, health care is not 
affordable to too many small employers. There are a lot of 
things you've done in this legislation, numerous things to make 
it affordable and then every employer can pay because you've 
made it affordable, even the smallest low-wage employer because 
you've made an affordable option in this legislation.
    Mr. DRAPER. Yeah, I think you pretty much want to have to 
try to include every business just because trying to exempt 
some, I mean, it's difficult just because the other side will 
say, oh, but what about the small business? But, looking at the 
big picture, if you guys wanted to help small business, just 
eliminate income tax for small businesspeople and raise capital 
gains tax.
    But so, it's hard to argue for it. I think it may be tough 
for some people, but I think people in small business are used 
to getting it, and it's kind of the only way to do it is to 
require everybody to have it.
    Mr. KIND. Thank you. Thank you, Mr. Chairman.
    Chairman RANGEL. You have been one outstanding panel. And 
one patient panel, I might add. And I only can offer to you, 
remember this day as you kicked off an historic piece of 
legislation that is long overdue in our great Nation and that 
you have been a part of it.
    In the early 1960s, I walked with Dr. Martin Luther King 
for 54 miles. I had no idea what I was doing. But I don't tell 
that to my grandkids today. I told them I was a part of that 
great civil rights movement. And I want you to really and truly 
believe that your testimony is going to help get this thing 
started. We're going to have the outstanding businesspeople of 
our community understanding that their concern with our 
country, the employees, competition, education, health care, 
and all of you are going to be very proud of the contribution.
    We are collectively thankful and I know that Mr. Camp joins 
with me that we're going to get this thing done. Thank you so 
very, very much. I yield to Mr. Camp.
    Mr. CAMP. Well, no, I just want to echo. Thank you all for 
taking the time. It's been a long day waiting and then a long 
time at the witness table and I certainly appreciate all of 
your effort today to help eliminate what we're looking at which 
is a health care proposal that is a significant one. And I just 
want to thank you for your testimony.
    Chairman RANGEL. Thank you. Now, we will call the next 
panel. Dr. Baxter. He's from my hometown and if we could 
package, where's Dr. Baxter? If we could package the enthusiasm 
that the doctors and staff have at William F. Ryan Health 
Center, it would be good for the country. You do a great job 
and our community appreciates it.
    The American Academy of Family Physicians, the President of 
that group, Dr. Ted Epperly. We hope that you feel very proud 
of this package because we've invested a lot of money in 
expanding the number of physicians, especially primary care and 
we're going to make certain that we give the opportunity to do 
what doctors were trained to do and that is to take care of 
patients and provide health care.
    And our nurses. The Rhode Island State Nurses Association 
on behalf of the American Nurses Association in Silver Spring, 
Donna Policastro. Some believe that the nurses are really the 
backbone of the hospitals and we want to appreciate, not only 
what you've done, but to appreciate and encourage and provide 
incentives in terms of pay for the professional work our nurses 
do.
    Chip Kahn. Chip. Well, it's good to have you with us. I 
remember the meetings that we had and I told the hospitals that 
we're going to pass you by, but what an opportunity to 
participate, to help us, to give us direction and we couldn't 
have done it without the professionals. We tried to do the 
right thing as legislators, but we can't do it without the 
people on the ground that deal with these problems every day 
helping us so that we can avoid making big mistakes.
    And Richard Warner, a doctor from the Kansas Medical 
Society House of Delegates, the AMA Alternate Delegate and past 
President of the Kansas Medical Society, we welcome you here 
and I'm going to call upon Mr. Larson, John Larson to share 
with us his support for Ronald Williams, who's the Chairman and 
CEO of Aetna Insurance Company, from Connecticut who, 
unfortunately is with the President, as he has joined with us 
in sharing his expertise in this field. The Chair would like to 
yield to the Chairman of our Caucus, John Larson.
    Mr. LARSON. I thank the distinguished Chairman and I make 
apologies on behalf of Mr. Williams who was, along with our 
other panelists, waiting patiently to bring testimony but he 
has, as the Chairman has indicated, been called to the White 
House, where he is at a health care event and focusing on 
prevention.
    I just want to echo what the Chairman has said about Mr. 
Williams. The Aetna is an outstanding company in the State of 
Connecticut. And Mr. Williams has been an exemplary Chief 
Executive. He has toured the State with Senator Dodd conducting 
forums on health care. Aetna, as you might suspect, leads the 
Nation, in fact, was the first national insurer to offer 
consumer directed health care plans. It was the Aetna that 
through information technology in bringing new levels of 
transparency to the health care system, has paved the way for 
innovation and driving them, what the President continues to 
emphasize, is at the heart of bringing reform to this system. 
And that's the cost. With health care approaching 20 percent of 
our GDP, it's important that we focus on this. But also add 
that with respect to a public plan, Chairman Williams has been 
asked whether he could compete with a public plan or not, and 
he said, all things being equal, yes. And I think that's what 
these hearings are about to make sure we hear how we can make 
all things equal and move forward on behalf of the American 
people. Again, I want to thank the Chairman and on behalf of 
Ron Williams from the Aetna indicate the gratitude to be here, 
but as the Chairman understands, he was called away to a 
meeting to a higher authority at the White House. Thank you, 
Mr. Chairman.
    [The prepared statement of Mr. Williams follows:]
               Prepared Statement of Ronald A. Williams,
          Chairman and CEO, Aetna, Inc., Hartford, Connecticut
    Chairman Rangel, Ranking Member Camp and Members of the Committee, 
I am Ronald A. Williams, Chairman and CEO of Aetna. Thank you for the 
opportunity to speak here today as we approach a critical juncture in 
the national health care reform discussion. Let me start by emphasizing 
that we share a common goal. We want to get everyone covered with 
adequate health insurance, improve the quality of health outcomes, and 
get better value for each dollar spent on care--with the goal of 
reducing cost and improving affordability for the American people.
    Your effort moves us closer to those goals, and I applaud the 
Committee for trying to offer solutions that address the issues of 
cost, quality and access. Your plan would maintain the overall strength 
of the employer-based system, allow people to keep what they have, and 
provide solutions to improve the individual and small group market. 
While we may not agree on all the specific details of your overall 
plan, our intent is the same.
    For example, I called for reforms that would guarantee that health 
insurance companies have to issue health insurance regardless of health 
status and limit medical underwriting. We can make these reforms if we 
also have in place an individual coverage requirement, just like 
Massachusetts, so that insurance is not just about getting it when you 
are on the way to the hospital.
Facts About the Health Insurance Industry
    To fully appreciate that we have common interests, it is important 
to understand the goals and values of insurers today. Unfortunately, 
many people have made assumptions about our sector that may have been 
true 20 years ago but are not based in marketplace realities today.
    We are not, in fact, one of the key drivers of health care costs. 
U.S. health care spending topped $2.4 trillion in 2007, while the 
combined profits of the top 10 health insurers were approximately $8.3 
billion. It is important to understand that insurance premiums are 
directly tied to the cost of underlying services in health care, 
including doctor, hospital and other provider costs. In 2007, the cost 
of health care services grew at an annual rate of 6.4%, resulting in 
overall premium increases, on average, of 6.1%.
    Aetna today processes 206,000 calls a day and well over 50 million 
a year--over 45.5 million calls were answered in an average of 19.3 
seconds and 94 percent were resolved the first time; we processed 407 
million medical, dental and pharmacy claims in 2008. Of these, only 
0.3%, or 1.2 million, were not processed correctly. Getting all this 
right takes long-term investment, staying current and complying with 
the changing regulations from more than 50 jurisdictions and a 
commitment to constant improvement that can be implemented carefully.
    But it would be a mistake to see our business model as a simple 
claims-paying operation. In fact, the competitive nature of our 
business requires us to generate strong value on behalf of the members 
that we cover. We have become leading innovators in chronic disease 
management, wellness and prevention, performance-driven payment models, 
quality management, and end-of-life care.
    We also have been leading the health information technology (HIT) 
movement to give consumers and their doctors tools that empower them to 
make better decisions about their care pathway--using their personal 
health information in real time. Since 2005, we've invested more than 
$1.8 billion in HIT, and we're seeing real value for that investment.
    Notably, our unique clinical-decision support technology, 
CareEngine, provided through ActiveHealth Management, has been used to 
analyze more than 18 million complete patient records against current 
standards of care to identify gaps in care and to alert physicians with 
``care considerations'' that they can act on. These clinical alerts 
have been reviewed by specialists at Harvard, and as a result we are 
able to say that Harvard approves of the language and how these 
clinical tools have been built. We have also submitted many of these 
measures that are used to support the clinicians to the National 
Quality Forum, and 33 are being reviewed for endorsement. We feel that 
we are raising the bar in the measurement of quality by our ability to 
collect diverse data and integrate it into useful decision support for 
clinicians.
    CareEngine was tested in a randomized clinical trial, with the 
results published in 2005 and again in 2008. The use of the technology 
and the subsequent physician actions prompted by these care alerts 
produced a reduction in patient hospitalizations of 8% and a savings in 
charges of more than $8 per member, per month (PMPM). In a 2008 
followup study,\1\ the tool's impact was further validated by findings 
that showed the use of advanced clinical-decision support with care 
alerts reduced overall charges by 6%, with charge savings in excess of 
$21 PMPM.
---------------------------------------------------------------------------
    \1\ The Journal of Health Economics, ``Information Technology and 
Medical Missteps: Evidence From a Randomized Trial,'' 2008; 585-60.
---------------------------------------------------------------------------
    We are an essential element of health care today, helping employers 
and consumers get better care. Much of the innovation in our health 
care system is fueled by private insurers working alongside employers 
to ensure the health and well-being of employees. In fact, many of the 
payment and quality reforms currently proposed for the Medicare program 
were actually created, tested and proven by employers and insurers 
working hand in hand in the private sector.
    Our ability, however, to innovate and deliver diverse product 
offerings across the country is very much affected by our complex 
regulatory environment. We are one of the most heavily regulated 
industries in the Nation. We are regulated uniquely by 50 States and by 
multiple jurisdictions within each State; we are regulated by cities, 
in some cases, and several Federal agencies. Each regulatory body takes 
a different approach to how it handles regulation of the health 
insurance market and enforcement of the rules. These regulations today 
could fill a small town library.
    The unintended consequences of these regulations are that each has 
a different effect on cost to the consumer and our ability to provide 
innovative product offerings. It is one of the reasons we see 
individual health insurance in New Jersey that is about 300% more 
expensive than similar plans offered in neighboring Pennsylvania. 
Bringing a more common approach to regulating the market--if it is with 
an eye on simplification--could make the market more responsive and 
increase consumer access to more cost-effective products. If we are 
going to set national rules, they need to preempt other statutes that 
try to accomplish similar outcomes.
    We are also committed to continually reducing the administrative 
costs, and have made a pledge to the President to simplify our 
interactions with doctors, hospitals and other providers to produce 
savings and, more importantly, to streamline our system so that 
uniformity throughout reduces costs, improves interaction times, and 
addresses the key ``friction points'' that the medical community has 
asked us to address. The industry has committed to the following 
administrative simplification reforms:

      Automate and standardize the electronic processes used by 
health plans to do business with providers including: claims 
submissions, eligibility verification, claims status, payment and 
remittance.
      Eliminate the variation in how our industry implements 
administrative standards through the designation of an organization to 
develop uniform rules that would be incorporated in future versions of 
IT standards enabling providers to access consistent insurance 
information.
      Implement uniform standards for health plans' personal 
health records (PHRs) to ensure that patients and their providers have 
accurate, real-time information available 24 hours a day regardless of 
location. PHRs will help reduce duplicate tests, ensure up-to-date 
medication history, and facilitate better quality care by physicians.
      Adopt uniform quality performance measures that are 
actionable for physicians, hospitals, and other clinicians and issue 
consumer-friendly reports that assist patients in making more informed 
decisions.
      Propose that an independent third-party entity is created 
to: coordinate the collection of information on provider licensure, 
board certification, and adverse actions; and facilitate credentialing 
by hospitals and health plans across all private plans and public 
programs.
      Propose that a multi-stakeholder national task force is 
created to develop a process similar to the National Correct Coding 
Initiative (NCCI) to address correct coding for all populations and 
health care services covered by public programs and private insurers.

    The differences between Medicare and private plan administrative 
costs are often referenced, despite the significant differences in the 
target populations and services provided. Even so, when compared on a 
per-member, per-month basis, administrative costs are nearly the same 
for Medicare and private plans.
Cost and Quality
    Underlying medical trend is rising about 12-15% per year due to the 
cost and utilization of medical services. Recently, The New Yorker 
magazine, in a story by Atul Gawande, highlighted a worrisome problem 
in this country that some are now calling the ``McAllen, Texas 
Problem.'' McAllen has one of the highest Medicare expenditures per 
capita in the country, yet its population is no sicker than most other 
places. But because it has high provider capacity, this capacity drives 
up volume and cost. A lesson for our country--we need to align 
incentives with quality outcomes, not volume.
    The problems we face in health care can be solved. In fact, the 
industry came close in the 1990s, when the medical cost trend dipped 
from 8.1% in 1992 to (-1.1%) in 1995. Back then, you had a medical home 
called a primary care physician whom you needed to consult before you 
could see a specialist; you had limited choice of doctors and hospitals 
from a closed network, a network that agreed to tighter payment rates 
for services; and payments to providers were bundled for highly 
intensive procedures and allowed providers to keep some of the savings. 
Ultimately, that model did not work as consumers wanted more choice and 
more control over their options, and providers wanted more control over 
the options they could offer. We don't advocate it now. We may have 
achieved many of the right results but in the wrong way.
    Consumers' expectations remain essentially the same today as they 
were in the '90s. Today most experts agree that 30% of health care is 
unnecessary, and yet the majority of Americans believe they don't get 
the tests and treatment they need. Fifty-five percent of Americans say 
insurers should pay for what a doctor recommends, even if a treatment 
has not been proven more effective than a cheaper one. If our 
collective goal is to achieve affordable coverage for all Americans, it 
is essential that we address these issues and make delivery system 
reform happen.
    A lot of exceptional work is being done to examine the issue of 
paying for quality vs. volume. In cooperation with providers and 
employers across the country, we continue to experiment with aligning 
quality incentives and payments to providers when they follow the 
medically recommended care pathways, as determined by the various 
medical professions. As a result, we have seen improving averages in 
breast cancer and colorectal screening, improving back surgery outcomes 
while reducing the use of imaging, improved use of antibiotic 
management leading to fewer readmissions (in one network alone 
readmissions went down 19% over a 60-day period), and we have seen 
similar results in diabetes management, oncology and cardiac care. When 
we focus on the patient in a holistic manner, we get better quality 
outcomes for patients and overall reduced costs. These are programs 
that have been done in cooperation with groups such as the Leapfrog 
Group and our own Bridges to Excellence program. These programs have 
reduced cost while improving quality. When people get the right care at 
the right time, the whole health system benefits, and we achieve value-
based health care for all.
    Making insurance affordable will require us to bend the health care 
cost curve; all of us have a role in this effort. But we must start 
with a major reform of the payment system, as this is the underlying 
cause of the over expenditure we live with today.
Prevention and Wellness
    Health care reform needs to include strong prevention and wellness 
initiatives; it is the most important investment we can make in our 
future. Today, our health care delivery system is largely oriented 
toward the treatment of disease, rather than focusing on preventable 
health conditions. Refocusing our system to prevent disease and promote 
wellness can lead to better health for all Americans and positively 
impact costs systemwide.
    More than half of Americans are living with at least one chronic 
disease. Nearly one in five 4-year-olds is obese, with significant 
disparities in prevalence among different racial and ethnic groups. The 
United States spent $217.6 billion on direct costs in treating non-
institutionalized Americans for chronic disease in 2003, while 
experiencing an added $905 billion in losses associated with indirect 
costs.
    We must refocus the health care system on getting and keeping 
people healthy throughout their lives. I believe a number of strategies 
are critical to refocusing our system on wellness and prevention, 
including:

      Using consumer engagement and targeted incentives to 
encourage sustained healthy behavior and change unhealthy behaviors;
      Developing an integrated, holistic approach to care 
management to allow for early intervention and education; and
      Promoting coverage policies and initiatives that 
encourage the use of high-value health care and address the needs of 
specific population segments.

    Our own experience, as both an employer and as a leading national 
health insurer, tells us how effective this approach can be. Our 
Wellness Works employee programs are engaging employees, helping them 
get healthier and contributing to lower medical costs. The Get Active 
Aetna program, for example, is a 16-week fitness action campaign 
through which 55 percent of employees logged 970,000 exercise hours in 
2008--walking a total of 3,397,524 miles, the equivalent of walking 136 
times around the Earth.
    Aetna Health Connections Disease Management helps people with 
chronic conditions get the treatment and preventive care they need by 
taking a wider view of an individual's health, rather than focusing 
solely on a single disease. Aetna's nurses and clinicians help members 
understand and follow their doctor's treatment plan and better manage 
ongoing conditions with the goal of helping members achieve their 
optimal level of health. Employers who invest in this program have seen 
a 2 to 1 return on their investment. Moreover, through disease 
management programs, we have seen reductions in emergency room visits 
and inpatient admissions, including a 7 percent reduction in ER visits 
for asthma, a 13 percent reduction in inpatient admissions for coronary 
artery disease and an 18 percent reduction in inpatient admissions for 
strokes.
    Importantly, the employer-based system provides a critical venue 
for implementation of wellness and prevention programs, as insurers can 
help employers target interventions to the specific needs of their 
employees and their families. Congress should consider providing tax 
incentives to employers for offering evidence-based wellness programs, 
while also considering vehicles for pre-tax purchase of wellness-
promoting activities. Grants for community-based wellness and fitness 
programs should also be considered, and wellness and prevention 
initiatives should be implemented in public programs.
Insurance Markets
    Keeping what you have: We need to make the health insurance market 
work for everyone, and I believe we can. But as the President has 
stated: ``If you like what you have you should be able to keep it.'' 
Choice is always at the center of what Americans want to maintain. 
Whatever we do, we need to ensure we do not implement reforms that 
adversely affect the ability of the insurance market to offer choice. 
In a New York Times poll reported in Sunday's newspaper, 77% of 
Americans, an overwhelming majority, said they are happy with the 
coverage they have. Your bill recognizes that people want the ability 
to keep what they have, but if the rules are too sweeping or strict and 
the regulatory structure too complex and constraining, you will limit 
choice and destabilize existing markets. If strict rules tilt the 
playing field too much in favor of exchanges, consumers will slide out 
of their plans into these exchanges and face higher premiums that they 
will not find acceptable. Tax credits and/or subsidies should be 
offered inside and outside the proposed exchanges. If we fail to do 
this, it will destabilize risk pools causing an additional rise in 
premiums.
Large Employers (50+)
    Today, more than 177 million Americans get their insurance through 
the employer-based system, and the large majority of the 50+ market is 
self-insured. Employers expect great value for their spend in health 
care; they want wellness and prevention for their employees, chronic 
disease management, quality outcomes, and they want measurable results 
for each of these areas. This is not a system that should be changed, 
and by an overwhelming majority most employers don't want to see this 
market touched by reform.

      More than 95% of employers polled in a recent survey 
overwhelmingly want to continue to provide their employees this type of 
coverage.
      It is the employers' long-term commitment to their 
employees' health that has driven much of the innovation we have today 
in terms of services that help improve and sustain employee health.

    But, outside this market, insurance does not work well for 
everyone, and we need to reform these markets if we are gong to achieve 
full access for all. We do need specific reforms for the individual 
market and those parts of the small group market that are not working. 
We also need to remember that 18 million people are insured in the 
individual market, 30 million in the 2-9 market, and about 38 million 
in the 10-50 small group market. We should not expose these 
policyholders to disruptions that include higher rates. Where the 
market is not adequate we recommend the following:
Specific Solutions for the Individual and Under-10 Small Group Markets
    The Committee's reforms would make important progress in addressing 
the lack of coverage in this market. Only about 35% of the people in 
this market have access to insurance because of affordability concerns 
or preexisting conditions. By reforming the individual market, which 
should also include small businesses with fewer than 10 employees, we 
can tailor insurance market solutions to effectively address the needs 
of the uninsured without disrupting or even unraveling the entire 
insurance market.
    We can cover the uninsured if we:

      Guarantee issue of insurance and align it with a strong 
individual coverage requirement.
      Subsidize those that truly need help and possibly those 
at high risk.
      Provide affordable coverage options, which improve choice 
and reduce complexity.
      Provide modified community rating for age, geographic 
location and family size, but toss out health status and gender.
      Design benefit options that meet specific needs of 
consumers. Most consumers, when using their own money, pick a benefit 
design that is similar to the Massachusetts Bronze plan. The premium 
for this plan is about 55% lower than the premium for FEHBP's Blue 
Cross Blue Shield standard plan.

    We think it makes sense for these plans to be offered via an 
exchange and believe it should be national or Statewide, run by the 
State Insurance Commissioner. If the Federal Government decides to set 
the rules for the exchange, they should preempt State rules. Exchanges 
should be operated under a consistent set of Federal rules.
    Setting rating bands is all about which part of our population 
subsidizes which other part. In making policy decisions, we need to be 
mindful of how reforms may impact different segments of the population. 
While the very purpose of an insurance pool is to spread risk, how much 
should a 23-year-old with a lower than average income pay to lower the 
rate for a 60-year-old with a higher than average income? It's only 
when we truly reduce the cost of health care that we will be able to 
provide affordable coverage. The National Association of Insurance 
Commissioners should be asked to provide recommendations on rate bands; 
once set, they should be reviewed periodically to ensure rate bands are 
not unfairly and adversely affecting different segments of the 
population. These bands should offer a cap but should not be so tight 
as to make insurance unaffordable for too many Americans.
Small Group 10 to 50
    For small businesses with between 10 and 50 employees, 85% of whom 
offer their employees (about 38 million people) health insurance, we 
need a package of solutions that makes the current market work better. 
I believe the intent of the Small Business Health Options Program 
(SHOP) Act is the right approach, as it provides a package of solutions 
intended to address the major issues for these small businesses--rate 
volatility and affordability of coverage. We support:

      Allowing groups to keep what they have.
      Individuals entering the exchange if their employer 
doesn't offer coverage.
      Rating rules that are consistent nationally (and 
consistent in and outside the exchange)--rating rules should not be set 
in statute.
      Overall age band of 5 : 1.
      Subsidies for the costs of high-risk individuals.

    I would call on the Committee to leave some details to regulation, 
understanding that making our new model work will require time and 
experience. This would allow greater flexibility in meeting different 
consumer needs and expectations. Examples on this point include benefit 
package design, where we need not legislate in a ``one-size-fits-all'' 
manner. Rate banding is another example; while moving to a national 
standard is advisable, we need to allow for flexibility in designing 
rate bands that are based on actuarial modeling and reflect our 
collective intent to expand access and increase affordability. This may 
take some experience with a new system to get right.
The Public Plan
    I've been asked whether we could compete with a public plan. All 
things being equal, I would say, yes, we can provide better value, 
quicker innovation and do a better job in areas such as wellness, 
prevention, and chronic disease management.
    However, everything I have read so far says that a public plan 
would pay providers Medicare rates or something close to them and would 
control the delivery of care itself. The government would be, in other 
words, setting prices for services and paying below what providers 
consider to be market rates. There is no competition in this scenario. 
And, the government is missing the point--it is not how much we pay 
that is the problem, it is what we pay for that caused high-volume 
consumption of health care services. If everyone is paid at the same 
rate, how does that spur competition?
    It would be extremely difficult for the government to be both a 
player and a referee. I cannot support this kind of public plan and see 
it as a danger to the stability of community and rural hospitals and to 
health care overall. It would lead to continuing to reward episodic 
care, as opposed to care management. It will be costly to implement, 
taking dollars away from an already burdened health care system. And, 
it could be a plan of last resort, creating a new problem for us to 
manage.
Conclusion
    In closing, I want to be clear that we seem to have many more areas 
of agreement than we do areas in dispute. By making insurance coverage 
a matter of personal responsibility, you are laying the groundwork 
needed to help resolve the problem of access for so many of the 
Nation's uninsured. And, this requirement would serve as a key building 
block for other important reforms, such as guaranteed issue regardless 
of the consumer's health status and preexisting conditions.
    I also hope you will take away from this discussion how vital the 
private sector is to innovation. Whether we're talking about health 
care product designs, quality measures or payment system reforms, the 
private sector has worked with employers and consumers to find new ways 
of delivering innovation and value to an ever-changing marketplace. 
With changes in the regulatory system, that value can be compounded 
many times over. We are an integral part of the health care system that 
will continue to deliver real value and new ideas if allowed to 
participate on a level playing field.
    That is why a public plan option makes such little sense for health 
care consumers going forward. If we get everyone in the system and 
implement needed reforms across the individual and small group markets, 
it serves little purpose to weaken the ability of private insurance to 
deliver the level of service and value that so many Americans are happy 
with today.
    Thank you for the chance to offer our perspectives and 
recommendations. We look forward to working with you to pass meaningful 
reform that addresses affordability, access and quality. I'm confident 
that, together, we can arrive at a solution that America can afford, 
and we can get it done this year.

                                 

    Chairman RANGEL. I'm going to call on the Chairman of the 
Subcommittee, Mr. Stark, to welcome you, but again, you're an 
outstanding panel. I've been talking, Mr. Stark would miss the 
camp and we haven't, and we have thought that in order to get 
the maximum of the benefit that we know another cluster of 
votes are going to take place on the floor. So, if we ask our 
witnesses to restrict their comments to 3 minutes and our 
Members that are here to 3 minutes, we might avoid the 
collision with the people on the floor and get the benefit of 
all of your questions in. So, Mr. Stark, would you welcome Dan 
Baxter. And I've already introduced them all.
    Mr. STARK. Dr. Baxter, would you like to inform us, in any 
way that you're comfortable?

STATEMENT OF DANIEL BAXTER, M.D., MEDICAL DIRECTOR, WILLIAM F. 
                 RYAN COMMUNITY HEALTH NETWORK

    Dr. BAXTER. Thank you, Chairman Rangel, Ranking Member 
Camp, and distinguished Members of the Committee.
    I am the Chief Medical Officer of the William F. Ryan 
Community Health Center in New York City, which is named after 
a beloved, former colleague of yours. The vast majority of 
Ryan's 40,000 patients represent those groups most often left 
behind in our health care system, including the poor, working 
poor, racial or ethnic minorities, those publicly and privately 
insured, and those that have no insurance at all.
    In fact, in the last year the percentage of patients at the 
Ryan Center with no health insurance rose from 20 percent to 25 
percent. In our waiting rooms and in the faces of our patients 
we are privileged to serve, we witness the urgent need for 
fundamental health care reform. From the perspective of the 
Nation's health centers, current public programs are uniquely 
qualified to meet the needs of our most vulnerable communities.
    Patients can access not just primary care, but the full 
spectrum of services tailored to meet their individual and 
family needs. Despite chronic funding shortfalls and patients 
with multiple medical conditions, community health centers have 
demonstrated a record of quality care and cost control 
unmatched in the health care system. For all of these reasons 
we applaud the Committee's inclusion of a public plan option as 
part of health reform. Not only are current public programs the 
only insurers that cover our low-income and medically 
underserved patients, they are also the only payers that 
recognize the unique role of safety net providers such as 
community health centers, and also public hospital systems such 
as New York City's Health And Hospitals Corporation.
    The public programs are the only insurers that pay us 
adequately. By contrast, private insurers pay health centers 
less than 50 cents on the dollar for the care that the health 
centers provide; and, in fact, at the Ryan Center we have been 
forced to drop certain private insurance plans due to the 
unsustainable revenue losses from treating patients covered by 
these plans. It is our hope that as more and more patients gain 
coverage, a new public plan will follow the example set by 
current public payers by reimbursing health centers and other 
safety net providers appropriately and predictably for the care 
they provide.
    At the Ryan Center every day we see new patients who 
present with long-term, serious complications of treatable 
diseases, such as high blood pressure and diabetes, because of 
prior lack of access to primary and preventive care. Also, it's 
very common for us to see uninsured patients who cannot afford 
medically necessary but very costly outpatient investigation 
such as MRIs or cardiac stress tests. A properly regulated and 
monitored public health care plan will devote precious 
resources to ensure efficient and cost-effective care for such 
patients without being preoccupied with the need to balance 
medical care against profits.
    For more than four decades, long before the term became 
fashionable, community health centers have routinely practiced 
the model of care that has provided a genuine ``medical home'' 
for their patients. Even though many patients have complex 
problems, including daunting psychosocial issues, community 
health centers have met the challenges, preserving both cost 
effectiveness and quality of care.
    I want to applaud the house proposal for recognizing the 
need to preserve and expand this system of care by increasing 
funding for the new public health investment fund and for the 
``medical home'' demonstration bill. In conclusion, Mr. 
Chairman and honorable Members of the Committee, community 
health centers across America are proven, established, cost-
effective models that can bring their considerable experience 
and expertise to solving many of the challenges facing our 
system today. America's community health centers stand ready to 
provide you support and guidance as you negotiate final 
proposals in the coming weeks and months.
    Thank you for your time and attention.
    [The prepared statement of Dr. Baxter follows:]

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    Mr. STARK. Thank you for your patience and your 
contribution.
    Dr. Epperly.

          STATEMENT OF TED EPPERLY, M.D., PRESIDENT, 
             AMERICAN ACADEMY OF FAMILY PHYSICIANS

    Dr. EPPERLY. Chairman Rangel, Mr. Stark, Ranking Member 
Camp and Members of the Ways and Means Committee, I am Dr. Ted 
Epperly, President of the American Academy of Family 
Physicians, which represents 94,600 across the United States.
    On behalf of the academy I am pleased to testify today on 
your discussion on draft legislation to reform health care in 
this country. Your draft bill goes a long way toward providing 
quality, affordable health care coverage for everyone in the 
United States; a change AAFP has supported for two decades. We 
commend your leadership and we profoundly appreciate the 
inclusion of efforts throughout the draft to improve primary 
care.
    Achieving quality, affordable health care coverage for all 
will require a significant investment in the health care 
system; however, simply paying for more of the same fragmented, 
uncoordinated procedure-based health care will not make us 
healthier and we will not begin to control health care costs. 
Because of the cost-effectiveness of primary care services, one 
of the keys to reforming the health care system is to 
reemphasize the centrality of primary care and do so by 
supporting primary care including the patient-centered medical 
home, where every patient has a personal physician responsible 
for their care, emphasizing cognitive clinical decisionmaking, 
rather than procedures, aligning incentives to embrace value 
over volume and ensuring the adequacy of the primary care 
workforce.
    We appreciate your work with SGR. Medicare is a critical 
component of the U.S. health system and must be stable and 
predictable for patients and providers. Eliminating the past 
``scoring debt'' accumulated by this arcane, inexact, and 
clinically irrelevant SGR formula is critical to restoring 
stability and predictability. We applaud this and concur with 
the establishment of separate expenditure targets that place a 
greater emphasis on the cognitive clinical decisionmaking that 
is a hallmark of primary care.
    We also applaud the Committee for including a medical home 
pilot program in Medicare. The use of the PCMH by Medicare and 
other insurers can achieve savings while simultaneously 
improving quality. We further applaud the inclusion of 5 
percent bonus for primary care services, and up to 10 percent 
for those services provided in the health professionals' 
shortage area. And, Congress should make the primary care bonus 
permanent.
    The AAFP supports a health insurance exchange, a market 
where Americans can one-stop shop for a health care plan, 
private or public; compare benefits and prices, and choose the 
option that best meets their needs, much like Members of 
Congress and their families do. Patients should have a choice 
of health plans and a public plan should be among them. But the 
public plan should not be Medicare. While for transition 
purposes, there may be some similarities to the program, we 
urge Congress to de-link the public plan for Medicare by a date 
certain.
    Successful and sustainable health reform will require an 
adequate primary care physician workforce, equivalent to 
approximately 45 percent of the physician workforce. It also 
means not allowing unbridled growth of subspecialty training 
which fosters costly, fragmented care. The training of U.S. 
physicians is currently borne by Medicare to ensure an adequate 
primary care workforce for all Americans. GME funding should be 
derived from all payers.
    In conclusion the problems associated with primary care 
medicine are multifaceted and thus require multifaceted 
solutions. Payment, student scholarships, loan forgiveness and 
tax policy are all parts of the solution. Reforming the health 
care system is a complex endeavor. The status quo is not 
working. We urge Congress to invest in the health care system 
we want; not the one we have. Thank you very much.
    [The prepared statement of Dr. Epperly follows:]

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    Mr. STARK. Thank you.
    Ms. Policastro. Did I pronounce that correctly?
    Ms. POLICASTRO. You did a very good job. Thank you.
    Mr. STARK. All right. Would you like to proceed?
    Ms. POLICASTRO. Yes.

STATEMENT OF DONNA POLICASTRO, EXECUTIVE DIRECTOR, RHODE ISLAND 
  STATE NURSES ASSOCIATION, ON BEHALF OF THE AMERICAN NURSES 
                          ASSOCIATION

    Ms. POLICASTRO. Good evening, Chairman Rangel, Ranking 
Member Camp, distinguished Committee Members and congressional 
staff. Thank you for inviting the American Nurses Association 
to this timely discussion on health care reform. I am Donna 
Policastro, a certified nurse practitioner for 33 years, and an 
Executive Director of the Rhode Island State Nurses 
Association, speaking today on behalf of the American Nurses 
Association.
    The ANA is the only full service national association 
representing the interests of the Nation's 2.9 million 
registered nurses in all education and practice settings, and 
advances the nursing profession by fostering high standards of 
nursing practice, promoting the rights of nurses in the 
workplace, and sharing a constructive and realistic view of 
nursing's contribution to the health of our Nation. The ANA 
commends the work of the House Ways and Means, Energy and 
Commerce, and Education and Labor Committees.
    The tri-committee draft legislation clearly represents a 
movement toward much needed, comprehensive and meaningful 
reform for our Nation's health care system. ANA appreciates the 
Committees' recognition that in order to meet our Nation's 
health care needs we must have an integrated and well resourced 
national health care workforce policy that fully recognizes the 
vital role of nurses and health care providers and allows them 
to practice to the fullest extent of their scope.
    ANA remains committed to the principle that health care is 
a basic human right and all persons are entitled to ready 
access to affordable quality health care services. ANA also 
believes that a health care system that is patient centered, 
comprehensive, accessible and delivers quality care for all is 
something that should not be partisan or a political issue. ANA 
supports a restructured health care system that ensures 
universal access to its standard package of essential health 
care services for all individuals and families. That is why ANA 
strongly supports the inclusion of a public health insurance 
plan option as an essential part of comprehensive health care 
reform.
    We believe that inclusion of this public plan option would 
assure that patient choice is a reality and not an empty 
promise and that a high-quality public plan option will above 
all provide the piece of mind that is missing from our current 
health care environment. It will help make health care more 
affordable for patients, generate needed competition in the 
insurance market and guarantee the availability of quality, 
affordable coverage for individuals and families, no matter 
what happens.
    There are a wide variety of ideas currently circulating 
about health care reform, but all include discussion of 
prevention and screening, health education, chronic disease 
management, coordination of care and provision of community-
based primary care. As the Committee has clearly recognized in 
its draft, these are precisely the professional services and 
skills that registered nurses bring to patient care.
    As the largest single group of clinical health care 
professionals within the health care system, licensed 
registered nurses are educated in practice within an holistic 
framework that views the individual family community as an 
interconnected system that keep us well and help us heal. 
Registered nurses are fundamental to the critical shift needed 
in health services delivery with the goal of transferring the 
current sick care system into a true health care system.
    Our ends are backbones of the health care delivery system. 
Advanced practice registered nurses, in particular nurse 
practitioners and nurse midwives, are proven providers of high-
quality, cost-effective primary care. ANA nurses are strong 
supporters of community and home-based models of care. We 
believe that the foundation of a well-based health care system 
is built in these settings, reducing the amount of both money 
and human suffering that accompany acute care episodes.
    ANA supports the renewed focus on new and existing 
community-based programs, such as community health centers, 
nurse home visitation programs and school-based clinics. ANA 
supports the use of community-based, multi-disciplinary teams 
to support primary care through the medical home model. This 
model demonstrates the commitment to quality, coordinated care 
by all health providers, and represents a focus; not just on 
treating illness, but on emphasizing wellness and prevention. 
ANA is especially pleased that under this proposal nurse 
practitioners have been recognized as primary care providers 
and we'd be authorized to lead medical homes.
    In conclusion, I'd like, once again, the American Nurses 
Association thanks you for the opportunity to testify before 
this Committee. We appreciate your clear commitment to nursing 
and your understanding of the important role nurses play in the 
lives of patients and the system at large. Nurses are eager and 
willing to work with you to support and enact meaningful health 
care reform today.
    Thank you very much.
    [The prepared statement of Ms. Policastro follows:]

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    Mr. STARK. Thank you.
    And next we'll hear from Louise's husband, who is well-
acquainted with this Committee; and, I'm happy to introduce 
Chip Kahn, the President of the Federation of American 
Hospitals.
    Chip.

  STATEMENT OF CHARLES N. KAHN III, PRESIDENT, FEDERATION OF 
                       AMERICAN HOSPITALS

    Mr. KAHN. I hope Mr. Rangel, Mr. Stark, Mr. Camp, and 
others on the Committee will forgive me for my checkered past.
    On behalf of the Federation of American Hospitals I 
appreciate the opportunity to offer our views on the House Tri-
Committee Health Reform draft. FAH is the representative of 
over 1,000 investor-owned or managed community hospitals and 
health systems from across the country.
    President Obama and the Congress are right to place health 
reform at the top of the domestic agenda. The House draft 
provides a good starting point for reform. The draft raises the 
right issues. It gives us a roadmap to coverage for all 
Americans. I would cover four or five points about the draft. 
We'd make other points in the written testimony that I'll 
commend to the Members and then be happy to discuss if you'd 
like.
    First, after conversations with the Chairman, the members 
of FAH set the same goal as our highest priority--affordable 
coverage for all.
    [Brief power outage.]
    Mr. KAHN. And we demonstrated that through a proposal that 
we prepared, the health coverage passport, which shows that 
universal health coverage can be achieved by building on our 
current system. The House draft is consistent with the 
principles upon which we based our proposal. It subsidized 
those Americans who lack sufficient, disposable income, to 
afford coverage. It builds on the employer-based system. It 
includes insurance reform and it requires Americans to obtain 
coverage.
    However, the draft wavers from our prescription an 
important aspect of its health insurance exchange. The draft 
includes a public option. We understand President Obama and 
many of you feel strongly that there should be an alternative 
to private insurance and HMOs. But, in our view, the public 
option is not necessary to achieve successful reform and will 
leave clinicians and providers alike with insufficient payment 
to serve our patients. So we respectfully request that you 
consider a nonprofit or co-op model, if you believe eligible 
consumers should have other choices.
    Second, we understand that Congress is going to call upon 
hospitals to contribute to the funding of health coverage. We 
stand ready to participate if payment effects are fair; but, we 
feel strongly that fairness includes reimbursement reductions 
calibrated to take effect only with commensurate increases in 
coverage. Third, we deeply appreciate that the draft recognizes 
the multiple purposes of the safety net-oriented 
disproportionate share payment in Medicare and Medicaid and 
appreciate the thoughtful approach the Committee's taken toward 
that in the draft.
    Fourth, we appreciate the Committee draft taking a position 
on prohibiting physician ownership and referral to hospitals. 
We think you take a sensible approach on bundling. It needs 
research and it needs development. And, finally, we are very 
appreciative that on readmission policy you focus on those 
readmissions that are most vulnerable and ought to be assessed.
    Finally, the draft recognizes the need to use care measures 
to enable clinicians and hospitals to improve services for 
those they serve, and to give consumers information that will 
enable citizens and Americans to choose the right caregivers. 
However, the draft falls short in supporting the processes 
needed to make this quality happen. The draft does not 
sufficiently embrace the initiative developed by Stand For 
Quality, an organization of 200-plus multi-stakeholders. It 
includes patients, consumers, labor, clinicians, hospitals, 
nurses, employers; everyone involved in the health care system 
in any way.
    Stand For Quality has proposed new support for the National 
Quality Forum and the Agency for Healthcare Research and 
Quality, and recommended a closer, more formal communication 
and consultation between the government institutions that 
establish and oversee the Nation's quality agenda and the 
universe of groups outside government whose shared mission is 
to make quality happen. We hope you will review the 
recommendations of Stand For Quality and that they may be 
included in the mark that you will take up in the next few 
days.
    Finally, we deeply appreciate the invitation today and look 
forward to working with the Committee as the draft develops 
toward enactment.
    Thank you.
    [The prepared statement of Mr. Kahn follows:]

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    Mr. STARK. Chip, thank you very much for your contribution.
    Mr. Minnix, would you like to enlighten us, please?

    STATEMENT OF WILLIAM L. MINNIX, JR., PRESIDENT AND CEO, 
    AMERICAN ASSOCIATION OF HOMES AND SERVICES FOR THE AGING

    Mr. MINNIX. Thank you, Mr. Chairman, and distinguished 
public servants.
    I am Larry Minnix. I represent the American Association of 
Homes and Services for the Aging, 5,600 mission-driven 
organizations in everyone's community; everything from small, 
adult-based centers to very large and comprehensive retirement 
communities.
    I represent the issue nobody wants to talk about in health 
care reform, but everybody will face sooner or later if we live 
long enough, so it's time to confront it. And we believe that 
long-term services and supports can be a contributor to health 
care reform, not a detraction from it and a burden that many 
feel we cannot bear. So I want to talk about how we can finance 
long-term care through a public option as we look to the 
future, and some things that need to be done to improve the 
Medicare program.
    We certainly agree with the direction that you all are 
taking in health care reform and support the principles. From 
our standpoint, you are moving in the right direction as a 
matter of helping iron out the details. You may not realize it. 
While 40-something million Americans don't have health 
insurance, 250 million Americans are uninsured for long-term 
care. Ten million, 65 and older, on any given day are in need 
of long-term service and support, over 65. It's almost that 
many under 65, younger adults, with disabilities.
    There are 44 million caregivers, and they spend an average 
of 35 hours a week doing that job. It costs employers $2,000 a 
year for lost time, work, and stress-related illnesses. They 
spent out-of-pocket caregiving, $5,531 a year; $9,000 a year if 
they are a long-distance caregiver. The single biggest payer 
source is certainly Medicaid, and we have overburdened the 
Medicaid system with long-term care costs at $100 billion this 
year and growing. But families spend two and a half times that 
out of their own pockets.
    So we already have a huge problem. Now, what's the 
solution? We believe that the HELP Committee bill, the Class 
Act, if you will, that Congressman Pallone introduced to this 
body previously, and now is embodied in the HELP Committee 
bill, is a solution. We all, when we begin work, put into a 
national insurance pool; and any of us at any age get daily 
cash benefits to help the caregiving stay at home.
    For younger, disabled populations, it may be the difference 
between being able to work and not being able to work. Had a 
plan like this been in place today when the Pepper Commission 
recommended some kind of insurance model a generation ago, 
Medicaid expenditures for long-term care would be 50 percent of 
what they are today. So, if you think of what you could do with 
$50 billion to help us address the rest of the health care 
system, we also have some recommendations around improvement of 
the current Medicare program.
    You've heard some things about care management, transitions 
care, culture change in nursing homes. You look at some of the 
quality improvement things going on in nursing homes, 
especially around the advancing excellence campaign. Nursing 
home care can get better. We need to stabilize the financing, 
overhaul the public oversight to make it more modern and more 
accountable and transparent. All of those are fixable problems. 
None of it is going to work long-term though without a 
different approach to financing aging and disability-type 
services in what we believe is a public option.
    Private, long-term care insurance cannot do it. It has its 
place but it cannot do it, and Medicaid is the fallback for 
everybody and you all know what government-imposed poverty and 
asset transfer does. So we believe there's a solution, and 
let's wrap it into health care reform.
    [The prepared statement of Mr. Minnix follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. STARK. Thank you. Thank you very much.
    Dr. Warner will now click his heels three times and give us 
the Kansas solution to our problems.
    Welcome to the Committee, doctor.

 STATEMENT OF RICHARD B. WARNER, M.D., MEMBER, KANSAS MEDICAL 
   SOCIETY HOUSE OF DELEGATES, AMA ALTERNATE DELEGATE, PAST 
               PRESIDENT, KANSAS MEDICAL SOCIETY

    Dr. WARNER. Thank you, Mr. Stark, and Chairman Rangel, 
Ranking Member Camp and Members of the Committee.
    I am Richard B. Warner, M.D., from Overland Park, Kansas, 
and I appreciate the opportunity to talk with you about the 
reform of health insurance and its market. My perspective is 
that of a psychiatric physician in private practice. I am a 
recent past President of the Kansas Medical Society and a 
member of the Kansas delegation to the American Medical 
Association.
    I also serve on the Board of Directors of the Kansas Health 
Insurance Association, which administers the high-risk pool for 
the State of Kansas. In 2004 the Kansas Medical Society adopted 
a set of principles of health care reform to guide its staff 
and leadership in responding to proposals for health care 
reform, and these were updated in 2008. They form the 
underpinning of my remarks.
    The first point to understand about health insurance is 
that while it is a resource that helps people to be able to pay 
for medical care, it also aggravates the inflation of prices in 
the medical market. With third-party payers covering the 
largest part of medical expenses, people are insulated from the 
financial consequences of their health care purchasing 
decisions. The effect of that is profoundly inflationary, and 
we have a spiral in which a person needs health insurance to be 
able to afford care, but the insurance contributes to the 
higher and higher prices that we all see.
    We then see a variety of measures put in place to attempt 
to restrain prices in spending.
    The first KMS principle calls for a pluralistic, 
competitive delivery system, with choice of physician, facility 
and health plans; not only in private health plans, but to the 
extent practical, in publicly financed public health care 
programs as well. It suggests that the system should harness 
the power of choice, individual responsibility and market 
forces as a superior approach to a government-controlled 
system.
    Applied to the idea of a public option health insurance 
plan, it would raise a caution because of the risk that a 
government-designed, marketed, and funded health plan would 
eventually undermine the markets both for health insurance and 
health services. The likely price controls of such a plan would 
eventually bring about a shortage of services, as is starting 
to be seen in Medicare. A likely cost shifting as is now seen 
with Medicare and Medicaid and SCHIP programs would distort 
pricing in the private market and result in the crowding out of 
private plans.
    The second of the KMS principles calls for public policies 
which encourage the development of affordable, portable health 
insurance products, including those which emphasize greater 
consumer financial responsibility for their health care 
purchasing decisions, such as through the use of percentage-
based co-insurance and health savings accounts, combined with 
higher deductible insurance policies. These approaches would 
have patients participating in both the first and the last 
dollars of their transactions, which would offer a natural 
restraint to both utilization and price inflation.
    While asserting that all Kansans should have health 
insurance, the KMS principles state that mandating universal 
coverage by law is neither desirable nor likely. That would 
apply to both individual and employer mandates. To Federally 
mandate that individuals purchase health insurance would likely 
make it easier for States or the Federal Government to also 
insist on various mandated benefits, which would drive up the 
price of the insurance. To mandate employer purchase would lock 
more people into plans with very small risk pools and it would 
defeat the goal of individually owned and portable insurance.
    Finally, I would like to say a few words about the 
importance of the patient-physician relationship, which is 
based on the Hippocratic ideal of placing the patient's best 
interest ahead of one's own interest or that of any group. That 
relationship forms the moral bedrock upon which medical care 
rests; and, it is what allows patients to reveal whatever is 
necessary to properly diagnose and treat whatever may ail them.
    Financial and clinical systems should have as their mission 
to support what the patient and the physician undertake. 
Competitive markets in which no insurance plan, private or 
governmental, develops monopsony-like control will provide the 
best support. Allowing patients and physicians to privately 
contract for care also is a step toward them being able to 
shape care decisions in the best interest of the patient.
    Thank you for the opportunity and I look forward to 
discussing these ideas further.
    [The prepared statement of Dr. Warner follows:]
             Prepared Statement of Richard B. Warner, M.D.,
           Member, Kansas Medical Society House of Delegates,
     AMA Alternate Delegate, Past President, Kansas Medical Society
    Chairman Rangel, Ranking Member Camp, and Members of the Committee, 
I am Richard B. Warner, M.D. from Overland Park, Kansas, and I 
appreciate the opportunity to talk with you about the reform of health 
insurance and its market. My perspective is that of a psychiatric 
physician in private practice. I am a recent past President of the 
Kansas Medical Society and a member of the Kansas delegation to the 
American Medical Association. I also serve on the Board of Directors of 
the Kansas Health Insurance Association, which administers the high-
risk pool for the State of Kansas.
    In 2004 the Kansas Medical Society (KMS) adopted a set of 
Principles of Health Care Reform to guide its staff and leadership in 
responding to proposals for health care reform, and these were updated 
in 2008. They form the underpinning of my remarks today.
    The first point to understand about health insurance is that while 
it is a resource that helps people to be able to pay for medical care, 
it also aggravates the inflation of prices in the medical market. With 
third-party payers covering the largest part of medical expenses, 
people are insulated from the financial consequences of their health 
care purchasing decisions. The effect of that is profoundly 
inflationary, and we have a spiral in which a person needs health 
insurance to be able to afford care, but the insurance contributes to 
the higher and higher prices that we all see. We then see a variety of 
measures put in place to attempt to restrain prices and spending.
    The first of the KMS Principles calls for a pluralistic, 
competitive delivery system with choice of physician, facility, and 
health plans, not only in private health plans, but to the extent 
practical, in publicly financed health care programs as well. It 
suggests that the system should harness the power of choice, individual 
responsibility, and market forces as a superior approach to a 
government-controlled system. Applied to the idea of a ``public 
option'' health insurance plan, it would raise a caution because of the 
risk that a government-designed, marketed, and funded health plan would 
eventually undermine the markets both for health insurance and health 
services. The likely price controls of such a plan would eventually 
bring about a shortage of services, as is starting to be seen in 
Medicare. The likely cost-shifting, as is now seen with Medicare, 
Medicaid, and SCHIP programs, would distort pricing in the private 
market and result in the crowding out of private plans.
    The second of the KMS Principles calls for public policies that 
encourage the development of affordable, portable health insurance 
products, including those which emphasize greater consumer financial 
responsibility for their health care purchasing decisions, such as 
through the use of percentage-based co-insurance and Health Savings 
Accounts combined with higher deductible insurance policies. These 
approaches would have patients participating in both the first and the 
last dollars of their transactions, which would offer a natural 
restraint to both utilization and price inflation.
    While asserting that all Kansans should have health insurance, the 
KMS Principles state that mandating universal coverage by law is 
neither desirable nor likely. That would apply to both individual and 
employer mandates. To federally mandate that individuals purchase 
health insurance would likely make it easier for States or the Federal 
Government to also insist on various mandated benefits, which would 
drive up the price of the insurance. To mandate employer purchase would 
lock more people into plans with very small risk pools, and it would 
defeat the goal of individually owned and portable insurance.
    Finally, I would like to say a few words about the importance of 
the patient-physician relationship, which is based on the Hippocratic 
ideal of placing the patient's best interest ahead of one's own 
interest or that of any group. That relationship forms the moral 
bedrock upon which medical care rests, and it is what allows patients 
to reveal whatever is necessary to properly diagnose and treat whatever 
may ail them. Financial and clinical systems should have as their 
mission to support what the patient and the physician undertake. 
Competitive markets in which no insurance plan, private or 
governmental, develops monopsony-like control will provide the best 
support. Allowing patients and physicians to privately contract for 
care also is a step toward their being able to shape care decisions in 
the best interests of the patient.
    Thank you for the opportunity of sharing these brief remarks. I 
look forward to discussing them further with you.

            Sincerely,

                                            Richard B. Warner, M.D.

                                 

    Mr. STARK. Mr. Chairman.
    Chairman RANGEL. I'll be brief. I just want to thank this 
panel. I want you to know the diversity of the interest in this 
subject matter and the fact that we are dealing with a 
discussion draft allows us to try to perfect some of the things 
we have. And as far as the Ryan Community Health Center and 
health centers around this country, whatever you do, I wish we 
could page it.
    But, one of the things is that we recognize that doctors 
and nurses have to spend so much for their education and 
sometimes they can't do what their hearts and minds want done. 
They can't afford to practice the medicine; and so we are 
providing that in a larger group to let doctors do what doctors 
want to do. And, certainly we hope at the end of the day 
everybody can be on board.
    Chip Kahn, you may remember when we met a couple of years 
ago, we knew it wasn't going to be easy. We knew it was going 
to be compromise and we still are working on that. And I heard 
your concerns about the public health options. This is what I 
don't understand. It appears to me that doctors have people 
coming in, dish notwithstanding, that just can't afford the 
services that you provide.
    It seems to me, even though it may be risky to say that if 
you can't get it, that's in that inveterate no-insurance, 
you've got to get some money; that some way or other somebody's 
got to pay for their care. It just doesn't go away. And so 
however it is, it would seem to me if I was running hospitals, 
I would say, is it true that the Congress is going to give 
insurance to 50 million people? Is it true that half of that 
number that under insurance will get decent policies?
    Is it true that we can dedicate ourselves to health care 
and not check and see how much each and every patient has and 
how we have to spread this to people who are already paying 
high premiums? How does that opportunity to do what hospitals 
want to do without having been concerned with their budget? 
What has that got to do with the public health option people 
who would be uninsured that may end up in your hospital and 
they come in with an insurance policy in their hip pocket and 
say doctor, whatever you have to do we're prepared to pay?
    Mr. KAHN. Let me say two things about that, Mr. Chairman.
    On the one hand--and the bill does include insurance reform 
for the individual, individual market, and for those in some 
level of small group--you are going to create the health 
insurance exchanges. And you are going to call for in the 
health insurance exchanges a radical, which we support, change 
in the regulation of insurance. You are going to have guarantee 
issues. You are going to have guarantee renewability. You are 
going to have very limited preex. You are going to have 
whatever rate bands you have that are very narrow, and you are 
going to be watching those guys like a hawk. And it's going to 
change how insurance is offered to individuals, particularly. 
So we think that's a good thing.
    Chairman RANGEL. Isn't that good? Isn't that terrific?
    Mr. KAHN. We think it's a good thing, and what we want to 
do is see how that works. And from our standpoint, the public 
option we think on top of that would make it sort of too 
difficult. And let me make one other point which is we 
understand, and we can argue about what kind of crowd-out 
there's going to be. But at least in the individual market 
there are 15 million people that have coverage today that are 
individuals; and a lot of those people are going to come into 
the exchange, because they are going to be able to do it.
    And, right now, they have coverage, probably have 2,500, 
5,000 deductible; pay a lot for that. They're going to pay less 
in the exchange, but also, quite frankly the policies they have 
now pay hospitals a heck of a lot more than the private 
insurers are going to pay hospitals inside the exchange before 
you even add Medicare. And with all due respect, in the bill, 
all the public option would pay hospitals is Medicare. And, 
frankly, with the expansion of Medicaid, which we support but 
which would affect about 50 percent of the uninsured, you 
combine that with a public option that could be sizeable that 
adds more Medicare payment and does crowd-out some private 
business that we now get better payment for, it could cause us 
a problem.
    So we would rather see the reforms take place in the 
insurance market; and, then, if it doesn't work, if you need to 
have this public option, you can always do it. Congress can 
always come in and do it in the future, but we think from the 
get-go it's something that ought to be avoided and that's why I 
took the position I did. But we want to be supportive and 
helpful of you as you develop the legislation and figure out a 
way to make it work.
    Chairman RANGEL. Well, you came in on the ground floor. You 
gave your support and you gave your opposition; and that's what 
we're encouraging everyone to do. Give this historic 
opportunity a chance, and I just want to thank you, because you 
came in early on. You are pre-Obama.
    Mr. KAHN. Thank you, Mr. Chairman.
    Mr. CAMP. Well, thank you, Mr. Chairman.
    Mr. Kahn, obviously, if hospitals get Medicare-rate 
payments that's going to be a problem. And the Lewin Group 
estimates that would be a $36 billion cut to hospitals. Is that 
in line with what you estimate?
    Mr. KAHN. I've seen the Lewin numbers and I know there's a 
debate as to whether those, and I haven't seen the CBO numbers.
    Mr. CAMP. Look. Look, let's not talk about numbers. Do you 
think your member hospitals could continue to provide the best 
quality care to their patients if they got paid Medicare rates?
    Mr. KAHN. I believe that if we got paid Medicare rates only 
that would be a big problem for hospitals. I know we can get 
into a debate about MedPACs.
    Mr. CAMP. But they couldn't provide the quality of care 
they are providing now. Is that your answer?
    Mr. KAHN. I think if it was only a Medicare payment, but 
the problem is in the model in the bill, there's a big 
expansion of Medicaid, which is useful for the indigents who'll 
be covered, particularly the individual adults. But when they 
come to the hospital, we are going to get Medicaid rates. So 
we're not even talking about necessarily the Medicare side. We 
are expanding the Medicaid load.
    Mr. CAMP. But both of them cause a problem in the ability 
to provide quality care. Let's talk about care instead of 
numbers.
    Mr. KAHN. Yes, sir. And that's why I said we prefer to have 
a system in which at least from the get-go there's private 
insurance offered through the exchanges. That's our preference.
    Mr. CAMP. And I thought I heard from your testimony that 
you feel the bill as drafted would undermine employer-provided 
insurance, because you mentioned about people moving into the 
public plan and the pressures that would put on providers.
    Mr. KAHN. Now, what I said in my testimony regarding 
employers is.
    Mr. CAMP. It was in answer to a question. It wasn't in your 
written testimony.
    Mr. KAHN. Yes, at the end, I guess 4 or 5 years from now 
when all the employers could potentially become eligible for 
the exchange, we are concerned that the public option could 
grow. Obviously, that would be up to the individuals that were 
sent into the exchange by the employers, but we are concerned 
about that. Yes, I think there could be on the price.
    Mr. CAMP. Okay. Thank you.
    Dr. Warner, look. Medicare pays physicians less than 
commercial rates; Medicaid even less than that. You know, a 
government-run plan paying Medicare rates would draw people 
from a private plan into the government plan. And what impact 
would that have on doctors? We've heard about the impact on 
hospitals, but what would that do on physicians and their 
ability to practice and give patients access?
    Dr. WARNER. I think it would have a deleterious effect, 
quite frankly. We know with Medicare today 97 percent of 
doctors ``participate with Medicare,'' but what that really 
means is that 97 percent of doctors have signed an agreement of 
participation. It doesn't really tell you how many doctors are 
welcoming patients into their offices. And, I know, certainly 
anecdotally, I am hearing from patients the difficulty they are 
having getting appointments with doctors. Particularly if they 
haven't been established with a doctor, to be a brand new 
patient, is getting harder and harder.
    If you spread that over a larger portion of the population, 
I don't even think it's a matter of whether you pay Medicare or 
Medicare plus 5 percent. The fact of the matter is you have a 
price-controlled arrangement, and price controls always, 
ultimately, lead to shortages. It has taken a long time to come 
to that with Medicare, but it has finally arrived, and it would 
arrive I believe with another similarly constructed program. 
That's why I suggest at the end of my comments the idea of 
allowing private contracting, which would allow a patient to 
use whatever benefit is available from the insurance. But also, 
contract with the physician for maybe nothing above that or 
something above it that is worked out by the patient and the 
physician and allows everybody much more freedom, and will 
probably result in many more doctors participating.
    Mr. CAMP. All right. Thank you.
    Mr. STARK. Thank you.
    Dr. Warner, as I read your testimony I would be better off, 
if I had a high deductible plan or a health savings account, I 
would perhaps be more careful how I spent my medical care 
dollars if I did that. Is that your position?
    Dr. WARNER. Yes, and I think you can generalize that from 
across the country.
    Mr. STARK. Let me ask you this, then. In the Overland Park 
area, what does an echocardiogram cost?
    Dr. WARNER. I couldn't tell you. I'm a psychiatrist.
    Mr. STARK. All right. How about knee surgery? What's the 
average cost?
    Dr. WARNER. It's expensive.
    Mr. STARK. You don't know. Okay. How about just an E&M, 15-
minute visit? Do you know what that costs in the Overland Park 
area?
    Dr. WARNER. I couldn't tell you Congressman. I know my own 
fees.
    Mr. STARK. Doctor, you just made the case. You are the 
expert and you don't know what this stuff costs. How in the 
hell would I know what it costs as a pedestrian if a physician 
practicing in the community has no concept of what these things 
cost? How do you expect the poor patient to be able to 
negotiate this without knowing the cost? It's just ridiculous.
    It's a wonderful thing to suggest that I should be able to 
keep track of my own costs, but if a doctor doesn't know, how 
do you expect a patient who can't spell most of these things to 
know? It just doesn't make any sense. What you want to do is 
just kick these guys out and not let them get the services they 
need. I think that is just the most ridiculous thing. The 
health savings accounts and the rest of these things are tax 
avoidance schemes that do nothing to deliver medical care.
    Chip.
    Dr. WARNER. Do I get to answer that, Mr. Stark?
    Mr. STARK. Well, you did answer it. You don't know what 
these things cost. How do you expect me to know?
    Dr. WARNER. I did not get a chance to answer your comment.
    Mr. STARK. Go ahead. How do you expect me to know if you 
don't know?
    Dr. WARNER. You will know, if you live in a world in which 
patients actually are paying the price of medical.
    Mr. STARK. Yeah, if they could get the price. But when the 
doctor doesn't know the price, how am I supposed to find it 
out, on the Internet?
    Dr. WARNER. Well, we have certain antitrust rules that 
prevent knowing other doctors' charges for things. So, if I 
know it, I know it anecdotally.
    Mr. STARK. You made your own case. You don't know the price 
of medical care and you expect your patients to know it.
    Dr. WARNER. I expect under a condition in which patients 
are actually participating in the price, they would know it.
    Mr. STARK. You don't actively participate in what you 
charge your patients? Come on!
    Dr. WARNER. When patients call me, I tell them right up 
front. Do you want to know what you're getting into? I tell 
them my fee and I tell them the arrangements.
    Mr. STARK. Doctor, you made your own case.
    Chip, just one issue. On the historical perspective, people 
have been suggesting that we have a BRAC-type Medicare Payment 
Advisory Commission that would basically set prices; and, we 
would just have to react yes or no, which would leave us pretty 
much out of the loop in establishing these things. Do you have 
a concern about that?
    Mr. KAHN. Well, I actually was working here on the staff 
when MedPAC was originally formed that's been discussed as the 
kind of entity that would have this kind of power. And I think 
MedPAC does great work in analysis in providing you advice and 
guidance, but I would be really reticent to sort of hand over 
to them something as important as setting payment rates. I'd 
say 60 or 70 percent of their ideas are great. But 30 or 40 
percent of their ideas aren't. And they really need to be 
adjudicated both either in the Department through a Secretary 
going through the regulatory process or, I think, the Congress 
ought to be on top of this. And I think Congress has done a 
good job.
    And, you know, I know a lot of people say well, gee, 
Congress can never act. But if you look over time, over the 
last 30 years of Medicare, whether it's DRGs, RBRVS, the 
Medicare Advantage program, there are plenty of times when 
Congress wanted to change things that could come in and do it. 
So I feel that things ought to stick with the regular order in 
the old fashioned way, and you're obviously going to make a lot 
of changes in this bill. Obviously, there will be new 
secretarial powers through this bill, but I would be very 
reticent to hand off to some kind of health board or super 
MedPAC your responsibilities, frankly.
    Mr. STARK. Thank you.
    Sam, Mr. Johnson, would you like to inquire?
    Mr. JOHNSON. Thank you, Mr. Stark.
    I'd like to tell you that the specialists know what the 
costs of medicine are, and docs are quite private about their 
cost estimates. And they can tell you in a New York minute what 
the cost is, if you go to the right guy.
    I think that was a bad line of questioning, frankly.
    You know, it's unfortunate that the Democrat bill contains 
a provision which would gut doc-owned hospitals, and prevent 
these facilities from adding hospital beds or additional 
operating rooms, et cetera, and force hundreds of hospitals in 
this country that are currently under construction to close 
their doors.
    Dr. Warner, as a physician, have you had any experience 
with physician-owned hospitals, and any thoughts about Federal 
regulation forcing them to shut their doors?
    Dr. WARNER. Well, I think it's unfortunate if Federal 
regulation results in the shutting of the doors of such 
facilities. I think they've become an integral part of many 
communities.
    Because of the investment of physicians in the facilities, 
you have extra care, I think, in the development of the 
standards and the programs of the hospitals. I can tell you 
that in the State of Kansas and in Wichita, the Sedgwick 
County, and Topeka, Shawnee County and the Metropolitan Kansas 
City area, of Wyandotte and Johnson Counties, we have programs 
in which specialists and facilities offer charitable care on 
referral from safety net clinics, and those facilities are 
operating fully in those programs, in some cases more than 
others, more than the community.
    And so I think they're certainly shouldering their burden 
of charitable care as well as providing excellent care and 
competition.
    Mr. JOHNSON. Thank you. They are in Dallas for sure.
    You know, the White House has published a list of options 
that include more than $100 billion in cuts from hospitals, 
pushing physicians out of the program. I think the Chairman 
said that he anticipates $500 billion to come from providers.
    So I'm guessing that the rest will come from new taxes of 
sorts. Soda maybe; cigarettes, you know, are taxed 61 cents to 
pay for children's health care.
    And we need about 22 million new people to start smoking to 
pay for that expanded program. Makes me wonder how many Cokes 
Americans would have to start drinking to pay for trillions of 
dollars in health reform.
    Dr. Warner, if Americans are drinking more soda and smoking 
more cigarettes, what's that going to do to the cost of health 
care in this country?
    Dr. WARNER. Well, I mean, you're describing a spiral. But 
let me also say it's a reservation I've had. Whether we've 
talked about it in the State of Kansas or we talk about it at a 
Federal level of using particularly cigarette taxes to support 
insurance payments, because we're looking to reduce the number 
of smoking at the same time that we're trying to draw revenue 
from that.
    And what you do is you set up a situation in which you 
can't possibly raise the revenues that you intend to use to pay 
for your program; and therefore you have to start looking for 
other ways to raise that. And some of those, I think, will 
probably not be too pleasant.
    Mr. JOHNSON. Thank you. Mr. Kahn, I think you would agree. 
I'm out of time, so I can't let you respond.
    Thank you, Mr. Chairman.
    Mr. STARK. Thank you.
    I'm sorry, Mr. Levin, would you like to inquire?
    Mr. LEVIN. Thank you.
    I was going to ask Dr. Warner a question. So let me start 
with you, Chip, welcome. It's nice to see you again.
    So you basically represent hospitals, right?
    Mr. KAHN. Yes, sir.
    Mr. LEVIN. You know, and I think the spirit with which you 
come is important and is constructive. And I think our 
questions relate to how you implement that spirit.
    And by the way, I'm sorry Dr. Warner had to leave.
    I just want to say that, maybe for the record--I'm sorry he 
had to leave--with third parties covering the largest part of 
medical expenses, people are insulated from the financial 
consequences of their health care purchasing decisions. And 
then it goes on to say it's profoundly inflationary.
    I just urge everybody to talk to a family that has had 
illness in the family, of any extensive nature, and ask them 
what it means to say that the prices paid should be a matter of 
discussion and bargaining between the patient and the provider.
    I think for a rather minor procedure, maybe that works. But 
for a chronic illness--even I mean, say knee surgery, we're 
going to have patients negotiating with providers about the 
cost of the knee surgery? It's hard enough to explain to 
patients what knee surgery is all about.
    And I've met a number of people who have had knee surgery 
and they have trouble explaining the wonders that the physician 
performed.
    So I find that so unrealistic, and Mr. Stark tried to get 
at that, and I just think it's worth repeating.
    All right. So you represent hospitals. And you say in terms 
of the public, in terms of an option, ``it does not disagree 
that an alternative could be beneficial,'' but then you kind of 
shy away from a public option, and you want some kind of a co-
op, which I don't think most of us quite understand.
    And then you talk about the price setting. For the 
hospitals you represent, who sets the payment that's received?
    Mr. KAHN. Well, in terms of Medicare, it's set by 
regulation. Medicaid is a State-by-State basis, but it's 
basically set----
    Mr. LEVIN. So the government----
    Mr. KAHN. And then the private sector payment is negotiated 
in almost all cases.
    Mr. LEVIN. And so for Medicare and Medicaid, we know it's 
government.
    Mr. KAHN. Mm-hmm.
    Mr. LEVIN. And my time's up. Except to ask you, tell us 
some day when you come to our offices about the negotiations 
that go on between hospitals and insurance carriers and how 
much true collective bargaining there is between the hospital 
and the instructed carrier as to the fee you receive.
    Mr. KAHN. I actually can say that, I mean, most of my 
companies probably have, you know, 1,300 or 1,500 contracts per 
hospital. And I can say that there's a lot of give and take 
between the Blue Cross plans, between the large carriers, and 
the PPOs and the hospitals. I think if----
    Mr. LEVIN. That's----
    Mr. KAHN. If Bev Wallace was here, who works for one of the 
companies, she could, you know, make your hair stand on end in 
terms of the contentiousness of those deliberations.
    Mr. LEVIN. Okay. We'll talk about that soon, but my time is 
up.
    Mr. KAHN. Okay.
    Mr. STARK. Mr. McDermott, would you like to inquire?
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    Dr. Epperly, welcome. University of Washington is well 
represented here today.
    Dr. EPPERLY. Thank you.
    Mr. MCDERMOTT. You are a perfect example for us to get a 
response to a question I've had. Washington, Alaska, Montana, 
Idaho, and Wyoming are all covered by the University of 
Washington Medical School. They put students all over 27 
percent of the United States land mass.
    Those young people go out there and are trained in rural 
areas; but at the end of their training, not very many of them 
go back out to those places in Idaho and Montana and Wyoming. 
And I think it's largely because of debt.
    So I made a recommendation that we would have a tuition-
free at State medical schools in exchange for 4 years of 
service in primary care.
    Now you've also had to do with the Uniformed Services, so 
you know you go to medical school, you have a requirement when 
you come out. What percentage of the University of Washington 
students would sign up for that kind of a tuition-free 
education and guarantee that they would serve 4 years in a 
designated area where they were underserved?
    Dr. EPPERLY. Excellent question, Mr. McDermott.
    I would say to you that hard to know for sure, but more 
than are now. Maybe 20-25 percent. You're exactly right. I 
chose the United States Army to pay for my medical school. Once 
I got accepted to the University of Washington, I served for 4 
years, then it became a 21-year career for me.
    I would have happily served back in my home State of Idaho 
if that had been offered to me as a scholarship.
    So I very much support your thought in terms of if we can 
look at scholarships or loan repayment to try to create a 
workforce of primary care physicians, I think there's a lot of 
merit in that, and I think you'd have a lot of takers in that.
    A lot of these kids from those areas are looking for 
something to help them, so that they don't end up choosing a 
sub-specialty as a default to their financial loans.
    Mr. MCDERMOTT. Let me give you another element to that. One 
of the programs we have is the Health Service Corps. People go 
through medical school, accumulate $200,000 worth of debt, and 
say ``Oh, my God, what can I do about it?'' And they jump into 
the Health Service Corps.
    I contend that you would be better off to get them up 
front, agreeing that that's what they were going to do, so that 
they would train to be a general practitioner, or whatever you 
want to call it, primary care servicer, and that it would also 
change the teaching in the medical school.
    Dr. EPPERLY. Mm-hmm.
    Mr. MCDERMOTT. That it would be directed at making them 
prepare to go out.
    You've been involved in training programs and everything 
else, and I went to medical school like you did, where you were 
trained by specialists, who trained you in their little area. 
And I never saw any of that stuff when I got out.
    So I'm looking at the ability--of better to have them up 
front make the commitment than at the end, when they're 
suddenly facing a huge debt.
    Dr. EPPERLY. Excellent question. Totally agree with you. 
Scholarships on the front end will align the workforce better 
than a loan repayment on the back end.
    If you can have people desire primary care on the front end 
and make that decision, it will hold them in place to do that.
    On the back end, with loan repayment, they can drift off 
into all sorts of areas. You may not capture the workforce 
you're trying to create.
    Mr. MCDERMOTT. What number of people stay in primary care, 
once they're trained?
    Dr. EPPERLY. Once they're trained, meaning after residency? 
Or after medical school?
    Mr. MCDERMOTT. Yes. After their residency, they go out into 
primary care. How many of them stay?
    Dr. EPPERLY. In Family Medicine, almost all of them, 98-99 
percent. And in Internal Medicine, however, 98 percent will 
sub-specialize. And in Pediatrics, 85 percent will sub-
specialize into sub-specialty areas.
    That's why we're facing such a crisis with primary care. 
We're not getting them to stay in General Medicine or General 
Pediatrics. Family Medicine, family physicians are staying in 
that area.
    Mr. MCDERMOTT. And if we did those same scholarships for 
nurses and PA's?
    Dr. EPPERLY. I think it's a great idea.
    Mr. MCDERMOTT. Thank you.
    Mr. STARK. Thank you.
    Mr. Thompson, would you like to inquire?
    Mr. THOMPSON. Yes, I would. Thank you, Mr. Chairman.
    I want to just follow up on what Dr. McDermott had to say. 
It's tough in rural areas to recruit and retain providers. And 
I represent one of those areas. And in addition to recruiting 
and retaining them, we have an aging problem.
    So 48 percent of the docs in my district are over 50 years 
old, 30 percent are over 60 years old. So it's a problem that's 
not getting better. And we need to be able to figure out how to 
solve that, or all of our efforts on health care reform are 
going to be for nought.
    Dr. Baxter, you're from New York, and I don't know if you 
were here earlier, but my questions to all the panels have 
dealt with it in part: Telehealth. And telemedicine is 
something that's generally talked about in regard to rural 
health care.
    But there's a lot of underserved areas in urban parts of 
the country, as well. And in your area, in your home State, 
would an expansion of telemedicine be helpful and help provide 
better care and bring the cost down?
    Dr. BAXTER. Absolutely, Congressman. And in fact, the Ryan 
Center has a form of telemedicine, in terms of having x-rays 
done onsite at Ryan, such as ultrasounds, chest x-rays being 
read immediately, with our referral hospital, St. Luke's 
Roosevelt Hospital.
    And well, of course, as you know, New York's a big State, 
and there are medically underserved areas, not only within New 
York City itself, but elsewhere.
    So I think that this is definitely an area that needs 
development, and as much as it's practical in a large urban 
setting, we're also trying to do that.
    In fact, we also for emergency preparedness have a 
relationship with specialty hospitals, say involving burns, so 
that if there were, God forbid, a major accident----
    Mr. THOMPSON. Excellent point. They use it in my area for 
treatment of prisoners too, so you don't have to spend a lot of 
money with guards bringing prisoners----
    Dr. BAXTER. Exactly----
    Mr. THOMPSON. So a lot of different applications----
    Dr. BAXTER. So for all sorts of applications, yes.
    Mr. THOMPSON. Thank you.
    Dr. Epperly, you're from Idaho, and certainly a State that 
falls into the rural category; but a big percentage of your 
health care is performed in metropolitan areas, so, sir, you 
would agree is underserved?
    Dr. EPPERLY. Yes.
    Mr. THOMPSON. Thank you.
    Dr. EPPERLY. And in fact we've used tele----
    Mr. THOMPSON. Just a yes was good. I've got just a little 
bit of time.
    Dr. EPPERLY. Yes.
    Mr. THOMPSON. I apologize.
    Ms. Policastro, I want you to mention, I want to hear from 
you on the idea of dealing with the scope of practice laws. 
Because I don't think we cracked this nut of fixing the primary 
care problems, unless we change how we deliver health care. And 
if we can't somehow figure out how to make sure advanced-degree 
nurses and physicians' assistants factor into this somehow--and 
you referenced it in your opening testimony--we're never going 
to get there.
    And any comment that you have I would appreciate.
    Ms. POLICASTRO. All right. I agree with you. You know, our 
scope of practice is defined within our own State's nurse 
practice act. So every State has a different nurse practice 
act, which is regulated by the board of nursing. For nurse 
midwives, many nurse midwives in some States fall under the 
board of medicine.
    So there's inconsistencies within the definitions and 
regulations of scope and practice per State. So we really need 
to put all those scopes back into alignment.
    Scope of practice generally means that I do not practice as 
a nurse practitioner beyond what I'm qualified to do. And 
that's when I would collaborate with other health care 
professionals to assist my patient in treating and assessing 
their problem.
    Mr. THOMPSON. Thank you very much.
    Thank you, Mr. Chairman, for your indulgence.
    Mr. STARK. Mr. Pascrell, would you like to inquire?
    Mr. PASCRELL. Thank you, Mr. Chairman.
    It's been a long day, Mr. Chairman, for all of us, and you 
would think our health system was in good shape, listening to 
the opponents of a public health plan. But when you look 
through all the data and statistics, I'm sure most of our 
panelists are a great panel--the person read that famous New 
Yorker article, chapter and verse, specifically the system that 
costs more, that doesn't necessarily translate into better 
care.
    We ought to take--that should be like 101. And that is what 
has led to the work at Mayo Clinic and Cleveland clinics and 
other places throughout the United States. Thinking outside of 
the box I think is very, very, very important.
    I think the system is upside down. What's up should be down 
and what's down should be up. And what we want to do is raise 
quality and reduce cost.
    Mr. Kahn, I think there's some merit in what you suggest, 
that perhaps we're moving too quickly in trying to do all of 
this together, rather than maybe concentrating on the savings, 
the changes in procedure that were recommending efficiency in 
the system of delivery; and then making judgments about what we 
need to pay for and how we're going to pay for it later on, 
with this experience.
    And the draft--the legislation doesn't go into effect, as 
you know, until 2013.
    So I might agree to some degree on those things; but I 
definitely disagree with you on some of the points. I just had 
a point and a question to ask you, if you will.
    You say it is non-negotiable, as you know, that the effort 
must be fully paid for, whatever we do here. We made that 
commitment, the President's made that commitment. I would hope 
all of us would be on the same page about fully funding for 
what we do, unlike what happened for the last 8 years, when we 
paid for nothing. Really.
    Mr. KAHN. Mm-hmm.
    Mr. PASCRELL. So we cannot make claims of addressing the 
impact that health care has on our economy by passing 
legislation that is fiscally irresponsible. I think we are 
committed to that, all of us.
    Some on the panels have pointed out that any pricetag 
should be considered in the context of the whole economy in 
overall health care spending, since they're so integrally 
connected. I think the President has done a fantastic job in 
relating the cost of health care to the overall economy. Pretty 
soon, one-fifth of every dollar will be health care.
    I agree with that approach. But unfortunately that means 
that we have to make some very tough decisions to pay for this 
package, whatever it winds up to be. And some folks are going 
to feel some initial pain.
    Several of the panel members have throughout the day 
understandably voiced concern about payment policies that 
affect their respective industry. And I can understand that. I 
can appreciate that.
    But in the absence of the savings options that you have 
expressed some concern about--I'm almost finished with the 
question--I invite you to present to the Committee what 
specific alternative Medicare savings options that the CBO will 
score as savings. What are your alternatives to present to us 
that the CBO would score as a savings that we could put into 
that column?
    Mr. Kahn.
    Mr. KAHN. Let me say first that the hospital community--not 
just the ones I represent--understand that there has to be a 
great deal of delivery reform, and we're very supportive of 
that. The delivery reforms in the short run are not going to 
pay for this bill, and we understand the bill has to be paid 
for.
    And we understand that the Medicare payment is one 
potential area for coming up with some funding for this bill, 
frankly. And with all due respect, I understand that, we're 
ready to work with the Committee, and obviously we need a fair 
situation.
    But I'll just be blunt with you. I can't sit here and 
negotiate with myself. I think it's really up to the Committee, 
as you did in the draft, to offer some Medicare policy and then 
hopefully offer us an opportunity to work with you.
    And what I said in my testimony was, what we asked for, 
one, is sort of fairness in terms of how these requests are 
made; and two, that you at least consider that if there are 
reductions made in payment, that those be calibrated over time 
with the increases in coverage, because hopefully as more and 
more Americans are covered, hopefully most of them won't go to 
the hospital, but some will, and we're ready to provide 
services for them. And that will increase revenues to 
hospitals.
    Mr. PASCRELL. With all due respect----
    Mr. KAHN. So I'm looking for a balancing in terms of that--
--
    Mr. PASCRELL. I understand that. And what you say makes 
sense. But the Chairman has gone out of his way since we 
started this process many weeks ago to make sure nothing is off 
the table when we get to that part of the legislation. We are 
not--as far as I know, nothing's been taken off the table.
    So I don't think we should exclude anything or be afraid to 
include anything at this particular time. And I think he's made 
it very, very clear. I support that situation, and it's not 
written in stone.
    Mr. STARK. Thank you.
    Mr. PASCRELL. Thank you, Mr. Chairman.
    Mr. STARK. You bet.
    Mr. Blumenauer, would you like to inquire?
    Mr. BLUMENAUER. Thank you, Mr. Chairman.
    Ms. Policastro, I appreciate your support and focus, your 
testimony and the need for a public option. But I wondered if 
you would be willing from the perspective of your experience or 
that of your organization, to elaborate on the potential 
problems of some of the compromises that are being floated 
about co-ops or public options that might be sort of a locally 
based public insurance plan, as opposed to a national uniform 
option, as envisioned in this legislation?
    Ms. POLICASTRO. Yes. The American Nurses Association is not 
in favor of co-ops. We are in favor of--for a better phrase--
pure public option to deliver health care.
    We believe that co-ops equal volume versus quality. We have 
seen historically that some co-ops, because of the way they're 
governed, are governed by the community in which they serve and 
the patients which they serve, but there have been barriers in 
the governance issues between the physicians who deliver the 
services and the patients who are members of those co-ops.
    So historically, I can tell you in Rhode Island, for 
example, many years ago, there was a group called the Rhode 
Island Health Association that is no longer in the State 
because it just didn't work.
    And the American Nurses Association believes purely in the 
public option. We believe wholeheartedly, we believe that the 
public plan will bring needed competition to the market, and 
that comparative effective research helps doctors and nurses 
make decisions about treatment in medical homes who encourage 
primary care.
    So we stand tall that we're against the co-op model.
    Mr. BLUMENAUER. Thank you. I missed the exchange. I had a 
previous speaking engagement. But I would like to, Mr. 
Chairman, enter into the record an article about Oregon's 
experience with it's last physician-owned hospital calling 911 
for assistance before it closed, if you wouldn't mind.
    Mr. STARK. Without objection.
    Mr. BLUMENAUER. Thank you.
    I would conclude on one last point. One of the areas that 
we've been working on, that there is bipartisan support, deals 
with end-of-life treatment.
    It's appalling that Medicare will pay for all sorts of 
procedures, test tubes, and needles; but we haven't figured out 
a way to reimburse a physician to sit down with a patient and 
the family at the most difficult time.
    A physician, it could be a nurse practitioner. But somebody 
in the medical arena to help people understand their choices, 
what they're facing, give them a sense of working through what 
the path is. We've got language, and I appreciate the Chairman 
and the staff working with us to incorporate some of what we've 
got in legislation.
    But I wondered if any of you have some thoughts about that 
advisability and the long-term consequences of meeting the 
needs of families in this condition?
    Dr. EPPERLY. Yes, sir. I would speak to that.
    It's such a valuable and important time in a person's life. 
As a family doctor, I deliver babies, I take care of people at 
the end of life. And both of those are incredibly important 
moments. And I would say to you the value of primary care in 
the patient-centered medical home is having that relationship 
with that individual and his or her family, so that you can 
make appropriate choices that meet the family's and the 
patient's need where they're at.
    There can be a lot of dignity and quality in those moments. 
There can be a ton of costs savings in those moments. I think 
that's all about the relationship with the patient, through 
that patient-centered medical home, to make those kind of 
decisions. That's what a return to primary care can do to the 
health care system. That's why it's important and it's 
foundational.
    Mr. BLUMENAUER. Thank you.
    Mr. STARK. Thank you.
    Mr. BLUMENAUER. I would just--may I ask one question that 
they submit later?
    Mr. STARK. Sure.
    Mr. BLUMENAUER. I won't ask for an answer, Mr. Chairman, 
now, but we have been working on legislation for a transitional 
benefit. There's a lot of talk about readmissions and there may 
be penalties here or something there.
    We think one of the ways to do that would be to provide a 
transitional benefit to be able to work with the patient. We 
would ask you to look at--there's a little bit in the language 
of the bill I think that needs to be strengthened. And any of 
you that have some reflections on that would be deeply 
appreciated in the days ahead, so that we're doing the right 
thing there.
    Thank you very much for your patience.
    Mr. STARK. Mr. Meek, would you like to inquire?
    Mr. MEEK. Yes, sir. Thank you, Mr. Chairman.
    Mr. STARK. Thank you.
    Mr. MEEK. I'd like to thank the panel for your testimony 
today. And you know, being from a State like Florida, we have 
just under 19 million people, some 4 million of those 
individuals are uninsured.
    We also have a population, 18 percent of Medicare 
beneficiaries that are duly ineligible, that would usually be 
ineligible for Medicaid or Medicare.
    And we know that there will be some folks falling through 
the cracks, even with the proposal that we have on the table 
now. I know that a lot of folks have been--and I've been 
listening to your testimony and also I've read some of your 
testimony--very concerned about what we're doing in light of 
reform.
    In a State like Florida that--talking about the 4 million 
citizens that are uninsured, and that's 9 percent of the 
Nation's uninsured population--I want to try to address 
especially States like mine that have a number of undocumented 
individuals that are there, that are running up costs as 
relates to our emergency rooms and other critical care 
facilities, not only around in our State, but throughout the 
country. How do you think we can best address these issues of 
the uninsured and the ineligible? How do we bring them under 
this tent that we're trying to put them under?
    Mr. KAHN. Mr. Meek, I'd like to say two things.
    One, I think that the tri-committee draft does preserve the 
disproportionate share payments under Medicare and Medicaid 
with a study to see what the interaction will be between that 
and reform. And clearly the undocumented aliens are going to 
fall through the cracks here. I assume they're not going to be 
involved in whatever reform is done.
    So that's particularly important for hospitals, because 
generally they end up at the hospital if they need health care, 
and most of that payment goes to hospitals. So that's 
critically important.
    Second, I think matched with the individual responsibility 
mandate that you have in the bill, and the subsidies and the 
expansions in Medicaid, it is really critical for hospitals 
that there be automatic enrollment, that when someone comes 
into the emergency room or enters into the hospital, and in the 
new world, once the reform goes into effect, and is not 
covered, that we have the ability to very seamlessly sign them 
up and get them covered there, so that one, if they have to pay 
something, they may have to meet their responsibilities for the 
coverage; but at least then they've got the coverage and they 
can carry that coverage forward, and we can provide the 
services in a way that always goes better when people have 
coverage.
    Mr. MEEK. Would it be fair to say even when you--and just 
real quickly to your question, and I appreciate it--would it be 
fair to say in some of these areas where we have the small and 
large counties, especially agricultural counties--in the State 
of Florida we have a tourism industry--we will have some 
individuals that will walk into the emergency room for care, 
that are going to be in the middle of--maybe be the wrench 
within the machinery----
    Mr. KAHN. Right----
    Mr. MEEK. To allow us to have this smooth transition that 
we would like to deal with. I didn't know if there were any 
add-ons or concerns. I know we want to study it. But I think 
there's a lot of documentation out there as it relates to that 
population, cost that hospitals cannot do anything there----
    Mr. KAHN. I----
    Mr. MEEK. Yes, sir----
    Mr. KAHN. I think if you reduce the uncompensated care, 
which you will through all the new people that are covered----
    Mr. MEEK. Mm-hmm----
    Mr. KAHN. And you maintain the level of the 
disproportionate share payments, or maintain them at a high 
level, I think you'll solve that problem. I think then there 
will be a buffer for the hospitals, for these people that fall 
through the cracks, and at the same time, there will be many 
more people in the hospital now who are insured, either through 
Medicaid because of new eligibility rules, or hopefully most of 
them through coverage through the bill.
    Mr. MEEK. I'm sorry, can Dr. Baxter, just very quickly, Mr. 
Chairman?
    Mr. STARK. Go ahead.
    Mr. MEEK. I'm sorry----
    Mr. STARK. Dr. Baxter.
    Dr. BAXTER. Yes. I think the goal, of course, is to keep 
undocumented immigrants from having to come to the hospital for 
very expensive care that could have been prevented if primary 
preventive care had been provided. And that's one area where 
community health centers, I think excel.
    We, of course, do not at the Ryan Center ask for any proof 
of citizenship. But it would be disingenuous of me to say that 
I really don't know whether or not we have undocumented 
immigrants.
    And I think part of the goal is to have a friendly, 
welcoming, safe place that mothers can bring their children in 
for vaccinations, people can come in for treatment of their 
diabetes.
    And so again, I think of course the role of my colleagues 
in the hospital system is important. But I'm sure that the 
Committee agrees that let's try to head them off at the pass, 
so to speak, before they really require hospital care.
    Mr. MEEK. Okay. Thank you. I'm over my time. I'm sorry. 
Thank you, Mr. Chairman.
    Mr. STARK. Thank you. And I would like to again thank the 
panel for their patience, their indulgence, and their guidance. 
We'll be talking to you, I'm sure, as we proceed the next week 
or two.
    And the Committee is adjourned.
    [Whereupon at 7:08 p.m. the hearing was adjourned.]
    [Submissions for the Record follow:]

                     Statement of Nancy G. Brinker
Testimony Highlights

      The Susan G. Komen for the Cure Advocacy Alliance 
appreciates the Committee's focus on prevention, early detection and 
chronic disease management, as well as the goal of access to 
affordable, high-quality health coverage for all, including those with 
preexisting conditions.
      There are two key access issues we recommend adding to 
the draft legislation: extending access to patient navigation services 
to help guide patients through the complex health care system, and 
ensuring access to clinical trials.
      As the House of Representatives finalizes legislation to 
reform the Nation's health care system, Members are asked to consider 
the unique needs of persons who are fighting or who have faced a 
disease like cancer, because they encounter the most challenging 
obstacles in the current U.S. health care system.

Introduction

    Mr. Chairman, Ranking Member and Members of the Committee, the 
Susan G. Komen for the Cure Advocacy Alliance appreciates your 
attention to prevention, early detection and chronic disease management 
in the health care reform draft proposal released earlier this month. 
We support your goal of ensuring access to affordable, high-quality 
health care for all Americans, including people who are currently 
deemed uninsurable because they have a preexisting condition like 
cancer.

Komen Advocacy Alliance's Principles for Health Reform

    The Komen Advocacy Alliance is the nonpartisan voice for more than 
2.5 million breast cancer survivors and the people who love them. Our 
mission is to translate the Komen promise to end breast cancer forever 
into action at all levels of government to discover and deliver the 
cures. Cancer patients and survivors have some of the most challenging 
experiences with the health care system at a time in their lives when 
they are most vulnerable. Thus, the Susan G. Komen for the Cure 
Advocacy Alliance believes that health reform must:

      Increase investment in Federal and State programs for 
underserved patients.
      Protect cancer patients from excessive out-of-pocket 
costs.
      Ensure access to affordable, high-quality insurance for 
all, including those with preexisting conditions.
      Enhance quality and value by focusing on prevention, 
wellness, and chronic disease management.
      Address the shortage of cancer care specialists.

Additional Issues to be Considered
    The health care reform draft proposal addresses many of these 
priorities. However, there are two additional issues that should be 
included in the bill: Extending access to patient navigation services 
to help guide patients through the complex health care system, and 
ensuring access to clinical trials.
    Patient Navigation Services: We recommend that the Committee 
reauthorize and fully fund the Patient Navigator Outreach and Chronic 
Disease Prevention Act of 2005 (P.L. 109-18) for 5 years, FY2011 
through FY2015. Current authorization expires at the end of FY2010. 
Komen recommends enhancement of the original Act by adding minimum core 
proficiency standards for patient navigators.

      Navigating the complex health care system can be an 
insurmountable task for patients facing a complicated or chronic 
disease, especially if they are underserved, have a lower level of 
medical literacy, or do not speak or read English well. Patient 
navigators are trained to serve as personal guides and help people 
overcome obstacles to receiving timely cancer treatment and care. This 
includes obtaining financial resources, tracking appointments and 
coordinating transportation.
      Patient navigation is a proven concept that is cost-
effective, promotes prevention, saves lives, and addresses health 
disparities.
      Minimum core proficiency standards are vital because 
effective patient navigators should be culturally competent, good 
communicators, compassionate, and experts at navigating the health care 
system.
      The program should be fully funded; between FY2006 and 
the current FY2009, the Patient Navigator Act received only about $2.4 
million (in FY2008) of the $25 million that was originally authorized.
      There is significant support for the Patient Navigator 
program in the cancer community, and it is widely applicable to other 
chronic diseases.

    Access to Clinical Trials: Part of ensuring access to cancer care 
includes access to clinical trials. Barriers to clinical trials must be 
removed for all patients--including cancer patients--without regard to 
the type of health insurance plan or health status. This can be 
accomplished by (1) a codification in law of Medicare's current 
reimbursement policy for routine expenses for patients in approved 
clinical trials, and (2) making needed changes to ERISA, the Public 
Health Service Act and the Internal Revenue Code to accomplish the same 
policy for private insurance plans.

      Each year, thousands of people gain access to the 
highest-quality cancer care and receive new treatments before they are 
widely available by participating in a clinical trial. Millions more 
benefit from the findings. Yet, while more than 1.4 million Americans 
are diagnosed with cancer each year, fewer than 5 percent will 
participate in an approved clinical trial.
      Some health insurance companies do not cover routine 
medical care expenses for patients enrolled in approved clinical 
trials, or refuse to cover complications that sometimes occur during 
the course of an approved clinical trial. Failure to cover these items 
may mean otherwise eligible people are turned away, or are exposed to 
high out-of-pocket costs when they encounter complications.
      These issues could be addressed by including language 
from the ``Access to Cancer Clinical Trials Act'' (S. 488) by Senator 
Sherrod Brown (D-OH).

    Attached to this testimony are more detailed comments on the health 
reform draft proposal, including the importance of patient navigation 
and clinical trials, as well as the need for a continued focus on 
prevention, wellness, chronic disease management and access to care for 
underserved populations.
             Susan G. Komen for the Cure Advocacy Alliance
              Comments on the Health Reform Draft Proposal
    Committee on Ways and Means, U.S. House of Representatives
    As your Committee continues deliberations on reforms to the 
Nation's health care system, we urge you to consider the unique needs 
and challenges of people with preexisting conditions like cancer. 
Cancer patients and survivors have some of the most challenging 
experiences with the health care system at a time in their lives when 
they are most vulnerable. Thus, the Susan G. Komen for the Cure 
Advocacy Alliance calls on your Committee to:

      Increase the investment in Federal and State programs 
that provide cancer screening, treatment and patient navigation 
services for underserved populations.
      Protect cancer patients who have health insurance from 
excessive out-of-pocket costs that may lead to severe financial 
hardship and even bankruptcy.
      Ensure access to affordable, high-quality health 
insurance for all, including people with ``preexisting'' conditions 
like cancer--so everyone can continue to have health insurance, even if 
they lose or change jobs.
      Enhance the quality and value of health care by focusing 
on prevention, wellness and chronic disease management.
      Address the chronic shortage of cancer care specialists, 
particularly in underserved areas.

1.  Increase the investment in Federal and State programs that provide 
cancer screening, treatment and patient navigation services for 
underserved populations.

    PROBLEM: Almost 46 million Americans lack health insurance.\1\ 
Without reforms, the number is projected to climb another 7 million or 
more by 2010, due in part to rising health costs and high 
unemployment.\2\ Lack of adequate health insurance has a decidedly 
negative effect on cancer screening rates, as well as the stage at 
diagnosis and a person's chances of survival: \3\
---------------------------------------------------------------------------
    \1\ U.S. Census Bureau, ``Income, Poverty, and Health Insurance 
Coverage in the United States: 2007,'' August 2008. Available online: 
http://www.census.gov/prod/2008pubs/p60-235.pdf.
    \2\ Todd Gilmer and Richard Kronick, ``Hard Times And Health 
Insurance: How Many Americans Will Be Uninsured by 2010?,'' Health 
Affairs, Web Exclusive, w573-577, May 28, 2009.
    \3\ Elizabeth Ward, et al., ``Association of Insurance with Cancer 
Care Utilization and Outcomes,'' CA: A Cancer Journal for Clinicians, 
Vol. 58, No. 1, January/February 2008, p. 9-31.

      Patients with private insurance are more likely to be 
diagnosed at earlier stages, and are more likely to survive at all 
stages of diagnosis than the uninsured.
      Cancer patients who are uninsured--and those who were 
Medicaid-insured at time of diagnosis--are 60 percent more likely to 
die in 5 years than those with private insurance.
      In addition, disparities in cancer incidence and 
mortality rates must be addressed. For example, those with lower socio-
economic status and people in underserved areas are more likely to be 
diagnosed and are more likely to die from cancer.\4\
---------------------------------------------------------------------------
    \4\ American Cancer Society, ``Cancer Facts & Figures 2009.''

    As the ranks of the uninsured swell, demand grows for public health 
programs, including programs that provide cancer screening and cancer 
care services. Unfortunately, Federal and State safety net programs are 
dramatically underfunded, leaving huge gaps for the neediest Americans. 
---------------------------------------------------------------------------
For example:

      The National Breast and Cervical Cancer Early Detection 
Program (NBCCEDP) provides potentially life-saving cancer outreach, 
case management, and screening to low-income, uninsured and 
underinsured women. Yet, the program is so underfunded it is only able 
to reach less than one in five eligible women.\5\ The program is 
increasingly forced to turn women away or establish waiting lists for 
these vital services.
---------------------------------------------------------------------------
    \5\ See the Center for Disease Control's website for the National 
Breast and Cervical Cancer Early Detection Program. Available online 
at: http://www.cdc.gov/cancer/NBCCEDP/.
---------------------------------------------------------------------------
      All States allow underserved women to access Medicaid for 
breast or cervical cancer treatment if they are uninsured, need 
treatment for breast and cervical cancer, and meet other eligibility 
criteria. However, 20 States only allow this access to Medicaid if the 
woman's screening is funded by the State or tribal screening program--a 
large concern given the dramatic underfunding of those programs.\6\
---------------------------------------------------------------------------
    \6\ Tally of States based on M&R Strategic Services, ``Treatment 
Act Survey: Final Report,'' February 16, 2007, updated based on the 
experience of Susan G. Komen for the Cure Advocacy Alliance. The 
Treatment Act is the subject of a forthcoming report by the Government 
Accountability Office, which Komen helped initiate.
---------------------------------------------------------------------------
      Navigating the complex health care system can be an 
insurmountable task for many patients facing a complicated or chronic 
disease, especially when they are underserved, have a lower level of 
medical literacy, or do not speak or read English well. To address 
this, Congress passed the Patient Navigation Act, a pilot grant program 
to provide patient navigation services to those in need. Unfortunately, 
the Patient Navigation Act has received only a small portion of the $25 
million that was originally authorized.

    SOLUTIONS: As Congress overhauls the health care system, it must 
close the gaps plaguing Federal and State safety net programs that 
provide vital cancer screening, treatment and patient navigation 
services for our Nation's underserved populations.

2.  Protect cancer patients who have health insurance from excessive 
out-of-pocket costs that may lead to severe financial hardship and even 
bankruptcy.

    PROBLEM: Having health insurance does not necessarily protect a 
person from financial harm in the event of a health event like a cancer 
diagnosis:

      A recent survey of employer-sponsored health insurance 
plans shows employees' out-of-pocket spending grew more than a third 
between 2004 and 2007, while wages remained stagnant.\7\
---------------------------------------------------------------------------
    \7\ John Gabel, et al., ``Trends In Underinsurance And The 
Affordability of Employer Coverage, 2004-2007, Health Affairs Web 
Exclusive, w595, June 2, 2009.
---------------------------------------------------------------------------
      The exposure to high costs can be disastrous. A recent 
study by Harvard University found that half of all bankruptcy filings 
were partly the result of medical expenses, and 68 percent of those who 
filed for bankruptcy had health insurance.\8\
---------------------------------------------------------------------------
    \8\ Himmelstein, et al., ``Illness and Injury as Contributors to 
Bankruptcy,'' Health Affairs Web Exclusive, w563, Febrary 2, 2005.
---------------------------------------------------------------------------
      A national survey commissioned by the American Cancer 
Society Cancer Action Network shows one in five cancer patients has 
significantly or completely depleted their savings because of medical 
costs--one in seven has incurred thousands of dollars in medical 
debt.\9\
---------------------------------------------------------------------------
    \9\ Lake Research Partners and American Viewport conducted the 
survey, which was sponsored by the American Cancer Society Cancer 
Action Network, May 1 through 11, 2009, among a national sample of 
1,057 adults age 18 and older, in households with cancer or a history 
of cancer. Available online: http://www.acscan.org/pdf/healthcare/
reports/poll-05202009.pdf.

    Many health insurance policies have annual and lifetime caps on 
benefits or other limitations and exclusions. Patients may be exposed 
to large out-of-pocket expenditures because cancer treatments can be 
very expensive--some therapies run hundreds of thousands of dollars a 
---------------------------------------------------------------------------
year and may require extensive and long-term monitoring and followup.

    SOLUTIONS: Congress should protect patients from high out-of-pocket 
costs by reducing or eliminating annual or lifetime limits on the 
benefits, and possibly by establishing an annual maximum limit on out-
of-pocket medical expenditures.

3.  Ensure access to affordable, high-quality health insurance for all, 
including people with ``preexisting'' conditions like cancer--so 
everyone can continue to have health insurance, even if they lose or 
change jobs.

    PROBLEMS: For the 161 million Americans with employer-provided 
health insurance, a change in employment also likely means a new health 
insurance company with different benefits and network providers. But 
persons with preexisting conditions like cancer may run into 
challenges: \10\
---------------------------------------------------------------------------
    \10\ Karen Schwartz, et al., ``Spending to Survive: Cancer Patients 
Confront Holes in the Health Insurance System,'' Kaiser Family 
Foundation and the American Cancer Society, February 2009. Also see the 
Lake Research Partners and American Viewport survey.

      Cancer patients and survivors with employer-provided 
health insurance may lose jobs, change jobs, or have to cut back hours 
or leave a job during treatment--and lose their group health insurance.
      As a result, cancer patients or survivors may experience 
``job lock,'' in which they cannot leave their current job for fear of 
losing their health insurance. This runs counter to the trend of 
today's mobile workforce, in which people frequently move from job to 
job in pursuit of new opportunities.
      Even cancer survivors who have been in remission for 
years with a good long-term prognosis have trouble finding coverage in 
the individual market because of medical underwriting and the existence 
of their preexisting condition.

    Clinical Trials: Part of ensuring access to cancer care includes 
access to clinical trials.

      Each year, thousands of people gain access to the 
highest-quality cancer care and receive new treatments before they are 
widely available by participating in a clinical trial. Millions more 
benefit from the findings. Yet, while more than 1.4 million Americans 
are diagnosed with cancer each year, fewer than 5 percent will 
participate in an approved clinical trial.\11\
---------------------------------------------------------------------------
    \11\ American Cancer Society.
---------------------------------------------------------------------------
      Some health insurance companies do not cover routine 
medical care expenses for patients enrolled in approved clinical 
trials--or refuse to cover extra scans, doctor visits and drugs to 
address complications that occur during the course of an approved 
clinical trial.

    SOLUTIONS: Congress should require health insurance companies to 
provide coverage to all, with no preexisting condition limitations. In 
addition, barriers to clinical trials must be removed for all 
patients--including cancer patients--without regard to the type of 
health insurance plan. This can be accomplished by (1) a codification 
in law of Medicare's current reimbursement policy for routine expenses 
for patients in approved clinical trials, and (2) making needed changes 
to ERISA, the Public Health Service Act and the Internal Revenue Code 
to accomplish the same policy for private insurance plans. The issues 
related to clinical trials could be addressed by including language 
from the ``Access to Cancer Clinical Trials Act'' (S. 488) by Senator 
Sherrod Brown (D-OH).

4.  Enhance the quality and value of health care by focusing on 
prevention, wellness and chronic disease management.

    PROBLEM: The U.S. health care system often focuses too much 
attention on treating people once they become sick, and not enough 
attention on keeping people healthy or detecting chronic diseases like 
cancer early, when there are more treatment options and the chances of 
survival are often greater.

    Prevention, Early Detection & Wellness: Prevention saves lives. 
Applying proven tobacco control strategies could eliminate a third of 
all cancer deaths.\12\ Cancers related to obesity, physical inactivity 
and poor nutrition could also be prevented. And many of the more than 1 
million skin cancers that are expected to be diagnosed in 2009 could be 
prevented by protection from the sun's rays and avoiding indoor 
tanning.
---------------------------------------------------------------------------
    \12\ American Cancer Society.
---------------------------------------------------------------------------
    For other cancers, early detection is the key to survival. Regular 
screenings can detect cancers of the cervix, colon and rectum by 
detecting precancerous growths that can be removed, and can detect 
breast, colon, rectum, cervix, prostate, oral and skin cancers at early 
stages when they are most treatable.

      For breast cancer, the 5-year relative survival rate is 
98 percent when breast cancer is detected at an early stage, 84 percent 
for regional disease and 27 percent for distant-stage disease.\13\
---------------------------------------------------------------------------
    \13\ American Cancer Society, Breast Cancer Facts & Figures 2007-
2008, Atlanta: American Cancer Society, Inc. (Available online at 
http://www. cancer.org/downloads/STT/BCFF-Final.pdf).
---------------------------------------------------------------------------
      Yet, for women who are uninsured and underinsured, cost 
is a significant barrier to getting preventative care--only 67 percent 
of underinsured women over the age of 50 received a mammogram in the 
past 2 years, compared with 85 percent of adequately insured women.\14\
---------------------------------------------------------------------------
    \14\ Sheila Rustgi, et al., ``Women at Risk: Why Many Women are 
Forgoing Needed Health Care,'' The Commonwealth Fund, Issue Brief, May 
2009. (Available online: http://www.commonwealthfund.org/content/
publications/issue-briefs/2009/may/women-at-risk.aspx.)
---------------------------------------------------------------------------
      For women with health insurance or Medicare, even a 
relatively small copayment can significantly reduce mammography rates, 
particularly for underserved populations.\15\
---------------------------------------------------------------------------
    \15\ Amal N. Trivedi, et al., ``Effect of Cost Sharing on Screening 
Mammography in Medicare Health Plans,'' The New England Journal of 
Medicine, Vol. 358, January 24, 2008, pp. 375-383. (Available online: 
http://content.nejm.org/cgi/content/full/358/4/375). The study examined 
174 Medicare managed-care plans from 2001 through 2004, which included 
550,082 individual-level observations for 366,475 women between the 
ages of 65 and 69 years.

    Clinical Effectiveness: Komen supports the use of clinical 
effectiveness research (CER), which will arm patients and their doctors 
with the best available information on effectiveness and safety of 
drugs, devices and diagnostic tests. To that end, a comprehensive 
national comparative effectiveness research program should better 
identify the most effective health care options, and ensure information 
gained through CER is incorporated into clinical practice to better 
inform decisions made among patients, their health care providers and 
payers. A CER program should also link data from public and private 
entities to build upon existing data collection and research 
capabilities and support the development of ``personalized'' or 
---------------------------------------------------------------------------
stratified medicine.

    Coordination of Care and Survivorship Care Planning: A key aspect 
of chronic disease management is the coordination of care. To that end, 
cancer patients should have a coordinated plan for treatment and 
followup from the time they are diagnosed through the years of their 
survivorship. With a written cancer plan and the opportunity to review 
it in person with their doctor, cancer patients will better understand 
the process ahead, monitor their health, and participate in decisions 
about their care. And a written plan will help coordinate care among a 
patient's many doctors and providers, reduce medical errors, and 
ultimately improve patient care.

    SOLUTIONS: Congress should reduce or eliminate copayments or 
deductibles for preventative services like diagnostic imaging and 
screening, and should provide incentives for providers to focus on 
prevention, wellness and chronic disease management.

5.  Address the chronic shortage of cancer care specialists, 
particularly in underserved areas.

    PROBLEM: There is a shortage of cancer care specialists, 
particularly in underserved areas. This shortage will only intensify as 
the population ages, which will bring along with it a significant 
increase in the number of cancer cases each year. Congress clearly 
recognizes this is an issue. The economic stimulus package passed 
earlier this year included billions for community health centers, 
training for the health care workforce and an investment in health 
information technology.
    The promotion of a robust health information technology network 
could also help alleviate the shortage of cancer care experts, 
particularly in rural areas. Electronic medical records will ultimately 
improve health care quality for cancer patients by improving 
coordination of care. And it also allows for second opinions and 
reviews of patient records from anywhere in the world.

    SOLUTIONS: Congress should include provisions to strengthen the 
health care workforce by forgiving student loans, providing grants to 
increase faculty in nursing programs, providing financial incentives to 
encourage health care professionals to practice in underserved areas, 
and investing in health information technology. Congress should also 
encourage partnerships between community hospitals and large cancer 
centers.\16\
---------------------------------------------------------------------------
    \16\ Congress could consider building on the NCI's Community Cancer 
Centers Program, which is a pilot program to provide private medical 
surgical and radiation oncologists with close links to NCI research and 
the network of 63 NCI-designated Cancer Centers principally based at 
large universities. http://ncccp.cancer.gov/.

                                 
                    Statement of Albert B. (Al) Baca
    The intent of this paper is to explain why our Nation needs a 
``Single Payer'' system to pay for medical care. It is my hope that 
Sen. Brown will see fit to discuss the points documented in this paper 
with people whom he talks with.
    I would also deeply appreciate it if Sen. Brown's staffers in 
Washington can speak to the Senate Finance Committee staffers about the 
contents of this paper. Since the Obama Administration desires to push 
health care reform in this Congress, such a discussion with Senate 
Finance Committee staffers would be timely and pertinent.
    This medical horror story is about my 44-year-old daughter, Vivian 
A. (Vandy) Baca, who is almost completely disabled, cannot walk nor 
stand, draws SSDI, has Medicare and lives at home under the auspices of 
the State of Ohio Medicaid Home Health Care Waiver Program.
    Let me tell you about myself. I am a retired civilian employee of 
the Air Force. The past 4 years have been very hard on me because of 
the way that medical care is done in this country. To quote from two 
radio programs I used to listen to when I was a young kid: ``Taint 
funny McGee'' and ``What a revolting development this is.''
    For people outside of the Dayton, OH area who may not know, in 
2005, there was a gigantic squabble between Anthem Blue Cross and Blue 
Shield (BC/BS) and Premier Health Partners--i.e. Miami Valley Hospital, 
Good Samaritan Hospital, and the doctor groups directly associated with 
each hospital--concerning Anthem BC/BS payment of fees to Premier 
Health Partners for services rendered.
    The bickering lasted for all except 1 week of 2005. During that 
time many people in the Dayton, OH area suffered. One of those who 
suffered was my daughter, Vandy. The unfortunate thing is that Vandy is 
still suffering and she will continue to suffer for a long, long time. 
She may never quit suffering and return to normal.
    There is no doubt in my mind that the year-long squabble between 
Anthem BC/BS and Premier Health Partners was the direct cause of the 
medical horror story I am going to tell you. The story is not for the 
squeamish.
    Before I begin my story, I would like to state that because my wife 
and I are senior citizens, we both have Medicare as our primary medical 
coverage. I am a retired Federal employee and have BC/BS as my FEHBP 
insurance which is secondary to Medicare. Therefore, the Premier Health 
Partner and Anthem BC/BS squabble did not impact us because our FEHBP 
BC/BS was secondary. My wife and I were lucky. Vandy wasn't.
    For those people who are not from the Dayton, OH area, I found 
something on the Internet that summarizes the Premier Health Partners 
and Anthem BC/BS squabble for you in a very few words:

        Source: Redorbit.com
        Posted: Wednesday, 4 January 2006
        Title: Premier, Anthem Fight Hurt:

            Premier Health Partners and Anthem Blue Cross and 
        Blue Shield had to settle at some point. They need each other 
        too much.
            Three days before Christmas, the area's largest 
        hospital group and the popular insurer decided that it was 
        time, that a year was long enough to shoot at each other and 
        even at their own feet.

    Apparently, each side insisted on shooting itself in the foot for a 
solid year to prove a point. Was that ridiculous? Yes. Would that have 
happened under ``Single Payer''? No.
    Back to the story. In April 2005, Vandy had pneumonia and anemia 
which required her to be hospitalized. Because of the Premier Health 
Partners and Anthem BC/BS squabble, Vandy had to go to a hospital other 
than Good Samaritan Hospital which is close to her doctor's office and 
which has always been her hospital of choice. While a patient in the 
other hospital, Vandy contracted a staphylococcal infection (MRSA) 
which developed into encephalopathy or inflammation of the brain. Vandy 
spent several weeks in intensive care at the other hospital before 
being transferred to a nursing home where she was a resident for almost 
2 years.
    When Vandy arrived at the nursing home, she was in such terrible 
shape that the other residents and the staff thought she would never 
survive. But Vandy is a fighter and she did survive. She made progress, 
too. I would go to the nursing home every day to play memory games such 
as ``name the capitals of the States'' with her. Luckily, her mental 
faculties did come all the way back. However, she didn't get to walk 
out of the nursing home as she desperately wanted to do. In fact, she 
still can not walk. Nor can she stand.
    If Vandy would not have had to go to the other hospital because of 
the squabble between Anthem BC/BS and Premier Health Partners, she 
would not have caught the particular MRSA infection which disabled her. 
However, I will concede that Vandy might also have caught a staph 
infection at Good Sam. After all, a hospital is not the best place to 
be when you are sick.
    Wait. There is much, much more to this horror story and why I am so 
thoroughly disgusted with the way that we, the American people, have 
let the big insurance companies dictate medical care to us. And as you 
will see in a few moments, I am equally as disgusted with the way that 
the U.S. Government, especially the Social Security Administration, has 
let them.
    I have fought bureaucratic battle after bureaucratic battle with 
the Social Security Administration on behalf of my daughter. Because of 
that I have become somewhat of an expert on Social Security and 
Medicare. If I had the energy that I had 
25 or 30 years ago, I would offer free advice to people on how to fight 
Social Security.
    I will now delve into the silliness regarding what Vandy has to pay 
for her prescription medications. I will begin by telling you that 
Vandy is dual eligible for the Medicare and Medicaid low-income 
subsidies. Please remember her dual eligibilities as you read the rest 
of the story.
    Vandy's husband, Stanley Styles, has worked at Wright State 
University as a floor custodian for many years. Stan has carried a BC/
BS ``FAMILY'' plan as his group health insurance during all that time. 
(Please note that the word ``FAMILY'' is emphasized.) He also carries 
the WSU group dental plan and the WSU group vision plan.
    In November 2008, Vandy was notified by the Social Security 
Administration that Stan's BC/BS group health plan's copays rather than 
her Medicare Part D carrier's copays would have to apply when she 
ordered her prescription medications. The law is explicit that because 
her husband's employer, Wright State University, has more than 100 
employees, the WSU BC/BS group health plan copays have to apply rather 
than the Medicare Part D copays.
    My question to that is why can't the law be changed? The answer to 
that is that would be too easy and would make too much sense. Further, 
why does the law have to assume that larger employers have better 
health plans for their employees than smaller employers? That is not 
always the case; which is sad but true.
    While Vandy was in the nursing home, I was able to get her 
qualified for Social Security Disability Insurance (SSDI). She was 
still living in the nursing home when she began receiving her SSDI 
payments and became entitled to Medicare. As required by law, the 
nursing home kept most of Vandy's SSDI payment to apply against her 
nursing home expenses. The remaining nursing home expenses were paid by 
the State of Ohio Medicaid Program. In other words, either Medicare or 
Medicaid paid for all of Vandy's nursing home expenses, including all 
of her medications. She certainly didn't have to pay any BC/BS copays 
for prescriptions.
    Back to the story: As stated, in early November 2008, Vandy was 
notified that the BC/BS copays rather than the Medicare Part D copays 
would have to apply to her prescription medications. The BC/BS copays 
are $8.00 for generic drugs, $25.00 for brand-name drugs on formulary 
and $40.00 for brand-name drugs not on formulary. Since Vandy is 
required to take about 30 prescriptions a month, her BC/BS copays would 
have been hefty at the generic rate and out of sight at the brand-name 
rate.
    A pharmacy technician managed to accomplish a ``workaround'' 
whereby Vandy's Medicare Part D carrier covered her prescriptions 
through the months of November and December 2008. I am grateful to the 
pharmacy technician for doing that.
    During November and December, I called people all over the country 
about Vandy's prescription dilemma. The people I called were at 1-800-
Medicare, the SSA national 800 number, the local Social Security 
office, the SSA Coordination of Benefits office, three SSA Advanced 
Resolution specialists, several SSA CMS specialists in Chicago, the 
Ohio Job and Family Services Medicaid Hotline, the Ohio Senior Health 
Insurance Information Program office, (SHIIP Ohio) and Congressman 
Boehner's office.
    Most everybody that I spoke with advised me that the easiest 
solution to Vandy's dilemma would be to have her dropped from Stan's 
BC/BS coverage at work and to let Medicare and Medicaid cover all of 
her medical expenses. However, I was hesitant to recommend that to her 
because, if Stan dropped her from his BC/BS group ``FAMILY'' health 
plan at work, Vandy would also drop automatically from the WSU group 
dental and group vision plans.
    SHIIP Ohio advised me to inquire: ``Since Vandy is bedridden and 
dual eligible to receive the Medicare and Medicaid low-income 
subsidies, how come her dual eligibility for low-income subsidies 
doesn't trump the higher BC/BS copays?'' I got absolutely nowhere with 
that one.
    The WSU Benefits Unit told me that my daughter could be dropped 
from her husband's group health policy at any time. SHIIP Ohio told me 
the same thing.
    Because my daughter's family is strapped financially, there is 
absolutely no way that they could afford the more expensive BC/BS 
copays for her prescriptions. So Vandy and Stan decided it would be 
best to drop Vandy from the WSU BC/BS group ``FAMILY'' medical plan 
which also automatically dropped her from the WSU group vision and 
dental plans. This was done only to avoid paying the much higher BC/BS 
copays for her prescription medications. PLEASE, note that Vandy and 
Stan felt that they did not have any other alternative because they 
simply could not afford to pay the higher BC/BS copays.
    Vandy dropped from her husband's BC/BS coverage at work effective 1 
January 2009. On that date, Medicare assigned her to a new Medicare 
Part D carrier which is now covering her prescriptions. Please note 
that BC/BS does not pay a single DIME on Vandy's prescriptions, even 
though Stan has a BC/BS FAMILY plan at work which is supposed to cover 
a good part of his family's prescription costs. Instead the American 
taxpayer is paying for Vandy's prescriptions. Wouldn't you say that the 
American taxpayer is getting the shaft? I would.
    I am a firm believer that government is at its best when it is 
guided by common sense. I hope that Vandy dropping herself from Stan's 
BC/BS coverage at work was the right decision. I am not sure that it 
was. Let me tell you why:
    Vandy recently had to pay $151.00 for a prescription that was not 
on her Medicare Part D carrier's formulary. The cost of paying for that 
one expensive prescription ``out-of-pocket'' wiped out a good chunk of 
whatever prescription ``savings'' Vandy and Stan had achieved by 
dropping her from his BC/BS coverage at work.
    Next I want to explain that Vandy recently had to have bariatric 
surgery to try to lose some weight. The reason for the bariatric 
surgery is that her doctor and her therapists have told her that unless 
she loses some weight, she will never have a chance of walking again.
    I point out that the bariatric surgery was performed by a 
``preferred'' doctor at a ``preferred'' hospital.
    NOW FOR THE CLINCHER: The American taxpayer had to pick up the 
entire tab for that bariatric surgery even though Stan has a BC/BS 
group FAMILY policy at work. IS THAT BRILLIANT?--OR--IS IT JUST PLAIN 
STUPID?
    It makes me sick to think that the poor American taxpayer is 
getting the shaft while the big insurance company is paying nothing, 
especially when Stan has a 
BC/BS group FAMILY policy at work. And the U.S. Government lets them. 
Is that fair to the American taxpayer? You know my answer.
    That must be why the insurance companies ``lobby'' Congress so 
hard.
    If I sound disgusted, it is because I am.
    If, after reading this medical horror story you are a bit uneasy, 
get busy contacting your congressional delegation to tell them you 
don't like the way the Nation does its health care business and that 
you want it changed. Together, we can make a difference.
    I thank you for reading Vandy's medical horror story. If you want 
to contact me to discuss additional aspects to Vandy's medical horror 
story, please do so. Believe me, I have only skimmed the surface.

                                 
        Statement of the Association of Professors of Medicine,
         Association of Program Directors in Internal Medicine,
        Association of Specialty Professors, Clerkship Directors
     in Internal Medicine, and Administrators of Internal Medicine
Abstract
    In response to a projected physician workforce shortage, the 
Alliance for Academic Internal Medicine (AAIM) recommends:

      Strategically increasing the number of Medicare-funded 
positions for primary care specialties to adequately meet the Nation's 
health care needs. For these new positions, Medicare should support the 
entire duration of training, which is typically 3 years but is 4 years 
for combined programs such as internal medicine-pediatrics. In 
addition, AAIM believes new primary care slots should be added in 
geographic areas of demonstrated need. Ultimately, all health care 
insurers should have a role in explicitly contributing to GME funding.
      Enhancing the attractiveness of primary care careers by 
altering the physician reimbursement system, increasing job 
satisfaction for current and future primary care practitioners, 
providing incentives for geographic distribution of primary care 
physicians to areas of greatest need, and applying innovations to 
educational models.
      Increasing efficiency in the health care delivery system 
by broadening the use of electronic health records (EHRs) and other 
advances in health information technology and capitalizing on the use 
of physician extenders. Additional options for improving health care 
delivery should be considered.

    While the evidence that the Nation faces a shortfall of physicians 
is compelling and difficult to refute, increasing GME positions without 
respect to specialty or practice region would be imprudent. Steps must 
be taken to ensure access to primary care physicians, better methods 
for coordinating care, a physician reimbursement system that values the 
work of the primary care physician, incentive programs for physicians 
to train and practice in rural areas, adequate financial support for 
GME, and steps taken to improve the efficiency of health care delivery.
Introduction
    After two decades of consistent predictions that the United States 
will face a physician surplus, leading professional organizations and 
advisory boards have now altered their calculations and projected that 
the Nation may soon face physician shortages (1-5). These organizations 
are calling for teaching hospitals, medical schools, and the Federal 
Government to respond to predicted shortages (6-8).
    The primary determinant of the number of practicing physicians in 
the United States is the number of graduate medical education (GME) 
positions or training slots. These positions represent the only pathway 
to licensure for medical practice in the United States. Since the 
Balanced Budget Act of 1997 capped the number of federally funded 
positions in each residency program at the 1996 level, increases to the 
flow of new physicians into the workforce have been limited despite 
evidence of growing demand. The shortage of physicians is particularly 
significant in primary care specialties.
    AAIM's recommendations to allow strategic growth in positions in 
primary care specialties and geographic areas of need would prevent an 
unregulated increase in positions for highly specialized training 
programs, which might raise health care costs without adding primary 
care physicians to address health care needs. However, increasing the 
number of primary care positions will not result in an increase of 
physicians practicing primary care unless steps are taken to enhance 
the attractiveness of primary care careers.
    This position paper was created by the AAIM Advocacy Committee, 
with representation of its five member organizations: the Association 
of Professors of Medicine, Association of Program Directors in Internal 
Medicine, Association of Specialty Professors, Clerkship Directors in 
Internal Medicine, and Administrators of Internal Medicine. The 
committee solicited feedback from the alliance membership before 
writing the statement. After vetting by the leadership of each 
organization, the consensus statement was finalized and approved as the 
alliance position on how to address the projected shortage in the 
physician workforce. This paper reviews the data that support the 
conclusion that the United States faces the prospect of a shortfall of 
physicians, describes certain aspects of these data particularly as 
they relate to the supply of primary care physicians, addresses the 
mechanisms necessary for expanding the pool of practicing physicians 
through increasing Medicare funded GME slots, discusses the expansion 
of programs that distribute physicians to geographic areas of need, and 
comments on steps that can be taken to improve the efficiency of 
physician work.
Physician Supply
    COGME issued Physician Workforce Policy Guidelines for the United 
States 2000-2020 in January 2005 (9). COGME noted that although the 
absolute number of physicians would increase by 24% between 2000 and 
2020, the population growth would exceed the rate of growth of 
physicians, resulting in a decrease in the ratio of full-time 
equivalent (FTE) physicians per 100,000 Americans. COGME also 
postulated that the demand for physician services will grow as the 
elderly population increases as a proportion of the total population. 
The council concluded that U.S. medical school enrollment needed to 
increase by 15% by 2012 to meet demand.
    In June 2006, the Association of American Medical Colleges (AAMC) 
issued the AAMC Statement on the Physician Workforce, which claimed 
there was ``sufficient evidence'' to recommend increasing by 30% the 
number of entry-level positions in Liaison Committee on Medical 
Education accredited medical schools by 2012 (7). AAMC stated the 30% 
increase could be accomplished by increasing enrollment at existing 
schools as well as creating new medical schools. According to the 
statement, increased funding for GME positions should occur 
simultaneously to ensure graduating medical students could receive 
appropriate postgraduate training.
    In December 2008, AAMC released updated projections indicating that 
a shortage of 124,000 FTE physicians will occur by 2025 (10). According 
to their estimates, 37% of the shortage will be in primary care, 33% in 
surgery, 6% in medical specialties, and 23% in other specialties. The 
shortage of 124,000 physicians is based on the assumption that current 
supply, use, and demand patterns will remain the same for the next 16 
years. Since it is unlikely these patterns will remain stable, AAMC 
also created an alternative scenario assuming a continued increase in 
utilization rates, changes in work schedules, a moderate expansion in 
GME capacity, and improvements in productivity, which projects a 
shortage of 159,300 FTE physicians by 2025.
    While academic institutions have responded to the calls from COGME 
and AAMC with an increase in allopathic medical school class size and 
the creation of several new medical schools, new Federal funding for 
additional U.S. GME slots has not been forthcoming, except in a limited 
way from the Department of Veterans Affairs (VA). Increases to 
positions funded by other sources, while they exist, have also been 
minimal (11).
    Beyond increasing support to expand GME positions, interest in 
primary care careers among medical school graduates must also increase 
to positively affect the supply of primary care physicians. Extensive 
data support the observation that decreased numbers of U.S. medical 
school graduates are pursuing careers in primary care. For example, 
3,884 U.S. medical students matched into internal medicine residency 
positions in 1985 compared to 2,660 in 2008 (12). In a recent study by 
Hauer et al., only 24 (2%) of the 1,177 students in the 11 medical 
schools participating planned to pursue a career in general internal 
medicine (13). Conversely, while interest of U.S. seniors in general 
internal medicine has declined, the proportion of residents choosing 
specialty fellowships has increased from 50% in 1988 to 80% in 2006 
(14). According to Hauer's study, today's medical students prioritize 
lifestyle issues in career selection and perceive general internal 
medicine as a low-satisfaction, low-income, and uncontrollable career 
(13). The potential consequence of declining interest in general 
internal medicine careers is a decrease in the delivery of preventive 
measures and appropriate treatment of chronic diseases that often lead 
to disability and premature death. This consequence has direct 
implications for the growing number of the elderly in the United States 
who require coordination of treatments for multiple complex, chronic 
conditions.
    The geographic maldistribution of physicians in the United States 
also has negative implications for ensuring an adequate supply of 
physicians. Several studies indicate a shortage most pronounced in 
rural areas and certain urban neighborhoods (15, 16). A study of 20-
year trends in geographic variation of physician distribution shows 
that an increase in practicing physicians by 51% did not translate into 
regional variation of practice location. Despite long-standing public 
policies, physicians continued to locate in areas of adequate-to-high 
physician-to-population ratios, further compounding issues for health 
professional shortage areas (HPSAs) (17).
Physician Supply
    Assessing the country's future needs for physicians is a 
challenging and complex estimation of supply and demand. The supply 
side involves the output from multiple training pathways for initial 
medical degrees as graduates enter the final common pathway of 
residency training. Supply is also a product of physician effort and 
varies in relation to age, gender, and generational or lifestyle 
preferences.
    The largest source of physicians entering the ``funnel'' of GME is 
provided by U.S. allopathic medical schools. In 2005, 15,760 graduates 
of U.S. allopathic schools and 2,800 graduates of U.S. osteopathic 
medical schools were eligible to enter GME programs (18, 19). A total 
of 24,269 first-year GME positions in training programs approved by the 
Accreditation Council for Graduate Medical Education (ACGME) and the 
American Osteopathic Association were available for these new gradu- 
ates (12, 20). The gap between the number of available positions and 
the total graduates of U.S. programs was filled by approximately 6,000 
graduates from medical schools in other countries.
    Based on 2007 enrollment and class size increases, first-year 
enrollment into U.S. medical degree programs is projected to increase 
from 16,488 in 2002 to nearly 19,909 in the 2012 academic year (AY). 
Similarly, substantial growth in first-year enrollment of osteopathic 
schools is expected, from 2,148 in AY 2002 to 5,227 in AY 2012 (a 70% 
increase) (21). As a result, unless the number of first-year positions 
in GME training increases, not enough positions will exist to 
accommodate all U.S. medical graduates by the year 2012 (Figure 1).
             Figure 1: Funnel of Graduate Medical Education

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



    It is estimated that international medical graduates (IMGs) now 
account for 24% of the total U.S. physician workforce (22). Although 
concerns about depletion of the physician supply in IMG home countries 
also exist, the current demand for physicians in the United States can 
only be met by the continued training and retention of IMGs. If more 
residency positions are not funded, increasing the number of U.S. 
medical school graduates will be a zero-sum game in terms of the number 
of practicing physicians in the United States (19). Currently, more 
than a quarter of the Nation's primary care physicians are IMGs.
    The supply of physicians is also influenced by the rate at which 
physicians leave practice. Just as the total U.S. population has aged, 
the population of practicing physicians has also aged. It was estimated 
that there would be 99,000 U.S. physicians over the age of 65 in 2008 
(19). Furthermore, changing demographics and emerging expectations 
about professional life by both male and female physi- 
cians will lead to increasing numbers of practicing physicians with 
reduced work 
hours (23, 24).
    Projections from 2007 suggest that the number of practicing 
physicians in the United States will increase from 733,852 in 2000 to 
906,278 in 2010, and will rise further to 988,100 in 2020 (25). 
However, in spite of the increase in numbers of physicians, the 
projected increase in the U.S. population will mean that the ratio of 
active physicians to population (per 100,000) will increase only 
modestly from 278.5 in 2000 to 293.4 in 2010, and it will remain 
essentially unchanged for the next decade at 294.2 in 2020. These 
statistics do not account for the anticipated functional reduction in 
work capacity anticipated as a result of changing work habits and 
patterns of practice. Assessing the need or demand of the population 
for physician services is a complex and controversial topic. However, 
it is clear that the physician supply must increase to accommodate the 
growing and aging population as well as the growing number of medical 
students entering the pipeline.
Responding to Physician Workforce Projections

Recommendation 1: AAIM recommends strategically increasing the number 
of Medicare-funded residency positions in primary care specialties to 
adequately meet the Nation's health care needs as defined by COGME. In 
addition, AAIM believes GME slots should be added in geographic areas 
of demonstrated need.

    According to COGME, meeting the Nation's future physician workforce 
demand and need will require increasing to 27,000 the number of 
physicians entering residency training each year by 2015, which would 
represent an increase of approximately 3,000 positions annually. Based 
on its recent projections, AAMC has advocated for an increase of 5,000 
positions annually over an average of 4 years of training to respond to 
its recommended 30% increase in medical school class size. A global, 
unregulated increase in GME positions is unlikely to meet regional or 
specialty-specific shortages. A deliberate and strategic increase 
should be considered to justify the creation of new GME slots. AAIM's 
recommendation for Medicare to fund new positions in primary care 
includes a call for support for an average of 4 years per position. 
While training in internal medicine, pediatrics, and family medicine is 
3 years, training in combined programs such as internal medicine-
pediatrics takes 4 years.
    Current data suggest as many as one-half of physicians trained in a 
specific locale will stay there for their practice careers (17). To 
allow residents to train in areas of demonstrated need, Medicare GME 
funding regulations must change to permit resident time spent outside 
of the academic health care setting to count for purposes of GME 
funding. Currently, the use of non-hospital training sites is 
restricted by Centers for Medicare and Medicaid Services (CMS) 
regulations that require a training program to incur 90% of all costs 
for a resident or fellow rotating outside of the teaching hospital, 
which disallows private practitioners and other community faculty from 
volunteering their time and presents a barrier to increasing training 
in venues outside of the teaching hospital. Without funding, hospitals 
stop sending residents to non-hospital settings or use precious limited 
resources for this training at the cost of other programs. Removing 
current restrictions and breaking down barriers for reimbursement would 
increase residents' opportunities to practice in a variety of settings, 
including rural, inner city, and other underserved locations. Aside 
from providing experiences in areas where a resident may ultimately 
care for patients, allowing residents to practice outside of teaching 
hospitals can also serve as a successful recruitment mechanism for 
communities in need. While ultimate practice locations of physicians 
can not be controlled, increases in GME should be made with geographic 
factors in mind.
    The Medicare program provides approximately 40% of total GME 
funding. The remainder is supported by other sources that vary by 
institution and State and are often subject to the annual 
appropriations process (26). An increase in PGY-1 slots to respond to 
health care needs is only possible with increased funding. AAIM 
understands the restrictions of State, institutional, and Federal 
budgets to increase funding for medical education. As a result, AAIM 
supports a system in which all insurers contribute to GME costs.
    As long as Medicare funding is provided for GME positions, the per-
resident amounts paid to hospitals must be reassessed. Per-resident 
amounts for Medicare direct GME payments were originally set in 1984. 
While adjustments have been made, the per-resident amount has not been 
altered to account for changes in training. Mandated competency-based 
education and evaluation as well as duty hour restrictions require 
significant resources as do health care simulation, centralized 
oversight of regulatory compliance, and faculty development. These 
changes and many others that require additional resources and resident 
time have not been considered in the current GME financing system.
    In 2005, CMS redistributed 3,000 unused GME slots to hospitals that 
demonstrated greatest need. While this redistribution helped more than 
350 hospitals mostly in rural areas, it also proved disadvantageous 
because Congress lowered the percentage of indirect graduate medical 
education (IME) payments associated with the positions. AAIM recommends 
any increase in GME positions must include IME payments equal to those 
provided to existing positions.
    For hospitals and institutions with the capacity for additional 
training positions, funding should remain earmarked for primary care 
specialty positions and must not be redirected to other specialty 
slots. In addition, institutions and hospitals must make a commitment 
to keep current levels of primary care positions to receive funding for 
additional positions. Any move to decrease current primary care slots 
and use the funding for other specialty positions or fellowship 
training will not positively affect the total output of physicians 
entering primary care. Also, institutions must document their means and 
ability to add positions with respect to teaching resources.
Enhancing the Attractiveness of Primary Care Careers

Recommendation 2: AAIM recommends enhancing the attractiveness of 
primary care careers by altering the physician reimbursement system, 
increasing job satisfaction for current and future primary care 
practitioners, providing incentives for geographic distribution of 
primary care physicians in areas of greatest need, and applying 
innovations to educational models.

    If the capacity for GME in internal medicine is enhanced by 
providing more funding for residency slots, simply increasing the 
number of graduates from U.S. medical schools without improving the 
attractiveness of general internal medicine will not produce the 
desired effect. Without providing incentives for selecting a career as 
a general internist, larger class sizes will likely increase the number 
of specialists in a variety of attractive practice disciplines. 
Education, training, and reimbursement should be restructured to ensure 
positive exposure to general internal medicine for physicians-in-
training and job satisfaction for individuals who choose a career in 
general internal medicine.
    Studies of student career choice highlight lifestyle issues as a 
high priority in the decisionmaking process. Internal medicine has been 
identified as a specialty with uncontrollable lifestyle regarding work 
hours and patient care duties. In 2008, a study noted that clerkship 
students choosing a career in internal medicine and those choosing 
careers in other specialties perceive internal medicine residents as 
less satisfied than residents in other specialties (13). Exposure of 
medical students and residents to faculty who feel overwhelmed and 
devalued will inhibit new physicians entering the field of primary 
care.
    Aside from training, a major challenge primary care faces in 
becoming a successful career option is the current physician 
reimbursement system. Today's system proves lucrative for procedure-
based specialties while primary care and cognitive specialties are 
inadequately reimbursed for time spent delivering comprehensive patient 
care. Reviewing the process for determining the current value of 
physician services should be the first step in ensuring the work of 
primary care physicians is not devalued. The Medicare Payment Advisory 
Commission has made this recommendation to Congress along with 
recommendations to increase Medicare payments for primary care services 
and establishing a ``medical home'' pilot project through Medicare 
(27). The ultimate enhancement of adequate reimbursement by Federal, 
State, and private insurers for high-quality cognitive care will 
provide tremendous incentive for physicians to seriously consider 
primary care as a career of choice.
    Understanding job satisfaction for the general internist requires 
more than examining physician income. Outpatient schedules with 
inadequate time to carefully evaluate the patient results in less than 
optimal care and increased frustration for physicians.
    Job satisfaction has the potential to increase with adequate 
professional support. As the number of primary care physicians decline, 
fewer colleagues will share the clinical load. Increasing use of 
physician extenders may help to ease the burden of care; however, the 
prestige of the generalist must also be considered. While physician 
extenders can help ease the amount of work for primary providers, it is 
important to note that they are not replacements for physicians who are 
uniquely situated to identify and treat multisystem issues and complex 
diagnoses.
    Successful distribution of physicians to locations where primary 
care physicians are most needed will require additional incentives. 
Financial incentives for loan repayment may be successful in attracting 
primary care physicians to locations of most need. In addition, focus 
should be placed on recruiting and providing incentives to potential 
trainees from underserved areas. Studies show that medical school 
matriculants from underserved areas or with career plans to serve in 
such areas are more likely to serve as rural primary care providers 
than their peers. Programs developed to increase the supply of rural 
primary care physicians have proven successful (28, 29). While 
political and other forces that would be needed to make these 
adjustments will require considerable strategy, these changes would 
improve the overall health of the Nation if the best graduates were 
encouraged to consider primary care. Potential strategies at the 
national level for increasing the number of physicians in HPSAs include 
enhancing the National Health Service Corps (NHSC) and health 
professions education programs, passing legislation such as the Rural 
Training Act to remove regulatory barriers to having residents train in 
nonhospital and rural settings, and increasing the number of waivers 
through the J-1 visa waiver program to previous levels. Steps can also 
be taken at the State level.
    The understanding that the primary care physician is essential to 
access and optimal health outcomes underscores the need to address 
explanations underlying the current deficiency in the number of these 
essential providers. Understanding how best to integrate these 
physicians with other professional colleagues such as nurse 
practitioners and physician assistants rather than promoting their 
displacement by these individuals will ultimately lead to the optimal 
team approach. Focusing on the needs of the future health care 
workforce is critically important, and national strategies are urgently 
required to avoid a shortage of primary care physicians. The challenge 
of appropriate funding will require redistribution of financial 
resources and reimbursement to reflect the fair cost of delivering 
high-quality care to the U.S. population.
Improve Health Care Delivery

Recommendation 3: AAIM recommends increasing efficiency in the health 
care delivery system by broadening the use of EHRs and other advances 
in health information technology and capitalizing on the use of 
physician extenders. Additional options for improving health care 
delivery should be considered.

    The projected physician shortage could be mitigated by maximizing 
the efficiency of physicians. In the future, optimizing efficiency may 
actually reduce the number of physicians required to provide optimal 
care. AAIM proposes improving the health care delivery system by 
promoting widespread use of EHRs, capitalizing on the use of physician 
extenders, and considering other options for increasing efficiency such 
as improving access to health care screening.
    A study conducted at community health centers concluded that EHRs 
present a clear value to patients and stakeholders. Patients received 
better care and payers were likely to reap EHR-related downstream 
benefits in avoided specialist, emergency room, and hospital spending 
(30). EHRs help physicians and staff members view, chart, and interact 
with patients' health information in a timely and accurate manner. 
While computerized physician order entry systems may prove cost-
prohibitive for some institutions, the use of order sets or clinical 
practice guidelines could also serve to increase efficiency in patient 
care.
    Utilizing physician extenders can also increase efficiency by 
freeing up the primary physician's time and providing greater 
continuity of care. In primary care practices, nurse practitioners and 
physician assistants can improve productivity by providing some direct 
and indirect patient care, including routine examination and review of 
medical histories, telephone triage, patient education, counseling, and 
health awareness. Physician satisfaction with the use of the physician 
extender model to increase efficiency is very high (31).
    Additional options for increasing efficiency in the health care 
delivery system should be explored. For example, consideration should 
be given to regionalizing expensive treatments and applying the 
certificate of need system globally; improving access to health care 
screening to reduce the need for future hospitalization; and other 
innovative measures to enhance efficiency. AAIM believes addressing the 
physician shortage successfully will take both an increase in the 
number of physicians and improvements to the health care delivery 
system.
Conclusion
    The Nation is facing a physician shortage that is likely to 
adversely affect public health. AAIM recommends increasing the supply 
of Medicare-funded positions in primary care specialties, including 
internal medicine and internal medicine-pediatrics. National numerical 
targets should coincide with the physician-to-population ratio adequate 
to meet the Nation's health care needs as defined by COGME.
    The evidence that the Nation faces a shortfall of physicians is 
compelling and impossible to ignore. At the same time, an unbridled 
increase in GME positions without respect to specialty or practice 
region would be imprudent. AAIM believes that selective increases in 
GME slots can and should occur in primary care. Allowing local 
communities and their legislators to demonstrate the need for primary 
care providers could provide a mechanism to address the geographic 
maldistribution of physicians. In addition, steps must be taken to 
increase efficiency in the current health care delivery system and 
enhance the attractiveness of generalist careers, including internal 
medicine and combined programs such as internal medicine-pediatrics.
    AAIM has already begun such efforts with its statement, Redesigning 
Residency Training in Internal Medicine: The Consensus Report of the 
Alliance for Academic Internal Medicine Education Redesign Task Force. 
While the Nation seeks to increase the physician supply, it also must 
examine and implement measures that will improve physician efficiency 
and effectiveness. Ignoring the imminent shortage of physicians puts 
the Nation's health and well-being at risk.
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         Statement of American Academy of Physician Assistants
Physician assistants (PAs) are one of three health care professions 
providing primary medical care in the United States today, and are an 
integral part of health care reform.

      In 2008, over 257 million patient visits were made to 
physician assistants, and approximately 332 million prescriptions were 
written by PAs.
      PAs practice in virtually every area of medicine. Between 
35%-40% of all PAs practice in primary care. PA education is based on 
the primary care model of care, providing greater flexibility for PA 
practice upon graduation.
      By design, PAs always work with physicians. However, PAs 
make autonomous medical decisions. The physician is always available 
for consult, but the physician may not be onsite, in the same county, 
or in the case of the State Department, in the same country or 
hemisphere. Reimbursement for medical care provided by PAs is separate 
than reimbursement provided to physicians.
      PAs serve as medical directors in rural health clinics, 
community health centers, and other federally qualified health centers. 
In rural and other medically underserved communities, a physician 
assistant may be the only health care professional available.
      PAs provide first contact, continuous, and comprehensive 
care for patients throughout the United States. PAs currently manage 
care for patients in primary care, chronic care, and other areas of 
medicine.
      Studies show that in a primary care setting, PAs can 
execute at least 80 percent of the responsibilities of a physician with 
no diminution of quality and equivalent patient care satisfaction.
      By virtue of PA education in primary care and the ability 
of PAs to work in all medical and surgical specialties, PAs expand 
access to care in medically underserved rural and urban communities.
      By design, the physician assistant profession extends the 
reach of medicine and the promise of health to the most remote and in-
need communities of our Nation.

In addition to the need to produce more primary care physicians, it is 
critical that Congress support expansion of PA programs as they develop 
strategies for addressing health care workforce challenges.

      Funds should be made available to PA educational programs 
to increase the PA workforce, which in turn, will extend physicians' 
ability to provide.
      The Title VII, Public Health Service Act's Health 
Professions Program is successful in training health care professionals 
for practice in medically underserved communities. Funding for PA 
educational programs is woefully underfunded and must be increased.
      The single largest barrier to PA educational programs 
educating more PAs is a lack of clinical training sites. Attention must 
be directed to investing in the number of these sites, including loan 
repayment for preceptors in primary care medical practices and/or the 
increased use of VA facilities as clinical training sites for PA 
educational programs.
      Funds must be made available to increase the number of 
faculty at PA educational programs. Eligible PA students are being 
turned away because of the lack of faculty and clinical sites.
      Faculty loan repayment, including funding to attract 
faculty from diverse backgrounds, is also critical for PA educational 
programs.
      Federally supported student loans and increased 
opportunities through the National Health Service Corps are key to 
attracting PA students and clinicians to primary care.
      Graduate medical education funding should be used to 
support the educational preparation of physician assistants in 
hospitals and outpatient, community-based settings.

Physician assistants are key to health care reform. However, to be 
fully utilized, current barriers to care that exist in Federal law must 
be addressed.

      The Medicare statute must be amended to allow PAs to 
order home health, hospice, and skilled nursing facility care, as well 
as to provide hospice care for Medicare beneficiaries. (A 2009 report 
by the Lewin Group estimates an overall cost savings through 
implementation of the four PA Medicare provisions.)
      Medicaid should be updated to require States to reimburse 
all covered services provided by PAs under the fee-for-service plan. 
Additionally, Medicaid should recognize PAs as primary care case 
managers through managed care plans.
      The Federal Employee Compensation Act needs to be updated 
to allow PAs to diagnose and treat Federal employees who are injured on 
the job.
      Physician assistants must be fully integrated into new 
models of care, including the primary care medical home and chronic 
care coordination.

In brief, AAPA recommends the following changes to the House Health 
Care Reform Discussion Draft_

      Explicitly recognize physician assistants as primary 
health care providers throughout the bill.
      Incorporate the Senate HELP Committee language on 
reauthorization of the Public Health Service Act's Title VII Program, 
including a 15% carve for PA educational programs in Title VII training 
on primary care medicine, an updated definition of PA educational 
programs, and faculty loan repayment for PA education programs.
      Revise Medicare to allow PAs to order home health, 
hospice and skilled nursing facility care, as well as to provide 
hospice care for Medicare beneficiaries. (A 2009 report by the Lewin 
Group estimates an overall cost savings through implementation of the 
four PA Medicare provisions.)

    On behalf of the nearly 75,000 clinically practicing physician 
assistants (PAs) represented by the American Academy of Physician 
Assistants (AAPA), thank you for the opportunity to submit written 
testimony for the hearing record of the House Committees on Education 
and Labor, Energy and Commerce, and Ways and Means.

AAPA Principles for Health Care Reform

    AAPA has a longstanding history of support for universal health 
care coverage. Among the Academy's key principles for health care 
reform--

      The AAPA believes the primary goal of a comprehensive 
health care system reform is to ensure access to quality, affordable, 
and cost efficient health care for all residents of the United States.
      The AAPA supports a health care system that will provide 
basic services to all residents.
      The AAPA supports health care that is delivered by 
qualified providers in physician-directed teams.
      The AAPA supports reform that confronts the limits of 
care and resources.
      The AAPA believes that fair and comprehensive reform of 
the medical liability insurance system is needed.
      The AAPA endorses system reform that enhances the 
relationship between the patient and the clinician.

Physician Assistants

    Physician assistants are licensed health professionals, or in the 
case of those employed by the Federal Government, credentialed health 
professionals, who--

      Practice medicine as a team with their supervising 
physicians.
      Exercise autonomy in medical decisionmaking.
      Provide a comprehensive range of diagnostic and 
therapeutic services, including performing physical exams, taking 
patient histories, ordering and interpreting laboratory tests, 
diagnosing and treating illnesses, assisting in surgery, writing 
prescriptions, and providing patient education and counseling.
      May also work in educational, research, and 
administrative settings.

    PAs always work with physicians. However, this does not mean that 
the physician is necessarily on site, nor does it suggest that PAs do 
not make autonomous medical decisions. PAs employed by the State 
Department, for example, may work with a physician who is a continent 
away and available for consultation by telecommunication.
    PAs are located in almost all health care settings and in every 
medical and surgical specialty. Nineteen percent of all PAs practice in 
nonmetropolitan areas where they may be the only full-time providers of 
care (State laws stipulate the conditions for remote supervision by a 
physician). Approximately 41 percent of PAs work in urban and inner-
city areas. Approximately 44 percent of PAs are in primary care. Nearly 
one-quarter of clinically practicing PAs practice in surgical 
specialties. Roughly 80 percent of PAs practice in outpatient settings.
    PAs are covered providers within Medicare, Medicaid, Tri-Care, and 
most private insurance plans. Additionally, PAs are employed by the 
Federal Government to provide medical care, including the Department of 
Defense, the Department of Veterans Affairs, the Public and Indian 
Health Services, the State Department, and the Peace Corps.
    AAPA estimates that in 2008, over 257 million patient visits were 
made to PAs and approximately 332 million medications were written by 
PAs.

Overview of Physician Assistant Education

    Physician assistant programs provide students with a primary care 
education that prepares them to practice medicine with physician 
supervision. PA programs are located at schools of medicine or health 
sciences, universities, teaching hospitals, and the Armed Services. All 
PA educational programs are accredited by the Accreditation Review 
Commission on Education for the Physician Assistant, an organization 
composed of representatives from national physician groups and PAs.
    The average PA program is 26 months and is characterized by a 
rigorous, competency-based curriculum with both didactic and clinical 
components. The first phase of the program consists of intensive 
classroom and laboratory study, providing students with an in-depth 
understanding of the medical sciences. More than 400 hours in classroom 
and laboratory instruction are devoted to the basic sciences, with over 
70 hours in pharmacology, more than 149 hours in behavioral sciences, 
and more than 535 hours of clinical medicine.
    The second year of PA education consists of clinical rotations. On 
average, students devote more than 2,000 hours or 50-55 weeks to 
clinical education, divided between primary care medicine and various 
specialties, including family medicine, internal medicine, pediatrics, 
obstetrics and gynecology, surgery and surgical specialties, internal 
medicine subspecialties, emergency medicine, and psychiatry. During 
clinical rotations, PA students work directly under the supervision of 
physician preceptors, participating in the full range of patient care 
activities, including patient assessment and diagnosis, development of 
treatment plans, patient education, and counseling.
    After graduation from an accredited PA program, the physician 
assistant must pass a national certifying examination jointly developed 
by the National Board of Medical Examiners and the independent National 
Commission on Certification of Physician Assistants. To maintain 
certification, PAs must log 100 continuing medical education credits 
over a 2-year cycle and reregister every 2 years. Also to maintain 
certification, PAs must take a recertification exam every 6 years.
    The majority of PA educational programs offer master's degrees, and 
the overwhelming majority of recent graduates hold a master's degree.
Title VII Support of PA Education Programs
    The Title VII support for PA educational programs is the only 
Federal funding available, on a competitive application basis, to PA 
programs. Unfortunately, the level of support has eroded from the 
highest level of $7.5 million in FY 2005 to $2.6 million in FY 2007.
    Targeted Federal support for PA educational programs is authorized 
through section 747 of the Public Health Service Act. The funds are 
used to encourage PA students, upon graduation, to practice in 
underserved communities. These goals are accomplished by funding PA 
education programs that have a demonstrated track record of: placing PA 
students in health professional shortage areas; exposing PA students to 
medically underserved communities during the clinical rotation portion 
of their training; and recruiting and retaining students who are 
indigenous to communities with unmet health care needs.
    The Title VII program works.

      A review of PA graduates from 1990-2006 demonstrates that 
PAs who have graduated from PA educational programs supported by Title 
VII are 59% more likely to be from underrepresented minority 
populations and 46% more likely to work in a rural health clinic than 
graduates of programs that were not supported by Title VII.
      A study by the UCSF Center for California Health 
Workforce Studies found a strong association between physician 
assistants exposed to Title VII during their PA educational preparation 
and those who ever reported working in a federally qualified health 
center or other community health center.

    The PA programs' success in recruiting underrepresented minority 
and disadvantaged students is linked to their ability to creatively use 
Title VII funds to enhance existing educational programs. Without Title 
VII funding, many special PA training initiatives would be eliminated. 
Institutional budgets and student tuition fees are not sufficient to 
meet the special, unmet needs of medically underserved areas or 
disadvantaged students. The need is very real, and Title VII is 
critical in leveraging innovations in PA training.
Need for Increased Targeted Support for PA Education
    Federal support must be directed to PA educational programs to 
stimulate growth in the PA profession to meet the needs of universal 
health care coverage. Targeted funding should be directed to--

      The use of Title VII funds for recruitment and loan 
repayment for faculty in PA educational programs.
      Incentives to increase clinical training sites for PA 
education.
      Federally backed loans and loan repayment programs for PA 
students.
Eliminating Barriers to Care in Federal Law
    Eliminating current barriers to medical care provided by PAs that 
exist in the Medicare, Medicaid, and the Federal Employees Compensation 
Act (FECA) laws would do much to expand access to needed medical care, 
particularly for patients living in rural and other medically 
underserved areas.

      AAPA believes that the intent of the 1997 Balanced Budget 
Act was to cover all physician services provided by PAs at a uniform 
rate. However, PAs are still not allowed to order home health, hospice, 
skilled nursing facility care, or provide the hospice benefit for 
Medicare beneficiaries. At best, this creates a misuse of the patient's 
physician's and PA's time to find a physician signature for an order or 
form. At worst, it causes delayed access to care and inappropriate more 
costly utilization of care, such as longer stays in hospitals. For 
patients at end-of-life, it creates an unconscionable disruption of 
care. (A 2009 report by the Lewin Group estimates an overall cost 
savings through implementation of the four PA Medicare provisions.)
      Although most States recognize services provided by PAs 
in their Medicaid programs, it is not required by law. Consequently, 
some State Medicaid Directors pick and choose which services provided 
by PAs they will cover. Others impose coverage limitations not required 
by State law, such as direct supervision by a physician.
      Although nearly all State workers' compensation programs 
recognize the ability of PAs to diagnose and treat State employees who 
are injured on the job, the Federal program does not. As a result, 
Federal workers who are injured on the job may be rerouted to emergency 
rooms for workers' compensation-related care, rather than to go to a 
practice where the PA is the only available health care professional.

    The Medicare, Medicaid, and FECA statutes create Federal barriers 
to care that do not exist in State law. The barriers need to be 
eliminated to promote increased access to the quality, affordable 
medical care provided by PAs.
Integrate PAs into New Models of Care
    AAPA is concerned that health care reform could create new, 
unintended barriers to care provided by PAs unless special attention is 
devoted to ensuring that PAs are fully integrated into the medical home 
and chronic care coordination models of care.
    PAs always work with physicians, but in many rural and other 
underserved areas, the PA is the face of health care. The PA is the 
medical professional who develops the care plan and coordinates the 
care. PAs also own and/or provide care in rural health clinics and 
other settings that may serve as the patient's primary medical home. It 
is critical that the medical home and chronic care management models of 
care recognize the ability of PAs to develop and manage medical care 
plans, without unnecessary limitations. And, it is important that PA-
run clinics and practices be eligible for reimbursement from the new 
models of care.
Medicare Physician Payment Reform
    It is critically important that health care reform legislation 
contains a long-term solution to Medicare's physician payment system. 
The current system is simply not sustainable, nor is it fair to the 
health care professionals who provide medical care for Medicare 
beneficiaries.

                                 
              American Association of Colleges of Pharmacy
Dear Chairmen Miller, Waxman, and Rangel:

    The American Association of Colleges of Pharmacy (AACP) is pleased 
with the overall intent of the legislative discussion draft released by 
your three Committees last week. Your combined commitment to increasing 
all Americans' access to high-quality health care is certainly 
commendable. The legislation's focus on opportunities for preventing 
unnecessary illness and keeping our citizens well is an approach that 
has been too long in coming. Our intent is to work with you and the 
Committees to make sure this opportunity becomes a reality.
    The issue of how we will pay for reorganizing our health care 
delivery system is certainly important, but it is beyond the scope of 
our organization's mission. We are fully prepared to assist you in 
creating a reorganized system that makes the best use of the research, 
teaching, and service mission of pharmacy faculty. Pharmacy faculty can 
be of particular assistance, especially in the areas of quality 
improvement and measurement, wellness and prevention, workforce 
preparation, and the necessary research that establishes the evidence-
base to improve the quality of care patients receive.
Affordable Health Care Choices
    We encourage you, in both public and private plans, to make any and 
all efforts to ensure that patients have access to team-based, patient-
centered care as discussed in the 2003 report of the Institute of 
Medicine, ``Health Professions Education: A Bridge to Quality.'' 
Quality improvement is predicated on the needs of the patient to be 
addressed by a community of care. This approach to care delivery also 
reflects another IOM report from 1994 on primary care that was authored 
due to the growing complexity of and interdependencies within health 
care delivery.
    How care delivery is organized is just as important as what care is 
included in an essential benefits package, whether in a public or 
private plan.
    Therefore, we strongly encourage you to create opportunities for 
care to be delivered in a collaborative manner, making best use of the 
knowledge and skills of all health professionals (acting within their 
individual scopes of practice) focused on the needs of the patient, not 
the payment expectations of the providers.
    This approach will go a long way toward increasing access to the 
primary type of care, including medication therapy management, that all 
patients need, especially the chronically ill and elderly. This team-
based approach has been successfully employed in several State Medicaid 
programs including Community Care of North Carolina and integrated 
health care systems such as InterMountain Health in Colorado and 
Geisinger Health in Pennsylvania.
    Academic pharmacy is actively engaged with the types of delivery 
system examples above, as well as a host of others including those 
within family physician offices, ambulatory clinics associated with 
academic health centers, and increasingly with federally qualified 
health centers through a patient safety collaborative administered by 
the Health Resources and Services Administration. The research of 
pharmacy faculty forms a significant evidence-base supporting 
collaborative, team-based approaches to care as the standard of care. 
This evidence-base readily leads to the development of quality measures 
for plan and provider incentive strategies, important elements in 
moving toward a reorganization of care systems.
Medicare and Medicaid Improvements
    Medicare beneficiaries and Medicaid eligibles form a significant 
population that benefits from strong care coordination. Regardless of 
whether the difficulties of accessing care are due to frailty or 
ability to pay, efficient and effective management of both clinical and 
community-based services is essential to help improve outcomes and 
reduce overall costs.
    We strongly support provisions within the discussion draft that 
direct care to be delivered in a much more comprehensive and 
coordinated fashion.
    We ask that these provisions more stridently state the need for 
care coordination, especially at transitions of care and for the 
chronically ill taking multiple medications, to include medication 
therapy management services.
    With medications contributing a significant cost to any health 
plan, including Medicare and Medicaid, the integration of clinical 
pharmacy services, including medication therapy management, across the 
continuum of care is integral to improving medication-associated 
outcomes and controlling costs.
    We recommend that your proposed medical home pilot be expanded to 
be the standard of care for both Medicare and Medicaid patients.
    This coordinated, team-based approach has the ability to focus care 
on the needs of a disease-specific patient population as well as a 
general community/service area. This is due to the recognition that 
including the appropriate community-of-care providers focused on the 
needs of the patient population being served improves health outcomes 
and can reduce costs associated with care delivery. Academic pharmacy 
is actively engaged with these policy concepts. Faculty are currently 
working with hospitals to reduce readmissions due to medication-related 
problems that should have been addressed at discharge. Pharmacy faculty 
work with family physicians, their patients, and their patients' 
caregivers to improve the management of prescribed medications, which 
improves medication-related outcomes and prevents medication-related 
problems that may lead to emergency room visits or hospital admissions.
    This team-delivered care can be accomplished within a variety of 
contexts including those that utilize telehealth which makes your 
interest in increasing the access to telehealth all the more important 
to remain in final legislation.
    Elderly and chronically ill populations account for a significant 
cost to any health plan or delivery system and assistance with the 
management of their medication use has been shown to improve health 
outcomes, reduce unnecessary care across the continuum of care, and 
reduce the overall cost of care delivery.
    AACP supports the establishment of a Center for Comparative 
Effectiveness. We recommend that the national research agenda include 
the comparison of practice patterns.
    This is important in developing the evidence-base associated with 
support for team-based, patient-centered approaches to care delivery. 
For example, team-based, patient-centered care is important in 
improving the management of the chronically ill and patients at 
transitions of care. The results of this type of research are much more 
amenable to the development of quality measures to assist providers in 
the delivery of evidence-based care.
    We ask you to clearly state that the results of comparative 
effectiveness research should not necessarily be focused on payment 
issues that have the potential to reduce provider participation in 
research networks required for this type of work.
    Inclusion of all the stakeholders in the development of this 
national research agenda will be important. Therefore, legislative 
language should clearly state that all health professionals, not just 
physicians, are expected to have a seat on the Commission.
    We strongly support the expansion of prevention and wellness 
programs and services into the Medicare and Medicaid programs.
    The Committees should stress the importance of increasing access to 
all public health interventions across a wide range of health 
professionals, including pharmacists. Expanded access to prevention and 
wellness programs and services through a wide range of health 
professionals increases the chances that a patient will make the 
behavioral change necessary to become more responsible for their 
individual health and that of their community.
Public Health and Workforce Development
    Increasing access to high-quality care at an affordable price will 
require a substantial reorganization of our health care delivery 
system. As we know, the United States spends more and receives less 
compared to other industrialized nations when it comes to many common 
population health measures. The final division of the discussion draft 
does little to support the reorganization of health professions 
education toward the creation of professionals prepared to collaborate 
and provide culturally competent, team-based, patient-centered care, 
supported by informatics.
    The Committees could do much more toward this end by reauthorizing 
the Public Health Service Act Title VII health professions programs and 
requiring all the programs to be interprofessional in nature to the 
extent possible.
    Until the Federal financial support for health professions 
education is focused on meeting the IOM recommendations stated in its 
2003 report, ``Health Professions Education: A Bridge to Quality,'' 
efforts to move toward an interprofessional health professions 
education model will languish since Federal policy may give the 
impression that it is not of high importance.
    The Institute of Medicine defined primary care back in 1978, 
revised the definition in 1984 and again in 1994. The rationale for the 
1994 revision was to create a definition ``that recognizes two 
important trends: the greater complexity of health care delivery and 
the greater interdependence of health professionals.'' http://www. 
nap.edu/openbook.php?record_id=9153&page=5.
    The 1994 IOM definition reflects primary care as a concept 
incorporating the ``main, chief, or principle'' aspects of health care 
delivery and moves beyond the ``first-contact'' concept that suggests 
an initial interaction and then triage to the appropriate level of 
care. http://www.nap.edu/openbook.php?record_id=9153&page=9.
    ``Primary care is the provision of integrated, accessible health 
care services by clinicians who are accountable for addressing a large 
majority of personal health care needs, developing a sustained 
partnership with patients, and practicing in the context of family and 
community.'' IOM 1994 http://www.nap.edu/openbook.php?record 
_id=9153&page=15#p20003779ddd0000023.
    Over several decades, the United States Congress, recognizing the 
benefit to both individuals and communities of increased access to 
primary care, passed key legislation that authorized programs intended 
to increase access to primary care. The need to provide rural and 
underserved communities access to primary care was the rationale for 
establishing the National Health Service Corps. Increasing the supply 
of primary care providers created programs authorized under Title VII 
of the Public Health Service Act. Both of these Federal programs are 
focused on who is eligible to provide primary care. The legislative 
language makes primary care the responsibility of certain health care 
professionals. Both of these programs were established prior to the 
widespread appreciation, supported by IOM primary care definition 
revisions, of the multidimensional aspect of primary care.
    The effectiveness of these programs is further questioned in light 
of the 2003 IOM report that indicates that health care professionals 
competent in team-based, patient-centered practice may be one 
opportunity to close the quality chasm. The National Health Service 
Corps program, with its placement of those health care professionals 
deemed primary care providers through statute, makes no attempt to 
recognize the multidimensional aspect of primary care. It focuses 
solely on a health care professional. The negative aspects of this 
focus can and frequently does leave the designated provider isolated 
both from providers of his or her own profession, but more importantly, 
from those providers with whom he or she might establish a team-based, 
patient-centered approach to primary care delivery in keeping with the 
IOM's current definition of primary care.
    There are Title VII programs that, at least legislatively, 
recognize that the complexity of our health care system creates 
significant need for health care professionals to be educated through 
interprofessional approaches that establish team-based care as an 
acceptable and appropriate expectation upon graduation.
    The area health education centers (AHEC), geriatric education 
center (GEC), and HIV education center programs all address an area of 
national significance--primary, geriatric and HIV care, respectively--
the quality of which is improved by increasing the competence of health 
professions students to practice as teams focused on the needs of the 
patients for which they provide care. What is of concern is that the 
currently operating programs that Congress established to address past 
issues of national significance are not being readily considered as 
opportunities, through reauthorization and recommitment, for addressing 
new (or incompletely addressed) issues that impact the ability or 
willingness of our Nation's health professionals to provide recommended 
care more than 50% of the time that is evidence-based, culturally 
appropriate, and that recognizes both individual and community 
determinants of the patients health status.
    Therefore, the Committees should first consider how existing health 
professions education programs, such as those authorized within Title 
VII, could, through reauthorization and recommitment, more readily 
address the development of team-based approaches to care, as well as 
test the assumptions of the benefits of this approach to quality, cost, 
and access.
    One recommendation would be for all Title VII programs, to the 
extent possible, support interprofessional education of health 
professionals that is focused on team-based, patient-centered 
approaches to care.
    The focus of that care could easily address health care issues that 
remain important to the Nation as a whole, such as primary, geriatric, 
and HIV care, as well as addressing new issues such as chronic illness, 
medication therapy management, and wellness and prevention. Such an 
approach would reduce the opportunity for duplication of programmatic 
intent, increase buy-in to change from existing stakeholders, and build 
a team-based approach to policy development between current program and 
new proposal stakeholders.
    Academic pharmacy is a rich resource that has provided much of the 
medication-related evidence-base used to support many of the provisions 
within the proposals offered by your Committees, as well as those in 
the Affordable Health Choices Act. Pharmacy faculty remain committed to 
working with your Committees to ensure that new evidence is readily 
transmitted to policymakers and health care professionals so that our 
Nation's health care system continues to meet the needs of the patients 
it serves. Please do not hesitate to contact me to discuss how AACP and 
its members can be of assistance.

            Sincerely,

                                            William G. Lang IV, MPH
                                             VP Policy and Advocacy
                       American Association of Colleges of Pharmacy

                                 
            Statement of the American Farm Bureau Federation
    The Ways and Means Committee, Energy and Commerce Committee and 
Education and Labor Committee recently released a health care reform 
discussion draft. The draft document suggests bold new programs such as 
a health insurance exchange, a public health insurance option, a 
personal responsibility coverage requirement and an employer 
requirement to provide coverage. Many items in the discussion draft are 
of interest to our Nation's farmers and ranchers.
    Farm Bureau supports health care reform that improves and builds on 
our current health care delivery system. We believe that health care is 
primarily the responsibility of individuals and support efforts to 
provide all Americans with access to quality and affordable health 
care. We support the promotion of personal wellness, fitness and 
preventive care as basic health goals. We oppose compulsory national 
health insurance and any national health plan and favor instead tax 
incentives and market reforms that will expand health care coverage. 
Farm Bureau supports direct government financial assistance for those 
unable to pay for their own health care.
Rural Health Care
    Farm Bureau believes that any health care reform must address the 
disparities that exist between rural and nonrural communities. There 
continues to be a critical shortage of health care facilities and 
qualified health care professionals in rural areas. According to the 
Department of Health and Human Services, 20 percent of Americans live 
in rural areas while only 9 percent of physicians in America practice 
in those settings. In addition, many rural residents depend on small 
rural hospitals that face unique health care delivery challenges due to 
their size and case-mix. Transportation needs are also pronounced among 
rural residents, who face longer distances to reach health care. As a 
result, data shows rural residents are less likely to receive 
recommended preventive services and report, on average, fewer visits to 
health care providers.
    Farm Bureau supports equitable Medicare payment rates to rural 
hospitals and physicians as one way to preserve and expand health care 
services in rural areas and supports rural access protection provisions 
contained in the discussion draft. Prior to 2003, Medicare 
reimbursements for rural providers were lower than those for urban and 
suburban providers disadvantaging those who live in nonmetropolitan 
areas. Since then, the inequity has been corrected through a series of 
temporary legislative fixes that need to be made permanent. This is 
especially critical if Medicare reimbursement rates become the basis 
for establishing payments for other service providers and health care 
professionals as proposed.
    Farm Bureau believes that Health Information Technology (HIT) has 
the capacity to transform our Nation's health care delivery system into 
a higher-quality more efficient system. The discussion draft contains 
an important new initiative to expand and enhance Medicare beneficiary 
access to telehealth services. Such programs will aid the many rural 
Americans who are unlikely to enjoy the benefits of HIT due to the 
current lack of access to advanced telecommunications services in their 
communities. We caution against provisions that would penalize rural 
areas that are technically unable to rapidly employ health Internet 
technology.
    Farm Bureau supports government programs and incentives that 
encourage health care professionals to practice in areas without 
adequate medical care, many of which are in rural America. We support 
provisions contained in the draft proposal that would increase 
scholarships and loans to students who agree to provide health care 
services in medically underserved areas after graduation.
Individual Requirements
    Health care reform must not only address access but also cost. 
Farming and ranching businesses operate on tight profit margins and are 
cyclical, with unprofitable years nearly as common as profitable ones. 
Health insurance costs are an ongoing and significant expense for 
farmers and ranchers and for this reason we oppose compulsory health 
insurance in the form of an individual coverage mandate.
    A high proportion of farmers and ranchers are self-employed 
individuals, and as such purchase their own health insurance. We are 
concerned that prescribing national minimum benefit requirements will 
increase the price of insurance. When coverage is out of reach because 
of cost, imposing a 2 percent tax on adjusted gross income will only 
create greater financial hardship for our Nation's farms and ranches 
and the families they support. The discussion draft allows individuals 
and their dependents to keep current coverage and indefinitely continue 
their health insurance policies allowing them the option to continue 
coverage that they can currently afford.
    Farm Bureau supports tax incentives that help individuals pay for 
health care and afford health insurance for their families. We 
recommend continuation of the tax deduction for health insurance 
premiums paid by the self-employed and, because many farmers and 
ranchers pay as much or more in self-employment taxes as they do in 
income taxes, we recommend that a deduction also be allowed against the 
15.3 percent self-employment tax. We support eliminating the 7.5 
percent adjusted gross income threshold so that all medical expenses 
are deductible and expanding tax incentives for health savings accounts 
(HSAs). We are opposed to proposals to limit the deductions for HSAs 
and out-of-pocket medical expenses.
Employer Requirements
    Any health care reform passed by Congress must not unduly burden 
farm and ranch businesses who employ others or impose costs that they 
cannot afford. As stated before, farming and ranching businesses 
operate on tight profit margins and are cyclical. Requiring employers 
to provide insurance coverage or pay a tax equal to 8 percent of 
payroll will put added financial strain on already struggling farm and 
ranch businesses. Any new tax is troubling because, like insurance 
premiums, payment will be due whether or not a farm or ranch business 
turns a profit. For this reason, we do not support an employer mandate 
to ``play or pay.''
    Farm Bureau supports tax credits to help farmers and ranchers who 
struggle to provide insurance for their employees. The discussion draft 
proposes an important employer exemption for certain yet-to-be-defined 
small businesses and would create tax credits for small employers to 
help with insurance costs. It also contains an important 5-year grace 
period for current group health plans. Farm Bureau supports both a 
small employer exemption and tax credits and asks that small farm and 
ranch employers not be disqualified from eligibility because they hire 
seasonal or temporary workers.
    Many farms are small businesses with large labor needs for only a 
very short period of time. For example, a small farmer with 50 acres of 
cherries might have no full-time employees other than family members 
and yet hire 60 or 70 workers for 2 or 3 weeks per year. It will be 
counterproductive to the goal of expanded coverage to deny tax credits 
to small businesses that temporarily exceed employment thresholds. For 
small farm and ranch businesses, the administrative and financial 
burden of providing a health care program for temporary or seasonal 
workers would be truly overwhelming.
    There is also uncertainty about whether or not affordable short-
term coverage will be available for temporary or seasonal agriculture 
workers, some of whom may be employed on multiple farms or ranches for 
just a few days each. In cases where a seasonal or temporary worker has 
multiple employers, there are questions about who would be responsible 
to purchase health insurance and how coverage would be coordinated to 
avoid duplication and unnecessary expense. Farm Bureau believes 
seasonal and temporary workers should be exempt from employer provided 
health coverage requirements.
Market Reforms
    The discussion draft proposes the creation of a health insurance 
``exchange'' to make it easier for individuals and employers to compare 
and purchase insurance products. Farm Bureau believes that an exchange 
will increase the availability, quality and affordability of health 
care without the creation of a public insurance option. Farm Bureau 
supports efforts to foster health care competition but believes that 
such an exchange should not preempt State regulation or the authority 
of States to determine coverage requirements.
    Another market reform supported by Farm Bureau is the creation of 
voluntary regional insurance purchasing cooperatives to expand the 
availability of insurance coverage. Pooling arrangements would allow 
business owners to join together to purchase health insurance at lower 
rates, expand health care options and lower administrative costs. It is 
important to Farm Bureau that such cooperatives remain subject to State 
regulation.
Sugar-sweetened Beverage Tax
    Farm Bureau is concerned about the proposal to use a sugar-
sweetened beverage excise tax to fund health care reform. We oppose 
taxes on any agricultural commodity to fund health care programs. The 
obesity problem in this country is rooted in many factors, including a 
lack of exercise and poor nutrition education. Taxing sugar-sweetened 
beverages is an oversimplified attempt to address a health issue that 
goes far beyond consumption.

                                 
        Statement of the American Society for Clinical Pathology
    On behalf of the American Society for Clinical Pathology (ASCP), we 
commend you and the Committee for its leadership and efforts to reform 
health care delivery in America. ASCP concurs with you about the need 
and urgency to reform the way health care is provided in the United 
States. Moreover, it is imperative that efforts to reform health care 
address many of the long standing inefficiencies and inequities that 
have plagued our health system for years.
    The ASCP is a 501(c)(3) nonprofit medical specialty society 
representing 130,000 members nationwide. Our members are board 
certified pathologists, other physicians, clinical scientists, 
certified medical technologists and technicians, cytotechnologists, and 
educators. ASCP is one of our Nation's largest medical specialty 
societies and is the world's largest organizations representing the 
field of laboratory medicine and pathology. As the leading provider of 
continuing education for pathologists and medical laboratory personnel, 
ASCP enhances the quality of the profession through comprehensive 
educational programs, publications, and self-assessment materials.
    ASCP would like to begin by offering some comments on self-
referral, an issue that has received some attention in discussions 
regarding what should be involved in health care reform but not with 
the breadth and scope we believe is necessary. Following these 
comments, we offer ASCP's views on a number of the policies options 
that have been brought up in congressional discussions surrounding 
health care reform.
Self-Referral
    ASCP firmly believes that health care reform discussions to date 
have not adequately explored the impact of self-referral on the 
increasing utilization of medical and health care services and the need 
for Stark law reform, specifically as it relates to the exclusions 
contained within the law's in-office ancillary services exception 
(IOASE). ASCP is very concerned about the proliferation of a number of 
arrangements designed to enable referring providers to profit from 
their referrals. Over the last few years, a number of physician group 
practices have increasingly sought to exploit ``so-called'' loopholes 
in the IOASE to capture the reimbursement for anatomic pathology 
services.
    Last year, CMS inadvertently opened the door for additional self-
referral billing abuses. We have seen over the last few years a 
significant increase (41 percent between 2002 and 2007) in charges for 
and utilization of anatomic pathology services (CPT code 88305). We 
believe much of this increase is caused by self-referral. In fact, it 
was CMS' concern about abusive billing practices for anatomic pathology 
services that prompted a recent multi-year effort to revise the 
agency's anti-markup rule.
    As CMS noted in its proposed rules implementing the Stark I law, 
self-referral, markups and certain abusive contractual arrangements can 
distort rational medical decisions, lead to the overutilization of 
health care services and higher medical costs for patients and third-
party payers, and ``cause unfair competition by freezing out 
competitors'' unwilling to engage in such practices. These arrangements 
can also adversely affect patient welfare as well as undermine patient 
trust in the medical profession. Patients most likely to be affected by 
these inappropriate practices are often uninsured and those covered by 
private payers that have not adopted safeguards similar to those 
designed to protect the Medicare program from abusive billing 
practices.
    In 2007, the Department of Health and Human Services Office of the 
Inspector General (OIG) launched an investigation into anatomic 
pathology-related self-referral. OIG published three audits of 
physician group practices to examine their utilization of anatomic 
pathology services after entering into business arrangements to capture 
pathology reimbursements. These arrangements typically utilized a ``pod 
lab'' or other contractual joint venture arrangement to obtain the 
revenues intended for the performance of the technical and professional 
components of anatomic pathology services.
    The OIG audits reveal an alarming increase in the utilization of 
anatomic pathology services once these group practices were able to 
capture the pathology-related revenues. In the year after the three 
urology practices entered into arrangements allowing them to profit 
from their referrals, their utilization of pathology services increased 
699%, 230%, and 26%, respectively. One urology group practice increased 
its per patient utilization of pathology services from one unit of 
service to almost 9 units of service. With Medicare reimbursing the 
examination of a biopsy speci- 
men at about $110 per specimen this represents a cost increase of 
almost $900 per patient.
    In addition, the OIG audits reveal that all of the audited 
physician groups billed significantly more biopsies than the area 
Medicare carrier paid on average to other providers--124%, 65%, and 
58%, respectively. It is difficult to justify such significant 
increases in utilization over a 2-year period on changes in ``clinical 
practice,'' considering the comparison with the billing practices of 
other area providers.
    When CMS first started to examine these billing abuses, much of its 
efforts were focused on ``pod labs.'' These arrangements were described 
in a 2005 Wall Street Journal article. Since then, and due in part to 
CMS' initial efforts to curtail these abusive arrangements, new 
arrangements known as in-office histology laboratories have been 
established by a number of physicians ordering anatomic pathology 
services to enable them to exploit the IOASE under the guise of 
``enhanced patient care.''
    The IOASE was intended to allow referring physicians to bill for 
services that are provided during a patient visit. Anatomic pathology 
services, however, are not ancillary services in that the proper 
processing of biopsied tissues is time consuming and cannot be 
performed during the patient visit. As anatomic pathology is not truly 
an ancillary service, ASCP strongly encourages the Committee to remove 
anatomic pathology from the Stark Law's IOASE.
Physician Quality Reporting Initiative:
Allowing Participation in a Maintenance of Certification Program
    ASCP strongly supports amending the Physicians Quality Reporting 
Initiative (PQRI) to allow physicians participating in maintenance of 
certification (MOC) program to receive PQRI incentive payments. As a 
certification agency for nonphysician clinical laboratory professionals 
we can attest to the important role that such programs can have on 
quality. Another reason we believe that allowing for participation in a 
MOC program is warranted is the concern that inter-specialty payment 
differentials could steer the next cadre of physicians away from 
specialties that lack approved quality measures, raising the prospect 
of shortages within these specialties. Given the difficulty of 
developing quality measures for all physician specialties and 
subspecialties, we believe allowing for participation in a MOC program 
is appropriate.
    ASCP supports incentive payments for physicians participating in 
initiatives to improve quality, such as the PRQI. While we have 
concerns about what we believe are design flaws with the program, we 
believe that patient care is best enhanced by the extension of the PQRI 
incentive payments. One of our concerns with the PQRI relates to those 
physician specialties or subspecialties that are not served by an 
approved quality measure, such as molecular pathology. Consequently the 
payment structure of PQRI can adversely affect the reimbursement 
prospects of certain physicians through no fault of their own. We do 
not believe that this is fair, especially since options under 
consideration by Congress for the incentive program call for cutting 
physician reimbursement in 2013-2014 for those physicians that do not 
participate in the program. Allowing physicians to participate in MOC 
programs removes this problem with the PRQI.
Transparency and Evidence-Based Decisionmaking for Imaging Services:
Transparency in Self-Referrals
    ASCP is concerned about the limited scope of proposals to require 
physician disclosure of financial interest in certain imaging services 
provided to patients through the IOASE. ASCP believes that it is clear 
that abuse of the IOASE is occurring. While Congress' interest on this 
issue seems to be focused largely on self-referral related to imaging 
and physician-owned hospitals, self-referral, especially as it relates 
to abuse of the IOASE, is a growing problem for a number of physician 
services.
    If Congress truly wishes to rein in utilization increases resulting 
from self-referral, it must act to amend the in-office ancillary 
services exception to remove those services from the list that are not 
truly ancillary services, such as anatomic pathology.
Promotion of Adherence to Appropriateness Criteria for Imaging 
        Services:
Transparency in Self-Referrals
    ASCP appreciates congressional interest and efforts to curb abusive 
billing practices, such as abuse of the IOASE. While we appreciate the 
intent of this proposal to address self-referral of imaging services by 
providing lower differential payments to ordering providers, this 
proposal will ultimately fail to stop billing abuse, overutilization, 
and its accompanying increases in health care costs.
    So as long as the differential payment still provides the ability 
for a referring provider to profit from his or her referrals, self-
referral will likely continue. We believe that it would be more 
effective to reexamine the Stark law's IOASE or to reexamine 
certification of need requirements. Some of the services that are 
currently listed in the in-office ancillary services exception, such as 
pathology, are not truly ancillary services--services that can be 
performed on the patient during a patient visit. For example, anatomic 
pathology services require extensive and time-consuming processing that 
prevents the analysis of biopsied tissue during a patient visit. We 
strongly recommend removing anatomic pathology from the IOASE.
Chronic Care Management Innovation Center
    With regard to proposals to establish a Chronic Care Management 
Innovation Center at CMS, ASCP is concerned about proposals to utilize 
a ``standard process that would be developed to evaluate the design and 
performance of payment models under consideration for broad-scale 
testing.'' Our concern here is that the criteria that may be most 
appropriate to evaluate one demonstration project, may not be 
appropriate for other projects. We are particularly concerned about the 
criteria that may be adopted to assess quality during a demonstration. 
For example, during one recent demonstration project, CMS relied on a 
measure akin to accreditation status, which fails to allow for a 
quantitative assessment of the facilities performance during the course 
of a demonstration project.
The Sustainable Growth Rate
    ASCP believes that the Sustainable Growth Rate (SGR) should be 
repealed this year and replaced with an updated system that reflects 
increases in physicians' and other health professionals' practice 
costs. A realistic budget baseline for future Medicare payment updates 
that accurately reflects the anticipated costs of providing physicians 
with positive updates under a new update system in lieu of SGR-related 
cuts should be incorporated into the Federal budget.
    Should Congress and the Administration decline to repeal the SGR 
this year, it should adopt a transitional approach that does the 
following:

      Establish by law a roadmap for complete replacement of 
the SGR by 2015.
      Provide stability and predictability with positive, 
funded updates from 2010-2015 set by statute and linked to the Medicare 
Economic Index (MEI) for each year until a replacement takes effect.
      Establish a realistic baseline for Medicare spending on 
physician services that eliminate the assumption that SGR-driven cuts 
will be implemented, thereby greatly reducing the score assigned to 
legislation to repeal the SGR.
      Use regulatory authority to remove physician-administered 
drugs from the SGR from 1996 on to help reduce the cost of repeal.
      Use regulatory authority to adjust the Medicare Economic 
Index to include all the costs of a current medical practice and use 
realistic productivity assumptions.

Encouraging Health IT Use and Adoption in Support of Delivery System 
        Reform Goals
    Laboratory medicine and pathology is responsible for 60-70 percent 
of all patient diagnoses and treatments, and yet it is responsible for 
less than 2 percent of overall Medicare spending. Pathology and 
laboratory medicine's contributions are regularly overlooked. Pathology 
and laboratory medicine, along with pharmacy and imaging, is one of the 
areas of health care best positioned to contribute to Health 
Information Technology systems and Electronic Health Records (EHRs). 
Much, if not most, of the data that will likely be contained in patient 
EHRs will be pathology and laboratory test data.
    We suspect that much of the EHR records submitted by hospitals to 
qualify for Medicare EHR incentive payments will come from the hospital 
clinical laboratory, possibly even when the hospital has contracted out 
for much of its laboratory services. Moreover, since an independent 
clinical laboratory owned and operated by a pathologist appears to be 
eligible for the Medicare EHR incentives, it seems odd, and unfair, 
that other independent clinical laboratories would not be able to 
qualify for the incentive program. We believe that this could slow the 
adoption of HIT/EHR. As a result, ASCP encourages the Committee to 
allow all independent clinical laboratories to qualify for EHR 
incentive payments.
Physician Payment Sunshine
    ASCP supports transparency in the relationship between providers 
and manufacturers; however we do not believe that this proposal has 
sufficient breadth. ASCP believes that physician self-referral is a 
major issue and one that is responsible for a large share of the 
increases in health care costs, particularly with respect to increased 
utilization of health care services per patient. As a result, ASCP 
believes that provider submission of payment and ownership information 
should be extended to physicians ordering medical services through 
other physicians, providers, or entities with or in which they have an 
ownership or financial interest.
    One of our concerns has been the increasing utilization of anatomic 
pathology services by physicians in a position to profit from (markup) 
their referrals. We suggest that as part of the reform process, CMS be 
required to revise its Medicare claims forms to better capture 
information that would reveal when providers or entities, such as 
independent clinical laboratories, are billing for services by a 
provider or group practice that has an ownership or other financial 
interest in that laboratory or entity. We believe that this latter 
proposal will help shed more light on the problems that can be caused 
by pod labs and in-office histology (technical component) laboratories, 
both of which can facilitate physician self-referral. Moreover, these 
entities may be responsible for the significant increases in charges 
and utilization of anatomic pathology services (CPT 88305).
Developing a National Workforce Strategy
    ASCP believes there is an urgent need to develop a national 
workforce strategy. ASCP shares the concerns expressed by the American 
Association of Medical Colleges (AAMC) that physician shortages could 
impede our Nation's health care reform efforts. Recent findings from 
AAMC's Center for Workforce Studies project that an enrollment increase 
of 6,000 in medical and osteopathic schools between 2002 and 2013 would 
not be enough to ameliorate the estimated shortage of as many as 
100,000 physicians or more in the coming years. Furthermore, medical 
school enrollment increases will not lead to net increases in the 
physician supply without a corresponding increase in residency training 
positions.
    In addition, ASCP does not believe sufficient attention or funding 
is being provided for documented allied health professions shortages, 
such as for clinical laboratory professionals. A recent report on 
allied health personnel shortages (including nursing) in California was 
conducted by Health Workforce Solutions for the Campaign for College 
Opportunity. The report concluded that the profession experiencing the 
greatest need was technologist-level laboratory practitioners. 
Unfortunately, over the last few years many of the accredited clinical 
laboratory programs training our next cadre of laboratory professionals 
have closed, further eroding our Nation's ability to address staffing 
shortages. With laboratory professionals responsible for performing the 
laboratory tests that account for 60-70 percent of medical diagnoses 
and treatments, increased government attention to this shortage is in 
the Nation's best interests.
Health Insurance Benefit Options
    We urge Congress to make sure that when legislating the benefits 
required for insurance plans, that the list of covered services 
includes clinical laboratory diagnostic testing and screening. It is 
necessary to include laboratory services to ensure that all insurance 
plans provide coverage for these services. Laboratory services are 
essential for prompt and effective patient diagnoses and treatments. 
Further, clinical laboratory testing is a key component of preventive 
medicine and failure to specifically cover these services could 
undermine the Committee's previously stated goals to emphasize 
prevention and wellness.
Promotion of Prevention and Wellness in Medicine
    Given the importance of laboratory testing to early, more 
affordable diagnoses and treatments, we believe it is necessary to 
specifically add the performance of appropriate clinical laboratory 
testing as a central component of a Medicare comprehensive health risk 
assessment and personal prevention plan.
Incentives to Utilize Preventive Services and Engage in Healthy 
        Behaviors
    Regarding congressional proposals to remove or limit cost-sharing 
(copayment, deductible or both) for preventive services covered under 
Medicare and rated ``A'' or ``B'' by the U.S. Preventive Services Task 
Force (USPSTF), we do not believe that USPSTF should solely be tasked 
with such determinations. Other groups such as the Advisory Committee 
on Immunizations Practices, Institutes of Medicine, the Centers for 
Disease Control and Prevention, National Institutes of Health, medical 
specialty associations, patient care groups, scientific societies and 
the Clinical Laboratory Improvement Advisory Committee should be added.
    We note that the USPSTF's recommendations do not call for annual 
screening of individuals 30 and older who are at risk for having or 
developing type 2 diabetes mellitus or screening all patients with 
diabetes mellitus for chronic kidney disease annually, both of which is 
recommended by the American Association of Clinical Endocrinologists. 
We believe that such screening is justifiable not only from a proper 
patient care perspective but also on cost benefit grounds.
    Moreover, we believe that it would be beneficial for 
recommendations from the USPSTF and the aforementioned groups to be 
reviewed and approved by the National Quality Forum consensus standards 
process for inclusion in CMS' pay-for-performance incentive program.
    ASCP also believes that patient care would be enhanced by 
broadening the current composition of the USPSTF, which is comprised 
solely of primary care physicians, to include other specialties and 
public health professionals.
Adjusting Reimbursement for High-Growth, Over-Valued Physician Services
    ASCP believes that physician and other health care services, such 
as clinical laboratory tests, should be rationally and adequately 
valued. While the proposal to adjust reimbursement may have merit, we 
have concerns about several congressional proposals that have received 
attention. Unless reform clearly allows for readjusting reimbursement 
for those services that are currently undervalued, these reforms will 
lack rationale and have the potential to adversely affect access to 
important health care services. An effort that focuses solely on those 
services that are overreimbursed could limit access to essential 
services as providers may elect not to provide those services that are 
underreimbursed.
Modifying Beneficiary Contributions:
Making Beneficiary Contributions More Predictable
    ASCP is concerned about the discussions to apply a 20 percent copay 
to all Part B Medicare services, such as clinical laboratory services. 
We believe applying a copay to clinical laboratory services is ill-
advised for several reasons. First, because laboratory services are 
ordered by the patient's physician and not the patient, a copay on 
laboratory services would not likely result in sufficient savings, 
which is part of the rationale for a copay. Additionally, laboratory 
services are a key component of preventive medicine and applying a 
copay to these services could undermine the Committee's previously 
stated goals to emphasize prevention and wellness. It would shift an 
entirely new cost burden, approximately $24 billion, to Medicare 
beneficiaries.
    We note that the Institute of Medicine (IOM) considered this issue 
as part of its 2000 report Medical Laboratory Payment Policy and noted 
that ``cost sharing could create a barrier to appropriate use of 
laboratory services for chronically ill and financially disadvantaged 
beneficiaries, which could ultimately lead to greater program costs if 
deferred testing delays diagnosis and leads to more costly treatment.'' 
IOM recommended against imposing a copay on clinical laboratory 
services, concluding that because of the administrative costs and 
burdens . . . , cost sharing for laboratory services is inconsistent 
with its goals for a laboratory payment system that ensures beneficiary 
access and maintains administrative simplicity.''

                               __________
    ASCP appreciates this opportunity to provide comments on the 
Committee's efforts toward health care reform. If you have any 
questions about our comments, please do not hesitate to contact Matthew 
Schulze, ASCP's Senior Manager for Federal and State Affairs, at (202) 
347-4450 or by email at [email protected].

                                 
                        Statement of Paul Crist
    Americans for Medicare in Mexico, A.C. is an organization formed in 
Mexico by American citizens living either full-time or part-year in 
Mexico, who support and promote a Medicare Demonstration Project in 
Mexico. These individuals continue to vote and participate in other 
civic activities as U.S. citizens, as allowed under State and Federal 
elections laws.
    The need to cap spending and to find innovative reforms that reduce 
Medicare program costs is well documented. Actuarial data predicting a 
looming deficit and eventual insolvency of the Medicare Trust Fund make 
it ever more urgent to find savings as the percentage of seniors in the 
U.S. population increases and health care costs continue to climb.
    Based on data from a number of sources, a strong argument can be 
made that providing Medicare benefits to eligible beneficiaries in 
Mexico would result in substantial savings to the Medicare Trust Fund.
    Mexico is home to at least 800,000 American citizens (and many 
estimates exceed 1 million). Based on recent demographic studies, over 
200,000 of these people are 60+ years old, and thus at or near 
eligibility for Medicare benefits. In addition to these full-time, 
year-round seniors living in Mexico, an estimated 40% to 60% more live 
in Mexico for part of the year (under tourist visas).\1\
---------------------------------------------------------------------------
    \1\ International Education and Research Center. Preliminary Report 
#1. U.S. Expatriates Residing in Mexico. Mexico DF, 2008.
---------------------------------------------------------------------------
    Besides a moderate climate and warm and welcoming Mexican people, 
the cost of living is attracting thousands of retirees south of the 
U.S. border every year. In most of the well-known, popular, and safe 
American communities in Mexico, such as San Miguel de Allende, Lake 
Chapala, and Puerto Vallarta, retirees can live comfortably on a modest 
income. Even a U.S. Social Security check is enough to get by on. 
According to one survey of expatriate seniors, the median household 
income for this group is only US$35,000.\2\
---------------------------------------------------------------------------
    \2\ Dr. David C. Warner. Medicare in Mexico: Innovating for 
Fairness and Cost Savings. University of Texas, LBJ School of Public 
Policy, Austin, TX. 2007.
---------------------------------------------------------------------------
    Lack of access to the Medicare benefits for which they've paid is 
the top concern for seniors living in Mexico or considering retiring 
there. For seniors who have paid into the Medicare Trust Fund during 
their entire working lives, it is unfair to shut them out from coverage 
based on where they live. Many choose Mexico because they find it 
increasingly difficult to manage on a fixed retirement income in the 
United States, so the decision to retire to Mexico is frequently an 
economic one.
    Further, obtaining private insurance in Mexico is extremely 
difficult for anyone with a preexisting condition (which describes most 
seniors). Even high cholesterol or blood pressure can shut the door on 
insurance coverage. And for those over 75, private insurance is 
essentially unavailable in Mexico.
    This testimony will show why providing Medicare to eligible seniors 
in Mexico is a win-win proposal.
    Health care costs in Mexico are a fraction of those in the United 
States, while large majorities of seniors report high satisfaction with 
the quality of care. Lower-cost health care services provided in Mexico 
means Medicare wins by saving money. Seniors in Mexico win, because 
they'll have access, where they live, to the high-quality services 
they've paid for during their working years.

Medicare Program Cost-Savings Analysis for a Demonstration Project Pro-
  viding Medicare Benefits to Eligible Beneficiaries Residing in Mexico

    Based on data from a number of sources, a strong argument can be 
made that providing Medicare benefits to eligible beneficiaries in 
Mexico would result in substantial savings to the Medicare Trust Fund.
    According to a report by the Kaiser Family Foundation, Medicare 
spent on average $6,255 per beneficiary on health items and services in 
2005.\3\ The following chart from that study, based on the CMS Medicare 
Current Beneficiary Survey, details the changes in Medicare spending 
between 1997 and 2005. It highlights unsustainable cost increases for 
Medicare (53.2% increase), for beneficiaries (53.0%), and for third-
party payers (73.4%) during the period.
---------------------------------------------------------------------------
    \3\ Tricia Neuman, Juliet Cubanski, and Anthony Damico. Medicare: 
Revisiting ``Skin in the Game'' Among Medicare Beneficiaries; an 
updated analysis of the increasing financial burden of health care 
spending from 1997 to 2005. Henry J. Kaiser Family Foundation. February 
2009.
---------------------------------------------------------------------------
    Cost increases for all payers (Medicare, third-party, and 
beneficiaries) are at an unsustainable level. Medicare must look to 
every available innovation for cost savings for all three payer groups.


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    For the approximately 200,000 seniors living in Mexico, the 
provision of Medicare benefits would result in substantial savings to 
the Medicare Trust Fund, to beneficiaries, and to any third-party 
payers providing Medicare Supplementary Policies to this group. It 
would also resolve a serious issue of access and utilization of health 
care services by this group of seniors, thus improving health outcomes.
    In September 2008, the Mexican government published the results of 
a survey of expatriate U.S. and Canadian residents in Mexico.\4\ In 
that survey, which sought to identify the major obstacles faced by 
immigrating foreigners into Mexico, 80% of respondents were U.S. 
citizens. Nearly half (48.8%) of respondents were 61 years of age or 
older, and 76.5% were retired. Over two-thirds (71.3%) were year-round 
residents and 28.8% were part-year residents in Mexico.
---------------------------------------------------------------------------
    \4\ Dr. Rodrigo Garcia Verdu. Resultados de la Encuesta de 
Percepcion entre Ciudadanos Estadounidenses y Canadienses Residentes en 
Mexico. Secretaria de Hacienda y Credito Publico; Unidad de Seguros, 
Pensiones, y Seguridad Social. September 2008.
---------------------------------------------------------------------------
    Over half of the respondents (56.8%) indicated some difficulty with 
obtaining medical coverage in Mexico, with 17.0% indicating extreme 
difficulty. And 66.1% had paid some amount in medical expenses out-of-
pocket, despite having coverage in the United States, while 9% claimed 
never to have visited a doctor in Mexico.
    Nearly eighty-five percent (84.8%) felt that health care costs were 
lower or much lower than in the United States, while 67.3% felt that 
service was as good as or better than that available in the United 
States. And 82.5% believed that if Medicare benefits were available in 
Mexico, more Americans would retire there.
    Thus, the overwhelming consensus of expatriate seniors living in 
Mexico is that:

      Obtaining health care coverage in Mexico is difficult for 
non-Mexican citizens, particularly seniors.
      Health care costs are substantially lower in Mexico than 
they are in the United States.
      Quality of care is as good as that available in the 
United States.

    The perception of seniors responding to this survey, regarding 
costs, is supported by solid evidence. Based on our investigations of 
health care costs for specific, common medical services and procedures, 
the cost of health care in Mexico does not exceed 35% of that in the 
United States, and is probably even lower. Obtaining average costs for 
medical services is difficult, as prices vary widely both in the United 
States and in Mexico, but the following findings make a powerful case 
that costs are much lower in Mexico (see charts, below and next page).


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    As the preceding charts show with regards to the cost of medical 
services, it is not just the perceptions of expatriate residents that 
confirm lower costs in Mexico. Costs range from 70% to 80% lower in 
Mexico for common procedures.\5\ And on average for a broad ``basket'' 
of treatments and procedures, Mexican health care costs certainly do 
not exceed 35% of U.S. costs.
---------------------------------------------------------------------------
    \5\ Prices for these procedures and services are compiled from a 
variety of sources, including various online sources and information 
provided by individual Mexican and U.S. health care providers. In the 
case of major procedures described in the first chart, prices include 
estimated post-operative hospital stay. Part of the large difference is 
the very high cost of hospitalization in the U.S. relative to Mexico.
---------------------------------------------------------------------------
    Without doubt, the requirements of additional medical and financial 
recordkeeping, certification to international standards and improved 
administration will add some costs to Mexican health care providers, 
and place some upward pressure on medical services pricing in the 
market. However, both the Mexican government and the health care 
industry are already pursuing these innovations. Modest cost increases 
associated with improved administrative capacity are already a fact in 
most urban markets in Mexico.
    Even in the unlikely scenario that Mexican prices climbed to 50% of 
U.S. prices, the potential for Medicare savings would still be large.
Consider the following:

    1.  Assume only 20,000 enrollees in a Medicare Demonstration 
Project in Mexico.
    2.  Assume the worst case scenario that Mexican health care costs 
climb to 50% of U.S. costs.
    3.  Using the 2005 Medicare per-beneficiary spending, as shown in 
the Kaiser report previously cited.
    4.  Assume that currently, 64% of Mexico's expatriate seniors are 
traveling back to the U.S. for major medical care, but would remain in 
Mexico for care if it were covered there.\6\
---------------------------------------------------------------------------
    \6\ Dr. David C. Warner. Medicare in Mexico: Innovating for 
Fairness and Cost Savings. University of Texas, LBJ School of Public 
Policy. Austin Texas. 2007.


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---------------------------------------------------------------------------
    Thus, these calculations show a worst case scenario, in which:

      Health care costs in Mexico increased to 50% of U.S. 
costs; and
      Medicare utilization rates in Mexico are 100% of 
enrollees, compared to an estimated 64% now using Medicare by traveling 
back to the United States.

    Saves $17,524,000 per year, or a 21.9% cost savings to Medicare!

    However, the savings are likely to be larger. If enrollees in the 
Mexico Demonstration have a greater tendency to seek early diagnosis, 
preventive care, and wellness management, a portion of the high-cost 
inpatient care they are now obtaining in the United States could be 
eliminated. Because seniors in Mexico are currently paying for 
outpatient services out-of-pocket, it is almost certain they are now 
foregoing early care that would mitigate later inpatient treatments and 
procedures. With a Medicare Part B option available in Mexico, more 
seniors will seek early interventions, reducing costs and resulting in 
improved health outcomes. When hospitalization is required, Medicare 
Part A coverage in Mexico will provide the high-quality care that 
seniors deserve and Medicare requires, while saving substantial cost.
What is a ``Medicare Demonstration Project?''

    Short Answer: A Demonstration Project is the legal name for a 
Medicare pilot project, or experiment, in a Medicare program 
innovation. Since Medicare has never operated outside the United 
States, a Demonstration Project is required to prove that it can be 
done. The experiment seeks to prove that it is administratively 
feasible; that it will be budget neutral or cost saving; that it will 
result in improved health outcomes for participating beneficiaries, 
etc.
    We are seeking congressional authorization for a Demonstration 
Project because the current legislation does not allow for CMS to 
implement Demonstration Projects outside of the United States.
More Detail
    Historically, Federal policymakers have understood the need to test 
new ideas in the complex Medicare and Medicaid programs. Research and 
demonstrations projects whether initiated by States, health services 
researchers, providers, health plans, CMS, or Congress often lead to 
models or reforms available or mandated nationwide.
    Therefore, Federal law permits the Secretary of Health and Human 
Services to waive certain provisions of the Social Security Act and 
associated regulations as needed to conduct demonstration projects in 
Medicare, Medicaid, or both Medicare and Medicaid. Waivers are purely 
discretionary unless congressional legislation mandates a specific 
project.
Medicare Waivers Under Sections 402/222
    Under Sections 402/222, the HHS Secretary may waive Medicare 
statutes and rules to demonstrate new approaches to provider 
reimbursement, including tests of alternative payment methodologies, 
demonstrations of new delivery systems, and coverage of additional 
services to improve the overall efficiency of Medicare or to improve 
health outcomes for beneficiaries. (Sections 402/222 refer to section 
402[a] of the Social Security Amendments of 1967, as amended by section 
222[a] of the Social Security Amendments of 1972.)
    Any organization or individual may propose a Medicare waiver 
project. This includes providers, health plans, State Medicaid 
agencies, and health services researchers. CMS maintains an open 
invitation for outside parties to propose Medicare demonstration 
projects and the necessary waivers. However, the bulk of Medicare 
waiver-based demo projects are congressionally mandated in legislation 
or initiated administratively by CMS. CMS-initiated Medicare 
demonstration projects are often developed at the behest of the HHS 
Secretary, the White House Office of Management and Budget (OMB), the 
Medicare Payment Advisory Commission (MedPAC), or the Office of the 
Inspector General.
    Unlike many Medicaid waiver-based projects, most Medicare waiver 
projects tend to be genuine demonstrations projects with a careful 
research design and evaluation methodology.
    Once approved, Medicare waiver projects are administered by CMS 
either directly, through contractors (e.g., Medicare administrative 
contractors, Medicare Advantage plans), or (rarely) through States. 
Except for operational waivers, CMS evaluates each demonstration 
project. Major Medicare demonstrations, including congressionally 
mandated projects, are evaluated by independent health services 
researchers hired by CMS.
    Every proposed Medicare waiver program must be budget neutral to 
the Federal Government. That is, Medicare under the requested waivers 
must be projected to cost the Federal program no more than expected 
spending without the waivers. There is no set methodology--economic or 
actuarial--for determining Federal budget neutrality.
    Authority to issue waivers under Sec. Sec. 402/222 rests with the 
HHS Secretary. However, all Medicare waivers, regardless of size and 
scope, require the prior review and approval of the White House Office 
of Management and Budget (OMB). OMB may require changes, additional 
terms and conditions, or reject the proposed waivers.
    Medicare waiver projects initiated by CMS are typically operated 
for 3 or 5 years, depending on how much time is needed to test the 
policy change. Congressionally mandated waivers vary in length, with 
most 3 to 5 years in length and some indefinite.
A Brief Look at Health Quality Indices in the United States and Mexico
    In two separate surveys, overwhelming majorities of seniors living 
in Mexico report high levels of satisfaction with the quality of care 
available in Mexico.\7\ But is that an adequate measure to determine 
the quality of available health care in Mexico?
---------------------------------------------------------------------------
    \7\ Medicare in Mexico: Innovating for Fairness and Cost Savings, a 
study led by Dr. David Warner of the University of Texas, LBJ School of 
Public Policy; 2007. Also, Resultados de la Encuesta de Percepcion 
entre Ciudadanos Estadounidenses y Canadienses Residentes en Mexico, a 
survey for the Mexican government, undertaken by Dr. Rodrigo Garcia 
Verdu, an economist with the Ministry of Finance.
---------------------------------------------------------------------------
    Another way to assess quality of care may be a comparison of some 
common indices used to compare health care systems and quality among 
countries. These comparisons also have certain limitations, however. 
For example:

      Differences in health care spending per capita can result 
in substantial variation in indices of infant mortality, life 
expectancy, and other measures. In wealthy countries, a larger portion 
of the population may have access to services than in poorer countries, 
which can skew per capita spending statistics. Further, higher spending 
is not always a guarantee of better health outcomes. Thus, per-capita 
spending statistics must be considered in the context of differences in 
wealth; differences in income distribution; and cultural differences.
      Differences in first-year infant mortality are affected 
by the percentage of births in hospitals or attended by trained health 
personnel. In a poorer country, more births occur in the home or 
unattended by health professionals, skewing the statistics. As a 
consequence, infant mortality differences between countries may not 
necessarily reflect differences in quality of care when health 
professionals are involved.
      Similarly, differences in life expectancy may be 
reflective of wealth and income disparity, with associated access and 
utilization of health care services, rather than real differences in 
the quality of care available in the formal health care system.

    Nonetheless, commonly used indices can be helpful guidelines in 
assessing differences in quality of health care available between 
countries, with the proviso that indices are a snapshot that does not 
take into account differences in wealth, income, income distribution, 
educational levels, and culture. Given the significant differences that 
exist between the United States and Mexico on these factors, the 
indices reported by the World Health Organization for Mexico compare 
favorably with the indices for the United States.

--------------------------------------------------------------------------------------------------------------------------------------------------------
     Data from the World Health Organization Statistical Information System Interactive Database of Core Health Statistics for 193 Member Countries
---------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Per Capita Total
                                                                   Expenditure on
                                                                       Health          Physician                      Life Expectancy   Infant Mortality
                                                                     (Purchasing      Density per     Healthy Life     (for persons      (deaths during
                                                                   Power Parity in      10,000      Expectancy 2003    born between     the first year/
                                                                    U.S. $) 2006      population          data        2005-2010) 2006  1000 live births)
                                                                        data           2006 data                           data            2006 data

--------------------------------------------------------------------------------------------------------------------------------------------------------
U.S.A.                                                                     $6,714            26.0             69.0              79.0                  7
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mexico                                                                       $756            20.0             65.0              74.0                 29
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The above data reveal some interesting things:

      A huge difference in per capita total expenditure on 
health care has only a small effect on either healthy life expectancy 
or life expectancy for those of the current generation being born.
      Differences in physician density per 10,000 population 
are not large.
      Infant mortality rates are much higher in Mexico. 
However, certain infant mortality statistics for Mexico are not readily 
available:
        Rates for attended or hospital births for Mexico are 
known to be much lower in Mexico than in the United States. This can be 
expected to result in higher infant mortality in Mexico.
        Infant mortality rates among the highest wealth and 
education quintiles in Mexico are not available. Attended and hospital 
births among these groups would be substantially higher than the 
national average, and this would likely be reflected in much lower 
infant mortality for births among these population sectors.
        Infant mortality in Mexico has been reduced 
dramatically. In 1990, the rate was 42/1,000 live births. Government 
programs increasing prenatal care and education, expanding access to 
health services for expectant mothers, and economic growth have 
expanded access to health care services generally.

    In sum:

      World Health Organization indices appear to show that 
Mexico is achieving reasonably good health outcomes at very low cost.
      Expatriate Americans' perceptions about the quality and 
cost of health care in Mexico are very favorable.
      Cost comparisons show that health care services cost less 
than 35% of those in the United States.
      CMS could achieve substantial savings, improve health 
outcomes, and increase beneficiary satisfaction by providing eligible 
beneficiaries ac- cess to high-
quality care in Mexico via a Medicare Demonstration Project.

                             Submitted by Paul D. Crist, President,
                             Americans for Medicare in Mexico, A.C.

                                 
            Association of Ambulatory Behavioral Healthcare
Dear Mr. Rangel and Committee Members:

    The Association of Ambulatory Behavioral Healthcare (AABH) is 
providing Public Comment by way of this letter on issues related to the 
Health Reform in the 21st Century: Proposals to Reform the Health 
System. We thank you for the opportunity to comment on this issue.
    The AABH is a national membership organization of Partial Hospital 
Programs (PHP) and Intensive Outpatient Programs (IOP), outpatient 
hospital treatment providers, free standing treatment providers, 
administrators, doctors, psychologists, nurses, program directors, and 
front line therapist and support staff who serve as educators, case 
managers, political advocates, and treatment providers of individuals 
with mental illness and substance use (M/SU).
    The AABH feels that the use of Partial Hospital Programs (PHP) and 
Intensive Outpatient Programs (IOP) to treat mental illness and 
substance use (M/SU) conditions are proven methods of care and money 
saving options to inpatient and emergency care for these individuals 
and should be considered as the primary option to manage these 
conditions effectively and economically.
    The AABH supports the PHP and IOP treatment programs concept within 
the M/SU continuum of care, flanked by outpatient/assessment services 
and inpatient/acute services. Medical necessity guidelines determine 
eligibility for PHP and IOP treatment and reflect an acuity level only 
slightly less severe than inpatient treatment.
    In general, PHP and IOP treatment is effective when deemed 
medically necessary by the treating physician to avert inpatient 
hospital treatment. The patient must be experiencing noticeable 
impairment in self-care and must be unable to fulfill expected life 
functions. Patients may also be referred to PHP or IOP as a step-down 
from more expensive inpatient treatment to facilitate base-line 
functioning. PHP and IOP services are known for their ease of 
accessibility, and low cost treatment for individuals with acute and 
chronic mental illness.
    PHP and the less intensive IOP treatment, engages the patient in 
diagnostic assessments, symptom management and coping skills education, 
crisis intervention and relapse prevention, and relies on best 
practices and performance benchmarking to provide information as to the 
efficacy of the treatment programs.
    The continuance of PHP and IOP services within the continuum of 
care is vital, as it allows for patients to be treated in the less 
restrictive and a considerably less costly level of care, to be treated 
in the community in which they live, and takes steps to prevent 
decompensation of symptoms establishing a more positive quality of 
life.
    The AABH supports reform efforts that assist and establishes 
integration of the best knowledge and expertise available for M/SU 
treatment and prevention services into the health care reform planning 
process.
    The AABH fully supports utilizing the already proven and effective 
interventions provided through outpatient programs such as PHP and IOP 
for treating M/SU conditions while new and innovative interventions are 
being sought. M/SU treatment benefits already well exceed costs--for 
every dollar spent on M/SU treatment, we estimate that $7 in future 
health care spending can be saved. PHP and IOP care will save money.
Partial Hospital Programs (PHP) and Intensive Outpatient programs (IOP)
    Since as early as 1968, PHPs have been providing mental health and 
substance abuse treatment for the Nation's chronic and disabled 
mentally ill. Although not widely used until the mid 1990s, the PHP was 
developed as a less costly and more accessible treatment option to in-
patient hospital care. As the M/SU patient is treated in the 
environment in which he lives, he is able to live in a stable 
environment and receive outpatient treatment close to his home. The 
savings are significant when the efficacy and cost of a long-term PHP 
care is set against the efficacy and cost of short-term hospital or 
emergency care.
    Partial Hospital Programs (PHP), and the less structured Intensive 
Outpatient Programs (IOP), are ambulatory, active and time-limited M/SU 
treatment programs that offer therapeutically intensive coordinated and 
structured clinical services within a stable therapeutic milieu. 
``Partial Hospital and Intensive Outpatient'' implies psychosocial 
milieu treatment with group therapy as the primary treatment modality. 
While specific program variables often differ, all PHPs and IOPs pursue 
the general goals of stabilizing clinical conditions, reducing symptoms 
and impairments, averting inpatient hospitalization, reducing the 
length of a hospital stay, and providing medically necessary treatment 
for individuals who cannot be effectively treated in a less intensive, 
strictly outpatient level of care.
    All PHPs and IOPs attempt to employ an integrated, comprehensive 
and complementary array of evidence-based treatment approaches. 
Programs are designed to serve individuals with severe symptoms and 
functional impairments resulting from M/SU disorders. They are also 
intended to have a positive clinical impact on the individual patient's 
support system and therefore the individual's recovery environment. 
Treatment services may be provided during the day time, evening time 
and on some occasions, on the weekends.
    PHPs and IOPs may be free-standing, part of a mental health 
organization, or a department within a medical health care system. One 
of the unique strengths of a PHP or IOP is its applicability to a 
diverse array of circumstances such as clinical conditions, patient 
populations, treatment durations, treatment settings, etc.
PARTIAL HOSPITAL PROGRAMS and Intensive Outpatient Programs ARE 
        INTENDED TO BE COST EFFECTIVE AND:

      Provide the M/SU patient a way of managing their illness 
in an environment that allows them to remain in their homes and 
communities;
      Provides Continuum of Care options, as these patients 
require psychiatric care of some type for their entire lives;
      Provide options, other than inpatient hospitalizations, 
which are far more restrictive, far more costly, and far less 
effective;
      Provide a cost savings, as untreated mentally ill 
patients will eventually end up in hospital emergency departments, 
jails, prisons, or become part of the growing homeless population.

    The concept of PHP and IOP is to maintain patients with chronic 
behavioral disorders in a controlled environment, providing 
psychotherapeutic and pharmacologic support on a daily basis, without 
requiring an inpatient hospitalization. Patients admitted to a PHP or 
IOP must be under the care of a physician; patients must provide 
written informed consent for treatment; must require comprehensive 
treatment due to a M/SU disorder which severely interferes with 
multiple areas of daily life, including social, vocational and 
educational functioning.
    Patients appropriate for the PHP or IOP level of care comprise the 
following:

      Discharged from an inpatient hospital treatment program;
      In lieu of continued inpatient treatment; or
      Patients who, in the absence of partial hospitalization, 
would require inpatient hospitalization.

    Patients admitted to a PHP or IOP are provided comprehensive 
treatment and utilize the same services as inpatient psychiatric care 
at a greatly reduced cost; the treatment directly addresses the 
presenting symptoms and problems and consists of clinically recognized 
therapeutic interventions including individual, group, and family 
therapies and activities pertinent to the patient's illness. Medical 
and psychiatric evaluations and medication management are integral to 
treatment.
Admission Criteria to a PHP and IOP
    M/SU patients should be treated in the least intensive and 
restrictive setting that meets the needs of their M/SU illness. If 
patients do not require a 24-hour per day level of care, as provided in 
an inpatient setting, the PHP outpatient level of care is the perfect 
setting to prevent inpatient hospitalization. The M/SU patients being 
treated in a PHP or IOP receive active treatment through a combination 
of services such as psychotherapy, occupational, activity therapy and 
medical interventions as necessary.
    Patients admitted to a PHP or IOP must have an acute onset or 
decompensation of a covered Axis I mental disorder which severely 
interferes with multiple areas of their daily life and will have a 
degree of impairment that is severe enough to require a structured 
program.
Services Provided in a PHP or IOP

      Medically necessary diagnostic services related to M/SU.
      Individual or group therapy; Occupational therapy.
      Drugs and biologicals that cannot be self-administered.
      Individualized activity therapies that are essential for 
progress toward treatment goals.
      Treatment plans noting how each therapy fits into the 
treatment of the patients illness.
      Family counseling to assist the family members in helping 
the patient.
      Patient education where activities are related to the 
care and treatment of the patient.
      Diagnostic services for the purpose of identifying 
problem areas.

    M/SU conditions are tied to physical health and can be addressed 
like other chronic and acute conditions in order to provide efficacious 
health care. Ignoring one is likely to compound the other. However, for 
people that need M/SU treatment services the services vary widely. An 
effective health care delivery system must provide:

      Providers who are paid for providing services with 
desired outcomes;
      A comprehensive range of services;
      The full continuum of care, including PHP and IOP 
services;
      Service to those with both acute and chronic condition;
      Service to a wide and varied population--some will 
present themselves, some will be delivered into the system, and some 
the system will need to seek out and serve.
Summary: PHP and IOP Included in Health Care Reform
    PHPs and IOPs have evolved over the years until their current 
status as an instrumental part of the behavioral health continuum. 
Clients are referred both as an alternative to inpatient hospital care 
as well as a step-down from inpatient hospital care. PHPs and IOPs are 
particularly successful with first episode of care patients and utilize 
an educational format combined with group therapy, medication 
management, and specialized therapies to assist people in understanding 
their diagnosis and initiating a path toward recovery. Most programs 
are managed and adhere to strict medical necessity guidelines which 
determine individual eligibility for care.
    While reform must successfully deal with the medical needs of the 
many healthy individuals, the greater challenge is to ensure that a 
reformed system better serves the medical and M/SU chronic care and 
prevention needs of a small fraction of the population that consumes a 
disproportionate number of services.
    The AABH supports reform that goes beyond the current standards and 
practices of the meeting patient's needs and is looking to be involved 
in assisting in the crafting of new and innovative methods of care that 
are not only less costly but also more effective. Currently providers 
are paid for providing services rather than producing desired outcomes. 
There are significant disparities in health and health outcomes as they 
exist across sectors of society. Individuals, health practitioners, and 
policymakers make decisions based on a limited evidence base regarding 
which practices work effectively for which groups or individuals. In 
addition, the current system focuses heavily on expensive acute care 
for physical and M/SU illnesses to the detriment of an approach that 
can prevent and/or stabilize disease well before acute care is ever 
needed.
    In conclusion, we want to make sure that health care reform 
includes the provisions of PHP and IOP services for M/SU in health care 
plans, as they maintain a fundamental alternative to inpatient care for 
the seriously ill M/SU patient in acute crisis, while providing a 
supportive community-based setting that maintains the continuation of 
family and community support. This gives the patient the opportunity to 
maximize treatment gains through completion of homework assignments, 
reconnect with community services, seek out employment options, and be 
involved in activities that develop strengths and enhance resiliency 
and recovery.
    Again, we would again like to thank you for this opportunity to 
share our comments. The AABH continues to work with other organizations 
and governmental agencies towards an integrated health care system 
where the M/SU patient will be able to receive a multitude of services 
including treatment in a PHP and IOP economically.

            Sincerely,
                               Larry Meikel--President of the Board
             JoAnne Mandel--Co-Chairperson; Public Policy Committee
                                            AABH Board of Directors
                                            Public Policy Committee

                                 
               Statement of Becton, Dickinson and Company
    BD is a leading global medical technology company that develops, 
manufactures and sells medical devices, instrument systems and 
reagents. The Company is dedicated to improving people's health 
throughout the world. BD is focused on improving drug delivery, 
enhancing the quality and speed of diagnosing infectious diseases and 
cancers, and advancing research, discovery and production of new drugs 
and vaccines. BD's capabilities are instrumental in combating many of 
the world's most pressing diseases. Founded in 1897 and headquartered 
in Franklin Lakes, New Jersey, BD employs approximately 28,000 people 
in roughly 50 countries throughout the world. The Company serves health 
care institutions, life science researchers, clinical laboratories, the 
pharmaceutical industry and the general public.
    BD appreciates this opportunity to provide input on landmark health 
care reform legislation. One of our highest priorities is to provide 
incentives within the Medicare payment system that would reward 
hospitals for preventing health care-associated infections (``HAIs'').

    Policy Request. Include specific HAI prevention interventions as 
quality measures under value-based purchasing authorization in health 
reform legislation.

    The Department of Health and Human Services (``HHS'') recently 
finalized its HHS Action Plan to Prevent Health Care-Associated 
Infections (``Action Plan''), which provides a roadmap for a 5-year, 
national HAI prevention strategy. BD supports this comprehensive 
prevention effort as part of health care reform and quality of care 
improvements by the Obama Administration. Specifically, BD supports 
efforts to achieve the Action Plan targets for HAI prevention, 
including reducing invasive methicillin-resistant Staphylococcus aureus 
(MRSA) infections by 50% by 2014 and reducing Clostridium difficile (C. 
diff.) infections by 30% by 2014, as measured by case rate per patient 
days.
    Many health care and Medicare payment reform proposals have 
included the establishment of a Medicare hospital value-based 
purchasing (``VBP'') program. According to recent proposals from 
Senators Baucus and Grassley as well as the Centers for Medicare and 
Medicaid Services (``CMS''), a VBP program would increase or decrease 
hospitals' DRG payments depending on their success at achieving, or 
improving upon, certain quality performance measures. To ensure that 
the HHS-established HAI prevention targets are achieved, the Action 
Plan's targets and process and outcomes metrics should be incorporated 
into any Medicare VBP framework as quality performance measures. VBP 
payments to hospitals then would be conditioned, in part, on hospitals 
making annual progress toward their HAI prevention goals, creating a 
strong incentive for every hospital to take steps to reduce HAIs.

    Background. VBP Creates Incentives to Reduce High Rates of 
Preventable HAIs

    According to the Centers for Disease Control and Prevention, HAIs 
caused by MRSA, C. diff., vancomycin-resistant enterococcus (VRE) and 
other infectious pathogens are one of the top 10 leading causes of 
death in the United States, accounting for approximately 99,000 deaths 
annually. Furthermore, in addition to thousands of lost lives, HAIs 
cost the U.S. health care system an estimated $20 billion each year. 
Yet many of these infections are easily preventable.
    We must strengthen HAI prevention efforts. Prevention of HAIs would 
improve the quality of patient hospital care, save thousands of lives, 
and at the same time lead to billions of dollars in savings. The Action 
Plan signals a renewed national commitment to reducing HAIs. However, 
successful implementation of the Action Plan depends on an enforcement 
mechanism to ensure that hospitals implement infection control policies 
and take other precautions to prevent HAIs. Without specific 
incentives, such as VBP, hospitals may not achieve the Action Plan 
prevention targets, and HAIs will continue to be a major cause of death 
and a significant driver of health care system costs.
    In a recent announcement, the American Hospital Association, the 
Federation of American Hospitals and the Catholic Health Association 
embraced VBP in the context of health care reform. As Congress 
considers developing the framework of this program, it is important 
that HAIs be included as one of the conditions or clinical performances 
areas considered in determining hospital payments. According to a 
recent survey by the Association for Professionals in Infection Control 
and Epidemiology, more than 40% of hospital infection control programs 
have experienced budget cuts over the last 18 months. Incorporating 
HAIs into the VBP framework would establish a platform for providing 
hospitals with the resources they need to support efforts to prevent 
infections.
    VBP has been considered in health care and Medicare payment reform 
proposals on numerous occasions. Most recently, the Senate Committee on 
Finance, in a health care reform Policy Options paper released in 
April, proposed establishing a hospital VBP program that would build on 
the success of the current Reporting Hospital Quality Data for Annual 
Payment Update (``RHQDAPU'') program and ``move beyond paying for 
reporting on quality measures and activities, to paying for hospitals' 
actual performance on these measures.'' This proposal follows a 2007 
VBP white paper from CMS proposing that a portion of the hospitals' DRG 
payments (2-5%) be contingent on meeting certain quality goals.
    Furthermore, in the Medicare hospital inpatient proposed rule for 
FY2010, CMS acknowledged the ``growing concern regarding hospital 
acquired infections'' and discussed the possibility of adopting new 
quality measures for potential future use in the RHQDAPU program, which 
could include HAIs.
    Attached to this statement is a proposed amendment to the most 
recent available congressional discussion draft of a value-based 
purchasing bill. We hope that this draft amendment will provide the 
Committee with a concrete example of the type of legislative language 
that we are proposing.

FOR FURTHER INFORMATION, PLEASE CONTACT:

    Paul Seltman
    Director, Public Policy and Government Relations

    BD
   Proposed Amendment to 2008 Value-Based Purchasing Discussion Draft
  Include Health Care-Associated Infections in Value-Based Purchasing 
                             Authorization
    The Senate Finance Committee released a discussion draft of a 
value-based purchasing proposal in 2008. We recommend the following 
changes (in bold) to section 2 of the proposal to include prevention of 
health care-associated infections as a quality measure under the value-
based purchasing authority.
SEC. 2. HOSPITAL VALUE-BASED PURCHASING PROGRAM.
    (a) Program.--
    (1) In general.--Section 1886 of the Social Security Act (42 U.S.C. 
1395ww) is amended by adding at the end the following new subsection:
    ``(n) Hospital value-based purchasing program.--
    ``(1) Establishment.--
    ``(2) Measures.--
    ``(A) In general.--The Secretary shall select measures for purposes 
of the Program. Such measures shall be selected from the measures 
specified under subsection (b)(3)(B)(viii).
    ``(B) Requirement for fiscal year 2012.--For value-based incentive 
payments made with respect to discharges occurring during fiscal year 
2012, the Secretary shall ensure the following:
    ``(i) Conditions or clinical performance areas.--Measures are 
selected under subparagraph (A) that cover at least the following four 
five specific conditions or procedures:
    ``(I) Acute myocardial infarction (AMI).
    ``(II) Heart failure.
    ``(III) Pneumonia.
    ``(IV) Surgeries, as measured by the Surgical Care Improvement 
Project (formerly referred to as `Surgical Infection Prevention' for 
discharges occurring before July 2006).
    ``(V) Health care-associated infection prevention metrics and 
targets, as established in the Department of Health and Human Services' 
HHS Action Plan to Prevent Health Care-Associated Infections or any 
successor plan.
    ``(ii) HCAHPS.--Measures selected under subparagraph (A) shall be 
related to the Hospital Consumer Assessment of Health Care Providers 
and Systems Survey (HCAHPS).''

                                 
                   Statement of the Breyer Foundation
    America's health care system is fueled with innovation and 
pioneering discoveries leading to the cure, treatment and intervention 
of the most challenging diseases in the history of man. The unique 
economic structure of this country weaves the interconnection of the 
different factors that feeds and sustains the economic growth and 
promotes the discoveries of new ideas that changed the history of 
science and medicine. With this advancement comes the compassion and 
the struggle of every physician, health care provider and educator to 
reach out to all the people in disseminating new knowledge and cure. 
Since America is still considered quite a young country in comparison 
to the rest of the world, such efforts remained to be perfected and 
polished to reach the optimum potential that this system and country 
can achieve. Our ultimate goal is to be free of the burden of health 
care cost and provide the best quality health care for all the people 
in this country. Such goal can be achieved through some of the 
following key features:

      Improvement of the quality of life through an effective 
preventive care program, free preventive care coverage for all;
      Empowerment of the people through knowledge, access and 
control of their own health care portfolio;
      Effective communication and efficient dissemination of 
new discoveries, best clinical practices and treatments, and other 
information that promotes the improvement of the quality of life of the 
patients and growth of the system as a whole;
      Economically sustainable health care system powered by 
the inherent strength of the different stakeholders, and the alignment 
of their mutual interests that promotes synergistic growth--a win-win 
for all;
      Preserve the best of the current system--flexible option;
      Health saving system that builds foundation toward 
financial independence of health care cost;
      Provides solution to the financial problem of Medicare;
      An equitable, timely and quality health care system that 
addresses the needs of all Americans, including the 47 million 
uninsured;
      Effective and efficient Central Network System (CNS) 
design that eliminates unnecessary bureaucracy;
      Promotes innovation, collaboration and economic growth;
      Offers incentives such as tax exemptions or credits 
instead of tax increase;
      Promotes personalized medicine and depositories of 
effective treatment protocols and guideline;
      Works effectively in rural and urban areas of America;
      Provides real solution in eliminating health disparities 
representing all racial groups in America;
      Empowers each individual with the right to choose and the 
right to life;
      Eliminates barrier for the health insurance access of 
people with preexisting conditions.
                    Basic Implementation Principles
    Sustainable Health Care System Model: The fundamental and basic 
structure of the health care system is based on the alignment of the 
interest of the different stakeholders that promotes synergistic 
growth. A system based on a delicate combination and balance between 
the negative and positive rights of an individual and his/her 
responsibilities to the welfare of other stakeholders engaged in the 
system. The system is based on understanding the fundamental factors 
that will provide incentives to the different stakeholders to perform 
their optimum task and contribution in the system with minimum 
enforcement and barriers.

    Emphasis on Preventive Care (Benefits to ALL): Insurance for all 
will not be able to resolve the health care needs of the poor. As most 
of the current 47 million uninsured are eligible to a basic Medicaid 
system but cannot and/or will not access this system until absolutely 
necessary through our Emergency facilities. An annual preventive care 
visit to a physician could dramatically decrease the need of Emergency 
visits for all Americans.
    A free annual preventive care visit to a physician should be a 
major component of all standard insurance benefits for Americans. 
Although it is quite understandable that difficulties exist for the 
poor and underserved groups from factors such as transportation, time 
and lost wages, it is, however, essential to note that their well-being 
and health is their responsibility and their actions impact the rest of 
the Nation. Thus with the rights comes the responsibility for the 
underserved groups to take advantage of the free preventive care visit 
available for them in this program. The program subsidizes the 
insurance cost of the people below a certain poverty level. The subsidy 
is renewable every year and initiated through their first annual free 
preventive care visit to a physician. A decrease in the cost and number 
of major catastrophic care would eventually decrease the burden in the 
insurance companies and our entire health care system, thus providing 
the people a better leverage in reducing insurance premium.
    A portable medical electronic record for the system will keep track 
of the enrollment and medical history of individual participants. This 
will address the need of people who have no permanent residence and 
relocate more often than average Americans. Repetitive tests due to 
lack of health record history for the uninsured and homeless is one of 
the major contributions for high health care cost. Security in the 
access of these records will be ensured in order to protect the rights 
and privacy of the patients. All access to these health records by a 
third party (physicians, nurses, etc.) will be based on patient's 
consent (or authorized family members in cases of patient's incapacity 
to make a decision). These records will be maintained in the Central 
Network System (CNS), a fully independent agency, using a system with a 
defined security structure to prevent access of unauthorized 
individuals to sensitive information. Insurance companies and employers 
will not have access to health results and risk assessments of the 
individuals. The Central Network System will facilitate the 
communication of benefits and service between the patient-physician and 
insurance companies. Access to insurance provider and enrollment to the 
CNS program could be accomplished in the physician's office through 
automated, online and national standardized forms.

    Equitable and Affordable Insurance with Variable Options to Meet 
Participant's Needs (Financing, Benefits to Patients) (One size does 
not fit ALL!): Standard features such as free annual preventive care 
(including dental, vision, mental health, health education credit and 
assessment, etc.) visit and a component of a catastrophic care to cover 
the needs of an individual over the span of his/her lifetime. These 
standard features will be included in the minimum standard benefit 
reflecting the needs of the majority of Americans, as evaluated over a 
period of time, with additional options available, tailored to 
individual's need. Entry to the program is independent of preexisting 
condition. CNS, the Federal and State government will leverage the cost 
of these premiums for the people in order to optimize the cost savings 
of the system.

    Small business owners and their employees, self-employed 
individuals, employees of large corporations and Federal Government, 
and the current uninsured can choose between the different providers 
and options in the insurance exchange. The overall base premium (for 
all options) should reflect additional 20-30% of a cumulative 
individual health savings account (IHSA) components that would provide 
the participants with additional reward savings in meeting and 
maintaining his/her annual health and wellness goals. The IHSA account 
will be maintained and managed for the individual (in similar manner as 
the retirement account) and the program by an independent Central 
Network System. Interest from the trust fund (with sufficient funds) 
could be used to pay future insurance premium for the individual. 
Individuals could transfer the benefits/trust funds to their heir after 
their death.

    Eighty percent of uninsured individuals in the United States live 
in households with an employed individual. Breyer's plan will extend 
the tax exemptions and coverage to secondary families such as parents 
and children in student status. Tax exempt and credit structure will be 
set up and optimized to provide incentives for an individual (and their 
employers as an optional partner) to sponsor and buy in affordable 
insurance to uninsured secondary family members living in the same 
household. Children will be covered by the parent's insurance while in 
student status and 1 year grace period after school (while finding an 
employer-sponsor). Such option would provide not only affordable 
insurance to approximately 20%-34% of our uninsured but will also 
provide enrollment of these individuals in the individual health 
savings account (IHSA) and additional tax credit to sponsors.

    Breyer's plan does not require mandatory health insurance. 
Uninsured who are in high income brackets (20%-25% of uninsured) who 
choose not to buy insurance through the program will have to provide a 
set savings bond of at least $20,000-$50,000 to cover a future 
catastrophic incident. Since a portion of the individual health savings 
account in Breyer's model goes as donation to the underserved and 
uninsured, this approach will ensure a fair system where the individual 
donation will go to help the poor and uninsured and not the rich who 
skip paying insurance and later on will get the benefit from other 
people's sacrifice and efforts.
    A defined and clear guideline will be established consistent with 
taxable income and tax payment/credit structure to provide subsidy to 
insurance coverage for individuals who are below the 400% poverty line. 
Unemployed individuals will be covered in this subsidized insurance 
program. Financing will be provided through a portion of the individual 
savings (20 cents for every dollar saved) acquired through leverage 
with insurance companies (lower premium) and pharmaceutical industries 
(lower drug cost). A small copayment (between $20-$50) will be 
established depending on the poverty level above 200%. The program will 
not require any out-of-pocket expenses from individuals, such as 
increase in taxes, but will provide tax exemptions and credit on the 
IHSA and donated funds to the uninsured. (Please see the Breyer's 
Model).

    Veterans and their families who are not eligible for veteran 
hospital benefits (since VA health benefits are limited to war related 
injuries) will be able to enroll in the private insurance program and, 
with the consent and support of the Department of Veterans Affairs, can 
access the state-of-the-art facility of the VA Medical Centers or go to 
other hospitals of their choice. A Federal program will be available 
for Federal employees through choice of different private insurance and 
options. Culturally appropriate financial and infrastructure support 
will be provided to the Native American Indian Health System.

    Benefits to Participating Hospitals, local clinics and other health 
care institutions: All private and public hospitals, local clinics and 
other health care institutions who participated in the various programs 
of Breyer's plan (preventive, cost reduction through effective, 
efficient and quality health care) will receive subsidy for their 
uninsured enrolled in the program.

    Individual Mandate: Insurance is not mandatory to everyone. 
However, to prevent high-income individuals from skipping the insurance 
premium cost and taking advantage of the system's benefit in times of 
need, individual savings bond (at a minimum of $20,000), to cover 
catastrophic incident, would be required for high-income individuals 
(based on taxable income adjusted to the cost of living for a given 
State) who selected not to buy insurance in the program.

    Employer Requirements: Employer will be provided a tax exemption 
for employee-sponsored benefits and additional tax credit for extending 
sponsorship to secondary family members. Employers will receive the 
savings proportional to their contribution in the employees' overall 
insurance premium. A similar formula as specified in the Breyer's model 
will be applied in their contribution to the uninsured and in their 
corresponding tax credit.

    Expansion of Public Program (Solution to Medicare Bankruptcy): A 
portion of the current stimulus fund of $630 billion and leftover 
Medicare funds for 7 years (Medicare funds left until 2017) could be 
used to subsidize individuals above 65 years of age who are currently 
in Medicare while the rest of the population can slowly transition 
their Medicare contribution to their IHSA for their own individual 
health care benefits. Thus providing a solution to the unsustainable 
structure of Medicare and a path for independence of future health care 
cost for the individual. (A more detailed and optimized system (amount 
and timing) could be acquired and simulated with a given software 
resources/program).

    Premium Subsidies to (Benefits to) Employers: Tax exemption and 
credit will be available to employers for employee's benefits. No tax 
increase but additional savings that can be used to enhance employee's 
benefits. Small businesses and self-employed individuals would be able 
to access an affordable insurance premium that is currently just 
available to large corporations and Federal programs. CNS programs 
would be available to employees to improve health and work performance.

    Benefit Design: An annual preventive care (includes services that 
the American Medical Association and/or other medical associations 
considered essential in early prevention of diseases, i.e. vision, 
dental, mental health, podiatry, mammogram, lab tests, pre-natal care 
if applicable, etc.) is free for ALL. A minimum standard benefit of 
equivalent or greater value from the benefits currently enjoyed by a 
majority of Americans (such as the Blue Cross/Blue Shield Standard Plan 
and the Standard Federal Employees Health Benefit Program, FEHBP). 
Additional options are available for long-term disability and types of 
long-term care services. An additional component of the standard plan 
would be an optional tax credit and/or benefit for (preventive) health 
and wellness education program and assessment.

    Benefits to Private Insurance: A guaranteed insurance of close to 
330 million Americans every year. National support through CNS and all 
stakeholders for preventive care and efficient, effective and quality 
health care improving the health and quality of life for all. Support 
from CNS, Federal and State agencies, scientist and health 
professionals through depositories of effective clinical practices, 
more standardized cost of medication and services, innovative approach 
and effective treatment will be available resources to all. Additional 
public support programs for nutrition and wellness classes for the poor 
through existing programs, e.g. USDA food stamps and nutrition 
programs. CNS will coordinate programs with CDC, VA, NIH and other 
national health associations to expedite the dissemination of programs 
that will enhance risk assessment, prevention and treatment of various 
disorders. Together with various public and private organizations CNS 
will provide an efficient bridge in the translation of new discoveries 
and best practices from a bench to clinics and hospitals. These 
programs will drastically reduce administrative and catastrophic health 
care cost for insurance companies.

    Benefits to Pharmaceutical Companies: Twenty-five percent of the 
cost for pharmaceutical company's drug discovery and development is 
focused on marketing and dissemination of information. CNS will 
facilitate the dissemination of new discoveries in new drugs and 
technologies through its participating hospitals, physicians and health 
professionals, remarkably reducing the cost of marketing and 
dissemination for the company. Such activities will be done in 
coordination with the participating public agencies such as FDA, NIH, 
CDC, etc.
    CNS will also provide a national depository or listing of clinical 
trials for new drugs and technologies so as to provide options for 
individual participants to access innovative approach, medication and 
studies throughout the Nation. It would be the individual's choice to 
participate in any of the listed clinical trials based on the health 
benefits that study would provide. This connection will be facilitated 
by CNS through close communication with the Food and Drug 
Administration and other collaborating agencies (CDC, NIH and other 
public and private agencies) that would provide accurate and reliable 
information to everyone regarding the risk and health benefits of the 
discoveries. This would reduce the inefficiencies in the recruitment 
and retention of participants in evaluating the effectiveness of 
treatments and other intervention procedures. Reduction in the 
administrative, evaluation and dissemination cost for the development 
of drugs will help pharmaceutical companies in reducing the cost of 
medication in this program.

    Benefits to Physicians and Health Professionals: CNS will work with 
NIH, CDC and other public and private agencies to provide resources, 
medical information and technical support for physicians in urban and 
rural areas regarding new and effective treatments and discoveries. 
Telemedicine and ready access to specialists will be provided through 
this network. CNS will also help facilitate the transition of 
technology and approach to personalized medicine. Inter-individual 
biological differences exist and thus there will be no mandatory 
protocol. Best clinical practice protocols and results of effective 
treatment studies would be available in CNS depositories in order to 
guide physicians in making informed decisions. Breyer's plan promotes 
an integrated approach on health care through collaboration and 
communication between physicians and health care professionals beyond 
geographical barriers, all within the goal of providing the optimum 
care the patient deserves. Physician's decision based on well-founded 
and supported knowledge, and readily available support from other 
experts in similar and complementary fields will reduce the uncertainty 
and risk involved in malpractice lawsuits.
    An efficient communication infrastructure between the different 
health institutions and professionals will also provide further support 
for CDC and NIH in promoting and implementing studies that would 
resolve some of the problems in the health of the American people. 
Breyer's plan of a centralized network will provide efficient 
infrastructure and further support on CDC's and NIH's initiatives for 
more comprehensive NHANES and Framingham studies that would provide 
more information on the prevalence, risk and effective treatment of 
different diseases in various ethnic groups in the Nation. 
Understanding of the risk and prevalence of the different disorders 
such as cancer, diabetes and other diseases would enable health care 
professionals to better implement preventive care and treatment.
    Physicians in remote areas do not have ready access to the state-
of-the-art discoveries in medical treatment and technology. CNS' 
depository will be the means to bring this innovation to the rural and 
remote areas through training, support to physicians and other health 
professionals, while utilizing as much of the existing resource and 
infrastructure.

    State Benefits and Function: Since each State has different 
demographics, resources and infrastructure, CNS will work with local 
State health agencies to design and implement programs depending on the 
States' resources and infrastructure. The dynamic changes and flux in 
the different resources and needs of each State will be closely 
monitored by State agencies. Corresponding adjustment in the national 
CNS system will be performed based on the State quality assessment-
feedback and national process optimization approach. Progress and 
effective health care reform from each State will be evaluated based on 
their starting baseline. Private insurance and service options may 
differ between States but the same guidelines (in overall cost and 
benefits) will be observed.

    Cost Containment: CNS will leverage the reduced cost of insurance 
premiums and drugs for 330 million Americans. A minimum standard 
insurance premium will be established equivalent or higher in benefits 
to the current standard Blue Cross/Blue Shield or Federal Employee 
Benefit Plan (with free annual preventive care). Several payment plan 
variations and options of this standard plan would be available to 
address the financial needs of the people. Additional savings will be 
maintained by CNS and will be placed in individual accounts through 
participation and accomplishments in the preventive care programs. 
Participating hospitals that report an effective, efficient and quality 
health outcome for their patients get the corresponding savings through 
subsidy to their uninsured. Results and outcome for cost effective and 
quality care for patients can be evaluated through multiple followup 
and efficient recording of health results of patients. Thus electronic 
medical data and history will guide not only the physicians in 
prevention and diagnosis but also provides the patient a portable 
medical record and control of their own health. Information summaries 
and results of available studies in the service cost, effectiveness of 
existing treatment and medication will be available to patients, 
physicians and other health professionals for their review and 
evaluation. Strict penalties will be placed on fraud and corruption in 
the system. The CNS in collaboration with agencies in State, Federal, 
and private institutions will set up guidelines, routine audit checks 
and oversights of each participating group in this system.

    Health Disparities: CNS will work with the U.S. Census, CDC and NIH 
towards programs such as NHANES and Framingham studies to evaluate the 
risk, prevalence and effective interventions for various diseases for 
all the groups (African Americans, Asian Americans, Caucasians, 
Latinos, Native American Indians, Pacific Islanders) represented in the 
American population. Oversampling of groups will be implemented in 
order to provide statistically valid health information, especially for 
small underrepresented ethnic groups.

    Central Network System: The Central Network is independent of any 
entity (Government, insurance and health care providers) and provides 
not only insurance leverage but also effective communication 
(personalized medicine), treatment, clinical, scientific guidelines and 
services in coordination with other private and public agencies--an 
integrated approach necessary to run a complex system. CNS' structure 
will consist of an oversight board consisting of representatives from 
all stakeholders and external advisers.

                                 
                   Statement of Budd N. Shenkin, M.D.
The Obama Health Insurance Reform in Perspective
    I'm glad to see that the first step of the Obama Health Plan (OHP) 
will rest on creation of a health insurance ``exchange,'' where 
consumers are presented each year with a menu of alternative plans at 
predetermined standardized levels of benefits, offered by various 
companies. Since there will be government subsidies to make at least 
the basic plan affordable to everyone, insurance will probably become 
nearly universal, and job mobility should improve. It seems that, after 
all this time, the problem of the availability of health insurance to 
individuals will be largely solved. This will mark a good and important 
first step, tactically very smart to take, in fixing health care and 
making insurance available.
    But it is only a first step. As everyone knows, the whole system 
needs revision, to make it relatively efficient, fair, less costly, 
higher quality, and progressively gaining ground in all these aspects 
instead of losing ground. The basic problems lie in the nature of the 
insurance system, the cost and organization of hospitals, 
pharmaceuticals and medical devices, and reliance on specialists 
instead of primary care. So, while the OHP's first step is a great one, 
it needs to lead to bigger changes in the way the system functions as a 
whole. Which I think it will.
    The key to understanding the current insurance system is this: How 
do the companies make their money? Competition in and of itself is not 
a good thing if the way they compete doesn't redound to the benefit of 
the public. To simply celebrate the existence of competition qua 
competition is to celebrate ideology rather than what competition is 
supposed to deliver.
    I wish I knew more about insurance companies so I could write with 
a deeper factual background, but here is the way it seems to me. First 
of all, they compete by underwriting. In the individual market they 
assess health and age status; in the group market they assess 
utilization history and probabilities; in both cases they then price 
their products accordingly, and deny applications, raise premiums, or 
restrict coverage. (This is called experience-rating; if a company 
would give the same price to all comers, this would be called 
community-rating). The companies that underwrite most artfully make the 
most money. In addition, since benefits are not standardized, the 
companies that can write their plans most cleverly also win. 
Unfortunately, the underwriting enterprise winds up making coverage 
either unobtainable or exorbitant to many people who thus become 
uninsured.
    Insurance companies also strive for profits in other ways. In the 
large company sphere they provide administrative services; if they can 
do this most efficiently, they win. They negotiate with care providers, 
especially physicians and hospitals, to variable effect, bending to the 
pressure of hospitals with a lot of market power, making others bend to 
them when the insurance company is more powerful. Market power is more 
influential than straight cost-accounting. What a company loses in one 
market they gain in another. If they lose to hospitals, they make it up 
by short-changing the atomized physicians.
    Insurance companies can also profit by the way they pay providers, 
or don't. If they declare some services ``included'' with other 
services, they can avoid paying for both, although both might have 
perfectly valid CPT (service descriptor) codes. They can deny claims on 
obscure bases. Some insurance companies have been convicted of setting 
``payment denial'' objectives for their staff. They can delay payments 
and make money on the float.
    Unfortunately, what they have not been able to do to a significant 
extent is to assert control over utilization, nor to improve quality, 
because they are too far away from the functioning of the system, and 
too far away from their own expertise, to do so. Overall, the culture 
of the health insurance companies has been such that none have been 
described as particularly good citizens, looking out for the health of 
the Nation, coming up with schemes that would advance the health care 
industry and do better for people. In fact, quite the reverse.
    It is clear, then, that when it comes to health insurance, the OHP 
has more to reform than accessibility to a policy. The first step will 
be to establish the ``exchange.'' The second will be to eliminate the 
ability of the companies to reject applicants, and establish community-
rating premiums with governmental subsidies to avert adverse selection. 
(Hal Luft of the Palo Alto Medical Foundation Research Institute has 
suggested that establishing a Major Risk Pool is a way of achieving 
this.) While these changes will save insurance companies the overhead 
costs of underwriting, they will also mean that a major modus operandi 
of the health insurance industry will be altered. They can still make 
money by establishing contracts with providers that rest on their 
market power; they can still make money by denying claims; they can 
still make money by being efficient in administrative operations. But 
they will have to stop making money by experience-rating individuals 
and groups, and by cleverly designing plans to their own advantage.
    The OHP will of necessity solve the insurance accessibility 
problem. What it then needs to do is to influence the insurance 
companies to focus their profit motive to add to the public good by 
making their own internal operations more efficient, and inventing ways 
that make the system as a whole better. The issue is, would inclusion 
of the public option make that objective more possible?
The Question of the Public Option
    Given that there will be a health insurance exchange, and given 
that there will be community-rating, the biggest controversy right now 
is: should there be a so-called public plan on the menu? A public plan 
would be one sponsored by government--proponents want it to be the 
Federal Government, others would like it to be States, or even other 
entities such as ``cooperatives.'' I have called this option the BGP, 
the Big Government Plan. (Which it wouldn't be if it were to be the 
ill-advised cooperatives.) All agree that there would need to be a 
level playing field so that competition between public and private 
plans would be fair, and there are many suggestions on how to do this. 
This is the question I pose and answer today. I think we can only 
answer the question by reflecting on the nature of the health insurance 
industry, which is why I started this post as I did.
    Let's first look at what is being said. The May 28, 2009 issue of 
the New England Journal of Medicine contains three invited articles on 
the subject. One is by Jacob Hacker, a liberal strongly for the BGP; 
one by Mark Pauly, a free-marketeer from the Wharton School who accepts 
a BGP to make reform politically viable; and the third by the canny 
veteran health economist Victor Fuchs, who thinks the BGP would be 
irrelevant. Two weeks later in the June 11 issue of the Wall Street 
Journal, Karl Rove stated the hard Right's objections to the BGP as the 
pathway to socialism, and the next day in the WSJ Stephen Burd, CEO of 
Safeway, didn't address the BGP at all, but gave the preventive 
medicine approach to fixing America's health care problem. These are 
our texts for today.
    Hacker strongly supports a BGP, while acknowledging that public 
entities are generally rigid, and private ones are ``more flexible and 
more capable of building integrated provider networks.'' He looks to 
the BGP ``to provide: stability, wide pooling of risks, transparency, 
affordable premiums, broad provider access, and the capacity to collect 
and use patient information on a large scale to improve care.'' He also 
thinks the BGP would have lower administrative costs (the government 
more efficient than private business?); will be able to receive better 
volume discounts (this would violate the level playing field provision, 
and just who would these discounts come from, and for what?); and would 
be nonprofit (OK, but what would the incentive be, then? Virtue?).
    Pauly, the free-marketeer, thinks that a very wide array of choices 
on the menu would bring public support, and many provisions to allay 
the advantages of size and the possible political domination of the 
BGP, would make the OHP politically viable. Interestingly, he puts 
forward the idea of having two distinct government plans in each area! 
I think this is a great idea--it gives a sense of where the incentive 
to the public plans would come from. We have experience with this 
format in California Medicaid, where in our counties, for instance, 
patients can choose either the local initiative (county health 
department) plan or the private Medicaid plan, and so can providers.
    Pauly also brings up the old issue of Any Willing Provider--could 
the BGP(s) choose not to let a duly licensed physician, say, join the 
plan? How could a governmental entity do this? Yet, if the BGP had to 
admit providers and the private plans didn't, wouldn't that give an 
advantage to the private plans? Likewise, if care were to be delivered 
in networks that contracted with the BGP, how could the BGP choose to 
contract with one group but not another? I think the answer here would 
have to be that each provider would have to have access to at least one 
plan, with the BGP as the contractor of last resort. More could be 
proposed here, but let's go on.
    Fuchs says that the three biggest challenges of health care are the 
uninsured, cost, and quality, and he doesn't see how a BGP would impact 
any of them. Insuring everyone will require a subsidy and compulsion, 
and a BGP is not needed for either. Neither cost nor quality have been 
positively affected by either Medicare or Medicaid, so why should 
another BGP have any effect?
    Moreover, says Fuchs, who would join a BGP? Medicare and Medicaid 
are already set for the elderly and the poor. Thirty percent of the 
populace are covered by large companies who self-insure, the 
administration of their plans contracted out to the health insurance 
companies for provider network supply and payments. The BGP would have 
nothing to offer these companies. Twenty-five percent of the populace 
are covered by smaller employers that contract with private health 
insurance companies. Again he argues, what would a BGP have to offer 
them? Since these contracts for care are generally experience rated 
rather than community rated (that is, one price for all despite 
historical medical care utilization), only the high utilizers would 
want to go to the BGP, thus giving the BGP adverse selection, and 
taking the bloom off their rose. (I think community-rating is in the 
works, given the nature of an exchange.) Currently 5.9% are 
individually insured, and these would go to the BGP. Fifteen percent of 
the populace are uninsured, of which three-quarters, or 12%, are too 
sick or too poor to buy policies, and the remaining 3% choose not to. 
Fuchs doesn't see the value of a BGP for these people either.
    I don't agree with Fuchs here. First of all, I think we have to get 
to community-rating for everyone, with risk adjustments made as Hacker 
suggests. Secondly, even by Fuchs' analysis tens of millions of people 
would sign up with the BGP.
    Rove asserts that we don't need a BGP because we already have 
enough competition. This is a purely ideological argument (surprise!) 
that doesn't look at the quality of the companies, nor at the results. 
Private insurance companies have a terrible history. Their innovations 
are generally pseudo-innovations, and the ways they choose to make 
money are not productive to the Nation as a whole--underwriting, 
refusing care, reneging on coverage, gaming providers who submit bills, 
etc.
    His second argument is that the public option will pay providers 
less than private companies will (not clear this is so), and thus cause 
other providers and patients to subsidize the BGP, the old transfer 
game that hospitals play.
    His third argument is ``crowd out,'' that in contrast to Fuchs who 
thinks hardly anyone will choose the BGP, Rove avers that so many will 
choose it that private companies will be stifled. As both Hacker and 
Pauly assert, however, if the playing field is indeed made fair, this 
will probably not be the case. And if it turns out to be as Rove fears, 
would that not be a testament to the underlying vapidity of the current 
private companies and their practices? If they can't beat the 
government that's a pretty low bar.
    Rove's fourth argument is also Fuchs', that Medicare and Medicaid 
are too expensive and do not lead to efficiencies, so the BGP would do 
the same. It's true that government is not good at innovation and cost 
control.
    Fifth and finally, Rove asserts that a governmental monopoly will 
be unresponsive and a bad, socialistic option. This is the Trojan Horse 
or Slippery Slope argument--BGP today, National Health Service 
tomorrow. Well, the point is then to make the playing field level, and 
as Pauly suggests, let there be competing governmental entities.
    Burd, finally, makes a non-BGP point, an argument that reminds me 
of the ``Legalize Marijuana'' solution to the California State budget 
crisis in its indirect approach. Burd says that Safeway has kept 
medical costs stable for the last 4 years by giving their employees 
incentives to avoid tobacco, reduce obesity, and keep blood pressure 
and cholesterol in normal bounds. The better health of the group has 
led to lower costs. It strikes me that only smaller, private insurance 
groups could handle this kind of innovative approach, and thus beat the 
BGP in competition.
Conclusion
    So, given that the OHP can make health insurance accessible by 
simply establishing the exchange, but that it needs to do more to 
``fix'' health care, does there have to be a BGP option? The answer is 
clearly yes. In fact, Pauly's suggestion of having two BGP's available 
on the menu would make the most sense--perhaps one a Federal and one a 
State program.
    If a BGP is on the menu, everyone agrees that the playing field 
needs to be made level. Community-rating and risk-adjustment could be 
accomplished by the Luft Major Risk Pool plan. The NEJM articles have 
cogent suggestions on other leveling procedures. More specifically for 
part of the means to this, the BGP needs not to undercut rates. I would 
suggest that the BGP start out with 130% of Medicare rates for primary 
care, 100% of Medicare for selected specialists (some, such as general 
surgery, would need to be higher; some, such as imaging could be 
lower).
    The temptation for health insurance companies would be to continue 
their operations as they have practiced them in the past. The more the 
OHP can deny them profit from old, nonproductive practices, the more 
they will have to find new means to make profit. Denied profit 
possibilities from underwriting and clever plan design, they would be 
tempted to continue to deny payments and care, and to assert market 
power where possible to glean profit. The presence of the BGP would 
blunt their ability to force poor contracts on relatively weaker 
providers. If properly designed, the BGP would force the private plans 
to compete for the allegiance of providers by ceasing those practices.
    What would be left for the insurance plans to do? They would 
benefit if they were truly efficient in administration, practiced 
prevention as Burd suggests, aligned with groups that were themselves 
innovative in the way they delivered care, etc. We would look for 
innovation from the private sector as we always have. They would have 
the advantage over the BGP by not having to contract with all 
providers; if the insurance company and providers shared their profits, 
both would have incentives.
    In addition, the presence of the BGP would act as a safety net. 
Everyone in every part of the country would have insurance available in 
a traditional way. If a private company tried to innovate and failed, 
the BGP would be there to pick up the pieces for the enrollees with 
that failed company. Also in addition, if small or large companies 
chose the BGP over private companies, so be it. And with several BGP 
entities available, they would themselves have a competitive incentive 
and measuring stick to work against.
    Some say that a BGP is necessary to ``keep the insurance companies 
honest.'' Clearly, left to itself, the industry has not been 
trustworthy. I hope that I have shown to some extent how the BGP would 
function in keeping the private plans honest.
    Finally, it is important to note that the point of the BGP would 
not be to be innovative--that's not something the government is good 
at, at least not for a long time. (See the OEO experience from the 
60's, for instance, on how innovation can begin and then be stifled.) 
It should be solid even if stolid, the safety net for everyone; honest, 
straightforward, maybe unimaginative, but present. The BGP should also 
be a lowest common denominator, in the sense that if the BGP can do 
something, then there is no reason other plans can't do it, too.

                                 
       Statement of the Friends Committee on National Legislation
Chairman Rangel and Members of the Committee:

    Thank you for your combined work and expertise to produce the tri-
committee discussion draft. We believe that this plan sets up a 
structure that could succeed in making high-quality comprehensive 
health care available and affordable for everyone in the United States. 
We offer a few comments and recommendations here to strengthen the plan 
and to further ensure that no one is excluded from health care coverage 
for lack of ability to pay or other reasons.
    The Friends Committee on National Legislation is a Quaker lobby in 
the public interest. Working in Washington since 1943, the Friends 
Committee promotes a vision of a society that lives well with itself 
and others. We share a Quaker belief in the essential integrity and 
decency of human beings, and support public policies that elicit and 
build on these strengths.
    In these comments, we lift up four critical elements of the tri-
committee draft: The public plan, subsidies, preventive care, and 
regulation of the private health insurance market.
A Successful Launch for a Public Health Insurance Plan
    The House tri-committee draft describes a public insurance plan 
that would meet or exceed the requirements of all plans in the Health 
Care Exchange, which would be available, initially, to uninsured 
individuals and employees of very small employers.
    We strongly support a public insurance plan, because of its 
potential availability to all health care consumers, and because of its 
eventual effect on the private market. A comprehensive standard public 
plan will set the bar for the private insurance market to meet. 
However, in order to have these desired effects, it is important that 
the public plan be launched to a broad demographic of potential 
participants. Large employers and currently insured individuals should 
be free to offer or opt for the public plan, along with those who may 
have been excluded from health insurance by prior existing conditions 
or high premiums relative to income.
    A robust launch accomplishes several intended goals, by:

      Offering real competition in the marketplace, at a level 
and of a nature that will affect the business decisions of private 
companies that also hope to attract large employer buyers;
      Including participants who represent a wide range of 
health care needs, not be weighted toward those with greater needs and 
fewer resources;
      Lowering the cost of administration per participant, 
relative to a plan that includes only individuals and small employers;
      Providing health care providers with a built-in incentive 
to participate in the public plan; and
      Alowing the plan to begin operating with a strong 
financial base.

    We are concerned that launching the plan to a relatively limited 
population that has not been well served by the current health 
insurance system will hamper the chances for the public plan's success. 
We urge the three Committees to make the plan available both within and 
outside of the Exchange, to currently insured and uninsured individuals 
and groups.
Subsidies to Make Health Care Affordable to All
    We strongly support income-based subsidies, delivered through the 
tax system or in other ways, to make health care affordable for non-
elderly people who have incomes above the (expanded) Medicaid 
eligibility level. The tri-committee draft proposal sets tiers of 
subsidies between 133 percent and 400 percent of the poverty level, 
ending with a standard that an individual or family should spend no 
more than 10 percent of income on health care. The draft essentially 
defines ``affordable'' as 10 percent of income, which we accept.
    However, at 401 percent of the poverty level, a family could easily 
be required to spend a much higher percentage of income--perhaps 18 
percent or more--on health care premiums alone (ignoring, for the 
moment, out-of-pocket expenses). We unite with the comments of your 
first witness in the June 24 hearing, Professor Karen Pollitz of the 
Georgetown Health Policy Institute, who suggested that the 10-percent-
of-income standard be applied without regard to an income cap. The 
anomalies that might occur with relatively high-income families 
receiving subsidies could be addressed by specifying that the subsidies 
apply only to standard plans that offer what the public plan offers. 
Applying the 10-percent-of-income rule uniformly above 400 percent of 
poverty would eliminate the ``cliff'' that would almost inevitably 
occur just above any cap on subsidies. As a result, the Committees 
could better achieve the goal of making health care affordable to all 
consumers.
Preventive Care Prevents Costly Intervention
    We appreciate the inclusion and recognition of preventive care as a 
valuable component of the health care system. Besides its intrinsic 
value in contributing to the overall health of the U.S. population, 
preventive care and wellness programs will save money for the 
government and for individuals.
    We are aware of the CBO's critique of the cost-effectiveness of 
prevention programs. This critique, and indeed, that of a few of our 
respected colleagues, misses the point of investments in preventive and 
wellness programs. These analyses incorporate two errors:

    (1)  They look for a payoff in 10 years. While many prevention and 
wellness programs produce profound improvements in health status within 
a few years (weight loss, blood pressure decrease, cholesterol control, 
etc.), the dramatic cost savings (lack of a need for expensive 
medicines or surgical interventions) do not occur until later in life 
and are, indeed, difficult to catalog and calculate. Numerous long-
range studies have shown the effectiveness of nutrition and behavioral 
changes; cost accounting that reaches beyond 10 years should be able to 
recognize and incorporate these savings.
    (2)  These analyses are based on an inaccurate understanding of 
preventive care and wellness programs. Prescribing drugs to control 
high blood pressure, cholesterol, and other diseases is a type of 
treatment, not prevention. These drugs are prescribed only for 
individuals who already suffer from common chronic diseases, and they 
tend, if successful, to minimize the need for further intervention.

    According to the Milliken Institute, the combined cost of the top 
seven modifiable chronic diseases (cancer, diabetes, hypertension, 
stroke, heart disease, pulmonary conditions and mental disorders) 
exceeds $270 billion per year in direct care costs. A modest focus on 
prevention, early intervention and behavior changes can save about 80 
percent of that cost annually. Preventive care and wellness programs 
address underlying conditions of obesity and physical inactivity and 
can and should be promoted broadly on a cost-effective basis to the 
public.
Fair Play: Regulating the Private Health Insurance Market
    The private health insurance industry has benefited greatly from 
tax exemptions provided to both the employer and the employee for 
employer-provided health benefits. The Federal Government has every 
right to insist that, to qualify for this benefit, health care plans 
must meet certain criteria.
    To qualify for tax advantages offered in the employment context, 
any such plan should be required to meet certain standards, including a 
defined comprehensive package of medical, mental health and 
prescription services with no exclusions for prior existing conditions, 
age, or gender; no termination of individual insurance for expenditures 
by the insurance plan; no lifetime caps; and a maximum yearly out-of-
pocket cost for participants.
    Rates for the standard package should be the same for all 
participants, with adjustments permitted for family coverage and for 
broad geographic areas (i.e. States or regions, not redlined 
neighborhoods). Discounts for health predictors such as nonsmoking or 
healthy weight could be permitted. But rate adjustments for age and 
other uncontrollable conditions should be minimized. Even the 2 to 1 
ratio for age permitted in the House plan would result in 
unrealistically high premiums for older, but not Medicare eligible, 
individuals and heads of households. An unrealistically high premium 
means the exclusion of certain demographic groups.
    ERISA-qualified private plans--the standard private plans that 
qualify as an employee benefit--should also be required to be made 
available to the individual market, at the same rates.
    The Tri-Committee Plan has two real options to catalyze change in 
the health care marketplace. One is by competition from a strong, 
widely available public plan. The other is by allowing a tax advantage 
only from employer-sponsored plans that meet the same criteria as the 
public plan, including breadth and depth of coverage, and rules 
governing guaranteed issue, renewability and rates. The Tri-Committee 
Plan is almost there. We believe that this plan, with some 
strengthening, can make an historic difference in health care 
availability and indeed in the health of this Nation.
    Thank you for the work that you and your staff have devoted to this 
important undertaking and for the opportunity to share our reflections 
and recommendations.

                                 
                        Letter by Richard Kirsch
Dear Chairman Rangel and Chairman Stark:

    Health Care for America Now (HCAN) appreciates the opportunity to 
comment on the draft House tri-committee health care reform legislation 
that is designed to address the critical health care issues that have 
plagued the American health care system for far too long. HCAN is a 
national grassroots movement powered by 30 million people and more than 
1,000 organizations working to win a guarantee of quality, affordable 
health care we all can count on. The draft legislation put forward by 
your Committees shows that we can achieve the President's goal of 
quality, affordable health care for all this year.
    Your draft bill is an excellent example of what can be accomplished 
when Members of Congress work together to do what is best for the 
people they represent. It provides quality, affordable coverage for 
all, requires shared responsibility by individuals, employers and 
government, and expands health insurance coverage choices, including 
being able to retain one's coverage, have additional private plan 
options, and a public health insurance option designed to lower costs 
and keep insurance companies honest.
    HCAN strongly supports the provisions in the draft bill that make 
health insurance and health care services more affordable. In 
particular, premium assistance, reduced cost-sharing, and application 
of an out-of-pocket cap are central to making health care accessible to 
low-income individuals and families. Also, we commend you for your 
leadership in extending assistance in purchasing health insurance to 
working families who have seen health costs increase four times faster 
than wages. Given the significant range in the cost of living across 
the country as well as the variance in the cost of health insurance 
coverage, these provisions are vital to ensuring that persons in all 
corners of our country are able to afford health insurance. 
Establishing true affordability is particularly important given that 
the draft bill requires individuals to obtain health insurance 
coverage.
    While the draft bill establishes a framework for achieving quality 
affordable health care for all, HCAN believes it should be strengthened 
in several critical areas:

      In order for the public health insurance plan option to 
be effective, it must be truly robust with a strong national network of 
providers from the start.
      The employer responsibility requirements should match the 
average contribution large employers currently pay.
      Health insurance must be affordable in terms of premium 
and cost-sharing and protect Americans from medical debt and 
bankruptcy.
      Individuals should not be required to have coverage that 
is unaffordable and inaccessible; coverage for all must mean coverage 
for everyone.
      Medicaid and CHIP need to be strengthened and new 
protections need to be put in place to ensure the benefits and cost-
sharing protections of these programs are maintained.

Public Health Insurance Plan Option
    HCAN commends the Committees for including in the draft a national 
public health insurance option, which is critical to reforming our 
health care system. So long as the playing field is not tilted against 
it, a public health insurance plan option will promote competition and 
efficiency, provide stability and advance innovation. More broadly, the 
public health insurance plan option will foster payment and delivery 
system reforms, remedy disparities in access to care, and guarantee 
that quality, affordable coverage will be there for individuals and 
families no matter what happens to their jobs or their health.
    HCAN, however, is concerned that the public plan as proposed may 
not be large enough to compete on a level playing field with large 
national insurers, which have many built in advantages and considerable 
experience in State and regional markets. The American Medical 
Association reports that 94 percent of insurance markets in the United 
States are now highly concentrated. In many State markets, one insurer 
already controls more than half and often more than two-thirds of the 
market. Two companies alone control more than one-third of the private 
health insurance market--WellPoint with 35 million insured and United 
Health Group with 18 million insured. The Health Insurance Exchange 
will include these well-established plans and other major players, 
which will make it very challenging for a new entrant such as a public 
plan to enter the market. Therefore, we believe several improvements 
are needed to the draft bill to ensure the public health insurance 
option can compete on a level playing field with private insurers.
Recommendations

      Ensure broad provider participation. Private insurers 
have had decades to build their provider networks. To ensure broad 
participation in a public plan start-up, the Committees should ensure 
that all providers (hospitals, institutional providers, physicians and 
other practitioners) that currently participate in public programs also 
participate in the public health insurance plan. However, physicians 
and other health practitioners should retain the ability to opt out 
after a sufficient period that allows the plan to get established.
      All employers must be allowed to join the exchange. HCAN 
is concerned that the Exchange, and through it the public health 
insurance option, is restricted to employers with 10 or fewer employees 
in the first year and 20 or fewer employees in the second year. 
Allowing larger small businesses to join the Exchange in the first 2 
years--for instance up to 100 employees--would give them access to more 
affordable health care options and create a much larger market that 
would increase the number of people insured both with private and 
public plans. While it may be necessary to give the Commissioner the 
authority to determine the schedule for phasing-in medium and large 
employers, the bill should specify that all employers eventually will 
be able to access the Exchange and the public plan. With more enrollees 
a public plan would be more viable in a very competitive insurance 
environment.
Employer Responsibility
    HCAN believes that employers (including public employers) should be 
required to fund a meaningful portion of their employees' and 
dependents' health care costs. Employer responsibility is a necessary 
prerequisite for individual responsibility requirements. Ensuring 
continued employer involvement in our health care system is also 
critical to the affordability of the package as a whole.
    We commend the Committees for recognizing the importance of a 
strong employer responsibility requirement. The draft bill also 
requires proportionate contributions for those employees who work less 
than a full-time schedule. HCAN offers the following recommendations to 
strengthen the employer responsibility provisions in the draft bill.
Recommendations
      Employer responsibility should match average contribution 
requirements made by employers today. HCAN believes large employers 
should be responsible for funding at least 80% of the cost of 
individual coverage and 75% of family coverage for the defined benefit, 
which are the current average employer premium contribution levels for 
employer-based health insurance. The employer contribution under the 
draft falls short of this goal--72.5% for individual coverage and 65% 
for families.
      The contribution amount should be applied to plans 
employers are currently offering. The contribution percentages in the 
draft apply not to the benefit plan offered by the employer but to the 
``lowest cost plan that meets the essential benefits package.'' 
Instead, we believe the contribution amount should be applied to plans 
employers are currently offering, or else the minimum required employer 
contribution may be significantly less than it would otherwise be if 
the coverage actually offered was the basis for the requirement.
      Contribution requirements should be based on a sliding 
scale. The Committees should also scale the contribution requirements 
for small and medium employers based on wage levels, part-time and 
full-time employment and number of employees. It is important that the 
contribution for part-time employees be scaled so that employers do not 
have an incentive to create part-time employment and thus avoid the 
employer's share of the responsibility.
      Accountability measures need to be in place to ensure 
compliance. There should also be an accountability mechanism in place 
for employers who alter employee status, such as by hiring people as 
``independent contractors'' instead of employees, for the purpose of 
evading insurance obligations.
      Employers should be responsible for covering their own 
workers. The legislation should ensure that employers who cover the 
employee of another employer as a dependent should receive 
reimbursement equal to the noncovering employer's contribution. 
Dependent children of working parents should be assigned to the paying 
employer as they are now.
      Definitions of family should be expanded to include gay, 
lesbian, bisexual and transgender families. For the purposes of 
determining access to health insurance coverage, subsidies and related 
Federal tax treatment of health care benefits, definitions related to 
``family'' should be extended to ensure inclusion of lesbian, gay, 
bisexual and transgender families, families headed by domestic 
partners, and recognize multiple family structures and diverse kinship 
networks.
      Establishment of a reinsurance program that encourages 
employers to continue to provide coverage to pre-Medicare retirees. A 
requirement that individuals purchase coverage could result in 
employers dropping coverage for pre-Medicare retirees since reform does 
not require them to continue such coverage. This is similar to the 
challenge Congress faced with respect to ensuring that employers 
continued prescription drug coverage when the Medicare Modernization 
Act (MMA) was adopted in 2003. We appreciate the proposal to establish 
such a reinsurance program to help ensure that coverage provided by 
employers and VEBAs to pre-Medicare retirees will be affordable 
(Section 501). This provision represents a positive step in addressing 
the health care needs of a vulnerable population. However, we recommend 
that the Committees make it a permanent program with sufficient 
funding.
      All workers should have access to coverage. Employers who 
pay into the system should be assured that their workers have access to 
coverage, helping to ensure that their workforce remains productive. As 
written the bill would exclude certain immigrants from affordable 
credits even where the employer is ``paying.'' The House should explore 
mechanisms to ensure that all workers of employers who are ``paying'' 
can benefit from that contribution and can have access to affordable 
coverage; in such cases it can be structured so that it is the 
employer's payment, and not a Federal payment, that is being used to 
make the coverage affordable.
Affordability/Individual Responsibility
    HCAN commends the Committees for the affordability and shared 
responsibility provisions of the draft bill that place the burden on 
the health of our Nation with individuals, employers and the 
government. We are pleased with the affordability credits that 
recognize that low- and moderate-income families need protection from 
both high premiums and high out-of-pocket costs. A sliding scale that 
phases out at 400% of the Federal poverty level is the minimum level 
necessary to assure consumers that coverage will be affordable. 
Similarly, HCAN strongly supports the study, by the Commissioner, of 
geographic variation in the application of the FPL. HCAN believes this 
report should be completed 12 months prior to year one. This 
information is necessary to establishing regionally-adjusted FPL limits 
that would more efficiently target subsidies to families that need them 
the most.
    HCAN, however, is concerned that the public plan as proposed may 
not be large enough to compete on a level playing field with large 
national insurers, which have many built in advantages and considerable 
experience in State and regional markets. The American Medical 
Association reports that 94 percent of State insurance markets in the 
United States are now highly concentrated based on U.S. Department of 
Justice criteria. In many State markets, one insurer already controls 
more than half and often more than two-thirds of the market. Two 
companies alone control more than one-third of the private health 
insurance market--WellPoint with 35 million insured and United Health 
Group with 18 million insured. The Health Insurance Exchange will 
include these well-established plans and other major players, which 
will make it very challenging for a new market entrant such as a public 
plan. Therefore, we believe several improvements are needed to the 
draft bill to ensure the public health insurance option can compete on 
a level playing field with private insurers.
Recommendations
      Provide cost-sharing credits to individuals and families 
with qualified employer coverage and allow individuals to apply their 
cost-sharing credits to their employer-sponsored coverage. Some 
individuals and families will face high costs relative to their income 
because their employer satisfies the ``play'' requirement or their 
income is above 400% FPL. These individuals and families should receive 
cost-sharing credits in the year following any year during which they 
reach their out-of-pocket maximums in an effort to protect families 
from the risk of financial ruin and bankruptcy. Additionally, credit-
eligible full-time (and part-time) workers who are likely to decline 
the employer offer should be allowed to apply their credit to the 
employer offer rather than enroll in the exchange.
      The individual mandate should not apply to everyone 
unless everyone has access to affordable coverage. While HCAN supports 
provisions of the bill that incentivize individuals to obtain coverage, 
there is a lack of congruence between the exceptions from the tax and 
the guarantee of affordability, threatening to leave millions of 
individuals in the double bind of being penalized even though they lack 
access to affordable coverage. Health care should be provided to all 
people who pay taxes and contribute to the system and everyone should 
be required to pay their fair share.
      Oppose expensive verification and documentation 
procedures. HCAN is concerned that the positive impact of several 
reform proposals on the table may be undermined by additional measures 
that would severely restrict access to health coverage by mandating 
new, expensive verification and documentation procedures. The best way 
to reduce costs in our health care system is to ensure that people do 
not have to follow a long paper trail to get to the doctor and that 
everyone shares the costs of a new system.
Medicaid and CHIP
    HCAN believes the Medicaid protections and standards given to 
people below the Federal poverty level should be extended to those with 
incomes up to 200% FPL, including no premium contribution requirements 
and only nominal cost-sharing requirements. Additionally, HCAN believes 
that individuals who are in groups currently with cost-sharing 
exemptions or caps should maintain this protection. The Committees' 
bill makes substantial improvements in coverage and access to low-
income persons. For instance, the Committees' commitment to ensure that 
every newborn and infant born in the United States have health coverage 
is a significant step toward improving child health.
Recommendations

      Increase Medicaid protections to 200% FPL. HCAN supports 
the House tri-committee bill's increasing the across-the-board Medicaid 
eligibility to 133% FPL with full Federal funding. However, we urge 
that this limit be increased to as close to 200% as possible.
      Cover legal immigrants. We are very disappointed that the 
draft does not support coverage for legal immigrants in Medicaid. In 
particular, HCAN supports requiring States to cover otherwise eligible 
legal immigrants in Medicaid at the same levels as citizens, without 
waiting periods. We urge similar coverage for legal immigrants, without 
a waiting period, in Medicare.
      Increase access to primary care. We strongly support the 
provision to increase Medicaid provider rates in primary care to 
Medicare payment levels by 2012 and believe this will improve access to 
important health services. We also encourage consideration of 
increasing Medicaid outpatient provider rates for specialty services in 
a similar manner.
      Preserve cost-sharing protections for children. HCAN 
appreciates a number of positive provisions regarding children's 
health, including coverage of well-baby, well-child, dental and vision 
services. However, it is important to continue the cost-sharing 
exemptions or caps currently provided for children in CHIP. If those 
affordability protections are discontinued after 2013, children could 
be worse off.
      Preserve EPSDT for CHIP children. Children enrolled in 
CHIP in 13 States and the District of Columbia are currently guaranteed 
EPSDT benefits through their Medicaid expansion CHIP programs. Those 
children will lose access to these vital protections if moved into the 
Exchange, unless benefits in the Exchange can be made comparable.
      Cover all children and pregnant women. Low-income 
immigrant children and pregnant women should be eligible for Medicaid 
and CHIP regardless of their citizenship or immigration status.
      Streamline enrollment procedures. HCAN believes the 
enrollment process must be simplified across Medicaid and other 
insurance options. For example, the Committees should consider applying 
the 12-month continuous coverage provision currently proposed for the 
credit to Medicaid as well.
      Increase protections to ensure seamless delivery of 
services covered by Medicaid and not covered by other insurance options 
through the exchange. HCAN has serious concerns regarding the 
provisions that after 5 years would give States the option to provide 
access to the exchange for people eligible for Medicaid. These concerns 
include, among others, that stronger protections need to be established 
concerning the seamless delivery of services covered by Medicaid, the 
affordability of insurance on the exchange (even with subsidies) and 
procedural protections available to Medicaid participants that may or 
may not be available to those insured through the exchange. We look 
forward to working with the Committees to resolve these issues and make 
this proposal work for all stakeholders.
Addressing Health Disparities Under Health Care Reform
    This draft demonstrates the strong commitment of the three 
Committees to achieving health equity for communities across the 
country. Health disparities populations--including racial and ethnic 
minorities, immigrants, women, the lesbian, gay, bisexual, and 
transgender (LGBT) population, people living in rural and tribal areas, 
and others--have historically experienced differences in disease 
incidence, health outcomes, and access to health care, and these 
differences continue to persist in the Nation's health care system 
under the status quo. The proposals included in the draft legislation 
make substantial, meaningful investments in achieving equitable health 
outcomes for all people living in the United States and its 
territories.
    Please see the attached analyses, which provide section-by-section 
recommendations to achieve the greatest impact for health disparities 
populations. The first (``Attachment A'') includes recommendations for 
health disparities populations broadly, while the second (``Attachment 
B'') details recommendations with respect to immigrant populations.
Recommendations
Coverage

      Family-based approach should apply to administration of 
affordability credits. The bill generally takes a family-based approach 
to application and enrollment in health coverage, which helps reduce 
paperwork and which ensures that individuals and their dependents can 
get the coverage they need. A similar approach should be employed in 
administering the affordability credit. An affordable credit eligible 
individual should be able to include any dependents seeking coverage on 
the application for an affordable credit, without subjecting those 
dependents to the same individual eligibility determinations. 
Additionally, affordability credits for families should be set at 
levels that reflect the true cost of obtaining family coverage, which 
is on average 2.7 times more expensive than individual coverage.
      Eliminate blanket exclusion for all persons with ``non-
immigrant visas.'' The blanket exclusion of all persons with ``non-
immigrant'' visas would deny access to affordable coverage to a broad 
range of individuals who are authorized by law to live, work, and 
remain in the United States, such as survivors of trafficking, domestic 
violence and other serious crimes who are cooperating in prosecuting 
these crimes (T and U visa holders), persons with fiance petitions (K 
visa holders), citizens of ``compact of free association states'' 
(Micronesia, Palau, Marshall Islands) and others.
      Reform must be consistent with and responsive to the 
Federal Government's trust responsibilities to American Indians and 
Alaska Natives.
      Government findings that impact the health of a community 
should be publicly released. Finally, in order to foster a more 
transparent policymaking process, HCAN encourages government decisions 
that impact the health of a community to be evaluated, and the findings 
publicly released, on the potential positive and negative health 
effects of these decisions.
Public Health Infrastructure

      Increase support for community health centers. A robust 
public health system, at a minimum, invests in health planning, 
undertakes prevention strategies, conducts disease surveillance and 
management, increases health literacy, and fosters a health care safety 
net through community health care workers and clinics. HCAN strongly 
supports increased investments in the community health center network. 
Community health centers will continue to serve as critical access 
points for many people living in underserved communities.
Prevention and Wellness

      Best practices must be ``evidence-informed'' rather than 
``evidence-based.'' We applaud the Committees' focus on community-based 
research and stakeholder input to develop and disseminate best 
practices, and recommend that the standard for these practices be 
``evidence-informed'' rather than ``evidence-based'' unless and until 
sufficient new research on health disparities has been conducted.
Data Collection

      Data collection must be based on uniform categories. HCAN 
strongly supports the establishment of uniform categories for the 
collection of race and ethnicity as specified by OMB Directive 15, 
including the five racial categories and dichotomous question of 
Hispanic ethnicity, as well as the development of standards for 
collecting primary language data. Congress should require health plans 
and other entities to collect disaggregated data on ethnic 
subpopulation and tribal affiliation whenever possible. To ensure 
transparency, HCAN urges the Committees to authorize and fund regular 
analyses of this data in order to track the Nation's progress in 
narrowing gaps in health care access and quality and health outcomes, 
with a special emphasis on historically marginalized populations.
      Standardized data must be collected across the entire 
health care system. Standardized, disaggregated health care data must 
be systematically collected and reported across the entire health care 
system in order to measure, track, and hold accountable our system's 
progress toward eliminating racial and ethnic health disparities in 
health coverage, health care, and health outcomes. While HCAN staunchly 
supports the proposed requirement that plans participating in the 
Exchange report data to the Commissioner for the purpose of identifying 
and remedying disparities, we urge the Committees to broaden the scope 
of this proposal by requiring all health plans--public and private--to 
collect this data from enrollees and report to a centralized system.
Language Access and Cultural Competency

      Health plans should provide culturally and linguistically 
competent health care services based on CLAS standards. All health 
plans, public and private, operating inside and outside of the Exchange 
should be required to provide health care services that are culturally 
competent and linguistically appropriate. Additionally, plans should be 
required to apply the culturally and linguistically appropriate 
services (CLAS) standards within all aspects of health services.
      Language access services should be an essential benefit 
and reimbursed under all public coverage. HCAN urges the Committee to 
include language access services--such as qualified medical 
interpretation and translation--as an essential benefit. Additionally, 
these services should be reimbursed under all public coverage programs, 
including both Medicare and Medicaid, at adequate reimbursement rates--
with a minimum of FMAP of 75%.
      Codify Executive Order 13166. HCAN urges the Committees 
to codify Executive Order 13166 to reinforce the prohibition of 
discrimination in health care settings based upon patients' national 
origin.
      ``Individuals with limited English proficiency'' should 
be specified as a vulnerable population to whom exchange-participating 
health benefits plans should be targeted.
      Include adequate funding for workforce diversity 
initiatives. HCAN supports the Committees' efforts to increase the 
number of health care professionals from underserved communities, and 
hopes that Congress will make adequate investments in these programs in 
order to achieve the greatest impact on the workforce.
The National Health Insurance Exchange
    HCAN commends the Committees for including provisions that require 
the Exchange to solicit and negotiate bids and contracts for coverage 
through the Exchange from qualified health benefit plans. HCAN offers 
the following recommendations to strengthen the exchange provisions in 
the draft bill.
Recommendations

      State exchanges should have the ability to negotiate with 
qualified health benefits plans.
      Ensure notice of exchange and affordability credits. The 
provisions on outreach and enrollment by the Exchange would be improved 
if existing COBRA/HIPAA requirements were amended to require notice of 
the availability of the Exchange, including the availability of 
affordability credits. For those who have lost employment-based 
coverage through loss of a job or loss of a spouse, the availability of 
the Exchange and affordability credits can help those individuals to 
meet their individual responsibility for coverage in an affordable way 
despite the loss of a job or a spouse to death or divorce.
      Privacy protections. HCAN urges the Committees to include 
provisions protecting the privacy of those covered by the Exchange so 
that information collected by the Exchange cannot be shared with other 
government agencies and used for other purposes. The Social Security 
Administration has strong privacy protections that assure that 
information provided to the Social Security Administration is not 
shared with other government agencies.
Comprehensive Benefits
    HCAN commends the Committees for including an ``essential 
services'' benefits package and creating the Health Benefits and 
Advisory Committee (HBAC) to recommend benefits beyond those listed in 
the draft bill. HCAN offers the following recommendations to strengthen 
the essential benefits package and the HBAC.
Recommendations

      Terms for members of the Health Benefits and Advisory 
Committee (HBAC) should be specified and staggered to protect its 
independence. HCAN supports the Committees' establishment of an 
independent Health Benefits Advisory Committee (HBAC) to recommend an 
essential benefit package beyond the broad direction provided by the 
legislation. Decisions about the specific services and items that must 
be covered should be made by health experts who are charged with 
shaping a benefit package grounded in science and guided by established 
standards of medical care. HCAN urges the Committees to establish terms 
of service for HBAC members and to stagger the terms so that all of the 
positions do not come open at a single time. This will guard against 
the possibility that the appointment process might in the future be 
used to impose a political agenda, which would undermine the medical 
judgment, expertise and independence of the HBAC.
      Comprehensive dental coverage must be an essential 
benefit. Comprehensive dental care is an essential part of health care 
throughout the lifespan, and such services may be especially important 
to the well-being of people who have been subjected to domestic 
violence that includes battering resulting in broken bones in the jaw 
or damage to teeth.
Insurance Regulation
    HCAN commends the Committees for including new insurance 
regulations that will prohibit insurers from excluding coverage based 
on preexisting conditions, refusing to renew plans, and prohibit them 
from being able to charge people different premiums based on their 
gender, health status, or occupation; while limiting the percent 
difference insurers can charge based on age. HCAN offers the following 
recommendations to strengthen the insurance regulations provisions of 
the draft bill.
Recommendations

      Identify a decisionmaking body charged with setting 
standards to determine ``clinical appropriateness.'' While the 
Discussion Draft would prohibit a qualified health benefit plan from 
imposing ``limits unrelated to clinical appropriateness,'' without 
further clarification, insurance companies would ultimately have the 
unfettered discretion to determine what ``clinical appropriateness'' 
would allow them to impose service limits.

    HCAN recommends a minor modification to Division A, Title I, 
Subtitle C, Section 123(c) (p. 23) to require the Health Choices 
Commissioner, the Health Benefits Advisory Council or some other 
independent entity (other than insurance companies) to issue objective 
standards to guide the use of a clinical appropriateness standard to 
impose any coverage limits.

      Structure cost-sharing limitations to protect against 
particularly onerous deductibles. We strongly support the inclusion of 
significant cost-sharing protections. HCAN is concerned, however, that 
the bill fails to address deductibles, which likewise impose 
significant barriers to care when deductibles are too high, and are 
especially burdensome for low-income individuals. HCAN recommends 
modification of the language regarding cost-sharing in Division A, 
Title I, Subtitle C, Section 122(c)(2)(C) (p. 26) [``In establishing 
cost-sharing levels for basic, enhanced, and premium plans under this 
subsection, the Commissioner shall, to the maximum extent possible, use 
only copayments and not coinsurance.'']. We encourage you to discourage 
the use of deductibles in addition to coinsurance, and to make clear 
that, to the extent any deductibles are part of any cost-sharing 
scheme, they should be set at sufficiently low levels to ensure that 
they do not impose cost-related barriers to accessing health care 
services.
      Add key notice and reporting requirements to prevent 
insurers from inappropriately limiting enrollment under the capacity 
exemption. We commend the Committees for including many important 
insurance market regulations for Exchange participating plans. HCAN, 
however, is concerned that without further clarification, insurance 
providers may inappropriately use a ``capacity limitation'' exception 
to limit enrollment if they find that a plan is attracting higher-cost 
enrollees. To avoid the inappropriate use of exceptions to enrollment 
requirements, we recommend language modification to Division A, Title 
II, Subtitle A, Section 204(b)(4) (p. 61) to clarify that:

               Contracts with Exchange participating issuers would 
        expressly indicate and quantify any capacity limitations; for 
        those contracts that do address capacity limitations, the 
        Commissioner should ensure that adequate alternative insurance 
        plan options would be available under each benefit tier through 
        the Exchange in the event that such capacity limitations are 
        reached; a reporting requirement ``trigger'' for insurance 
        issuers to notify the Commissioner in advance of reaching 
        capacity limitations that would allow enrollment limitations.
Delivery System Reform
    We applaud the Committees for considering innovative new health 
care delivery system structures, and support the premise that these new 
payment models are an opportunity to redesign care delivery to 
encourage better care coordination, greater efficiency, and more 
patient-centered care. HCAN, however, has several concerns with the 
current provisions in the bill and offers the following recommendations 
to improve these provisions.

Recommendations
Accountable Care Organization Pilot Program
    Without appropriate safeguards models such as the ACO model could 
result in perverse incentives for providers to under-deliver care for 
patients. We are particularly concerned that the underlying focus of 
the ACO pilot is the achievement of savings in Medicare, with too 
little emphasis on improving care for patients and holding ACOs 
accountable for delivering patient-centered care.

      Change ACO incentive payments to reflect quality. While 
we are pleased that the bill calls for ACOs to report on quality 
measures and ``utilize patient-centered processes of care, including 
those that emphasize patient and caregiver involvement in planning and 
monitoring of ongoing care management plan,'' we are concerned about 
the basis of the ACOs' incentive payments. The bill indicates these 
payments will be made to ACOs only if the expenditures are less than a 
target spending level or a target rate of growth. There is no language 
linking incentives to the delivery of high-quality, patient-centered 
care. We urge you to build accountability mechanisms into the new 
payment models to provide a check against providers' potential 
financial incentives to skimp on patient care.
      HHS should be charged with identifying and endorsing 
patient-centered measures. The Secretary of HHS should be charged with 
identifying and endorsing patient-centered measures for the services 
and activities performed by ACOs, that ACOs be required to report on 
such measures, and that the reporting be independently validated.

Medical Home Pilot Program

      The pilot program should focus on improving health 
outcomes for vulnerable populations and delivering appropriate care and 
should be expanded nationally as quickly as proven successful. We urge 
you to improve this section by incorporating into the pilot program an 
ongoing and continuous process for assessing the performance of medical 
home practices on measures of patient-centered care. For example, in 
addition to being required to meet patient-centered standards to be 
recognized as a medical home, practices should demonstrate on an 
ongoing basis that they are delivering patient-centered care.

Post Acute Care Services Payment Reform Plan
    We support your efforts to encourage better coordinated, integrated 
and accountable care by addressing avoidable and preventable hospital 
readmissions. Patients who are rehospitalized after a recent discharge 
experience greater-than-expected clinical complications, incur higher-
than-expected costs, and are less satisfied with their health care. We 
recognize, however, that a bundled payment for expected services puts 
hospitals more at risk for costs that exceed the payment.

      Ensure patient protections are included to eliminate 
incentives for hospitals to reduce needed care for patients or 
disregard patient preferences about kinds and sources of post-acute 
care. We recommend that the Secretary of HHS be charged with 
identifying and endorsing patient-centered measures for the services 
and activities intended to be captured by the bundled payment policy, 
that any hospital participating in the bundled payment be required to 
report on such measures, and that the reporting be independently 
validated.
      Expand demonstration projects that bundle payments. HCAN 
recommends that the introduced bill should expand these demonstration 
projects into a nationwide pilot program to bundle hospital and 
physician payments for inpatient care and provide for the development, 
testing and, if prudent, expansion of shared savings programs within 
Medicare.
Establishment of National Priorities and Performance Measures for 
        Quality Improvement
    We strongly support establishment of a process to identify 
priorities for performance measures and quality improvement. Without 
the right measures and measurement, we can't transition to quality-
based payment (as opposed to volume-based), we can't assess and 
eliminate disparities, and we can't tell whether such new payment 
models as ACOs, medical homes, or bundled payments are actually 
resulting in better care for patients.

      National priorities and performance measure should 
include broad stakeholder involvement. The Secretary of HHS should draw 
upon a multi-stakeholder process to inform and make recommendations. 
Such a process allows consumers and patients to have a meaningful role 
in shaping and advancing quality measurement.
      The Committees should include a process for testing and 
implementation of new purchasing initiatives. This process should 
evaluate the use of pay for quality and value-based purchasing 
initiatives, similar to the approaches contained in the ``Affordable 
Health Choices Act'' and the Senate Finance Committee's Delivery Reform 
options paper.
Prevention and Wellness
    HCAN believes the draft bill represents an impressive policy mix 
aimed at shifting our health care system from disease care to true 
preventive health care, which reflects HCAN's commitment to quality, 
cost savings, and equity. HCAN offers the following recommendations to 
strengthen the quality, prevention and wellness provisions in the draft 
bill.
Recommendations

      Increase funding for the Prevention Trust Fund and build 
on Medicare's pay for reporting initiative. HCAN believes the 
Committees should increase funding for the Prevention Trust Fund in the 
draft bill to the level in the Senate's ``Affordable Health Choices 
Act.''

    HCAN commends you for your leadership in fashioning this 
legislation. As the legislative process moves forward, HCAN is eager to 
work with the Committees to ensure that this excellent draft and the 
needed improvements reach enactment. We look forward to working with 
you to address the remaining issues and to move this critical bill 
through the legislative process. Thank you again for your consideration 
of these comments.

            Sincerely,

                                                     Richard Kirsch
                                          National Campaign Manager
                                        Health Care for America Now
                              ATTACHMENT A
    Section-by-Section Review of Disparities Provisions in the Tri-
                   Committee Health Care Reform Bill
I. Affordable Health Care for All
Sec. 123. Health Benefits Advisory Committee
    HCAN is pleased that the membership of the Health Benefits Advisory 
Committee must include experts on health disparities within racial and 
ethnic minority and disability communities as well as specialists on 
children's health. HCAN urges the Committee to ensure that the 
perspectives of other underserved communities--such as women, the LGBT 
population, and people living in rural and tribal areas--are also 
represented by the Advisory Committee.
Sec. 143. Consultation and Coordination
    HCAN supports the inclusion of Indian Tribes and Tribal governments 
in the consultation and coordination provisions. The government-to-
government relationship between Indian tribes and the Federal 
Government is a necessary for the health and independence of Indian 
communities. HCAN encourages the Committees to include language to 
encourage conferring--not consulting, which infers a government-to-
government relationship--with Urban Indian health programs to ensure 
that that the Federal Government and States fulfill in the trust 
responsibility to all Indian people.
Sec. 152. Prohibiting Discrimination in Health Care
    We strongly support the Committees' commitment to preventing 
discrimination based on personal characteristics in all aspects of 
health care delivery and health coverage plans. The Committees 
recognize that health reform legislation should include broad 
protections and adequate remedies, including the right to sue, with 
sufficient resources for enforcement to ensure that each actor in a 
reformed health care system is held accountable for adhering to 
nondiscrimination protections.
    These regulations promulgated by the Secretary must be rigorously 
enforced. The enforcement of anti-discrimination laws in health care is 
indispensable and must include directing sufficient resources to 
monitor, prosecute, and ensure active compliance with all civil rights 
laws, and must integrate and prioritize the health issues of 
communities of color in all relevant agencies of the Federal 
Government.
Sec. 202(b)(7) Essential Community Providers
    While HCAN strongly supports this provision and applauds the 
Committees for including community providers, we believe that Indian 
health providers must be specifically included as an essential 
community provider in order to protect the integrity of the Indian 
Health Service. Often private insurance plans, and even States, refuse 
to contract or otherwise work with Indian health providers because 
Indian patients are poorer and sicker than the general population, thus 
presenting a high risk. By specifically stating that Indian health 
providers are designated essential community providers which must be 
included in any PPO or other reimbursement scheme. Merely allowing an 
entity to designate Indian health programs as essential providers is 
not adequate. Tribes have enormous experience, across the country, with 
the variety of ways they can be excluded as providers by insurance 
plans. This is why Medicaid protections were included in ARRA Section 
5006(d) which simply requires plans to pay Indian programs as in 
network providers. This type of provision should apply to all plans 
participating in an Exchange.
Sec. 242. Affordable Credit Eligible Individual
    The bill generally takes a family-based approach to application and 
enrollment in health coverage, which helps reduce paperwork and which 
ensures that individuals and their dependents can get the coverage they 
need. HCAN strongly urges the Committees to employ a similar approach 
in administering the affordability credit. An affordable credit 
eligible individual should be able to include any dependents seeking 
coverage on the application for an affordable credit, without 
subjecting those dependents to the same individual eligibility 
determinations.
    In addition, the blanket exclusion of all persons with ``non-
immigrant'' visas is troublesome, since it would deny access to 
affordable coverage to a broad range of individuals who are authorized 
by law to live work, and remain in the United States, such as survivors 
of trafficking, domestic violence and other serious crimes who are 
cooperating in prosecuting these crimes (T and U visa holders), persons 
with fiance petitions (K visa holders), citizens of ``compact of free 
association states'' (Micronesia, Palau, Marshall Islands) and others.
Sec. 59B. Tax on Individuals Without Acceptable Health Care Coverage
    The array of health coverage options from which individuals and 
families may choose must be available to all people living in the 
United States and its territories. It would be unacceptable if any 
individual who lacked access to affordable coverage were then penalized 
for their failure to enroll, yet the exemptions from the tax are not 
congruent with the guarantee of affordable coverage. For example, many 
immigrants ineligible for an affordable credit are, due to their 
``substantial presence'' in the United States, defined as ``resident 
aliens'' under the Tax Code and are therefore not subject to the 
exemption for ``nonresident aliens'' however, rather than expanding the 
exemptions, HCAN urges the Committees to take as their first priority 
ensuring that the broadest range of individuals do have access to 
affordability mechanisms that make it possible to obtain health 
insurance coverage.
Sec. 1302. Medical Home Pilot Program
    We strongly support the creation of a pilot program for community-
based medical homes which integrate nonphysician practitioners and 
community health workers into chronic disease management and public 
health education. However, HCAN recommends that the Committees adopt an 
``evidence-informed'' standard for medical home guidelines rather than 
an ``evidence-based'' standard. Clinical research and evaluation is 
sorely lacking for many vulnerable populations, such as racial and 
ethnic minorities, women, and the LGBT community, making an ``evidence-
informed'' standard more appropriate.
Sec. 1401. Comparative Effectiveness Research
    Best practices in treatment, services, and medications must be 
grounded in evidence that is based on the actual populations involved. 
To ensure that comparative effectiveness research will truly promote 
improvements in quality care, the Committees should ensure fair 
representation of all groups in health research that have been 
historically excluded from health research including women of all ages, 
races, and ethnic groups, lesbian, gay, bisexual, and transgender 
individuals, and children. Although the Committees do call for research 
to include these populations and account for any differences ``as 
feasible and appropriate,'' HCAN believes that more robust requirements 
and incentives to conduct research inclusive of these populations are 
necessary.
Sec. 1801. Medicaid Eligibility for Individuals With Income Below 133 
        Percent of Poverty Level
    HCAN supports efforts to expand Medicaid eligibility to 133% of the 
Federal poverty level and to nontraditional Medicaid-eligible 
populations. In addition, we urge the Committees to repeal the 5-year 
waiting period and sponsor-related barriers for legal immigrants in 
Medicaid and CHIP by mandating that States cover legal immigrants on 
the same basis as citizens in these programs as well as Medicare.
Sec. 1802. Requirements and Special Rules for Certain Medicaid 
        Enrollees and for Medicaid Eligible Individuals Enrolled in a 
        Non-Medicaid Exchange-Participating Health Benefits Plan
    With respect to the proposed incentive for reducing State matching 
percentages, the Committees should be cognizant of the fact the way in 
which States' reduction in uninsured populations will be measured--by 
the Current Population Survey conducted by the U.S. Census Bureau--does 
not include data for U.S. territories.
Sec. 1201. Increased Funding [for Community Health Centers]
    A robust public health system, at a minimum, invests in health 
planning, undertakes prevention strategies, conducts disease 
surveillance and management, increases health literacy, and fosters a 
health care safety net through community health care workers and 
clinics. Community health centers will continue to serve as critical 
access points for many people living in underserved communities. HCAN 
strongly supports increased investments in the community health center 
network under health care reform.
Sec. 2301. Prevention and Wellness
    HCAN applauds the Committees for developing proposals that 
recognize the needs, language, culture, infrastructure and practices of 
the local population and build local capacity to address the health 
care deficiencies in the community.
    We support establishing and funding Health Empowerment Zones which 
integrate community-based strategies in health care delivery in order 
to reduce disparate health outcomes in underserved communities.
    We also strongly support the Committees' robust investments 
prevention and wellness programs with a strong commitment to health 
equity. The creation of the Task Force on Community Preventive Services 
demonstrate the Committees' commitment to eradicating disparities in 
health care and health outcomes for historically underserved 
populations. We applaud the Committees' focus on community-based 
research and stakeholder input to develop and disseminate best 
practices, and recommend that the standard for these practices be 
``evidence-informed'' rather than ``evidence-based'' unless and until 
sufficient new research on health disparities has been conducted.
    HCAN agrees with the Committees' definition of health disparities 
populations, which recognizes populations that have been historically 
marginalized from the health care system--including racial and ethnic 
minorities as well as geographically isolated individuals--and also 
appropriately allows for the further delineation of subpopulations.

II. Data Collection and Reporting
Sec. 142. Duties and Authority of Commissioner
Sec. 204. Contracts for the Offering of Exchange-Participating Health 
        Benefits Plans
Section 221. 
        Establishment and Administration of a Public Health Insurance 
        Option as an Exchange-Qualified Health Benefits Plan
    One of the primary functions of the Health Choices Commissioner 
will be data collection within the Exchange for the purposes of 
promoting quality and reducing health disparities. We support the data 
collection and reporting requirements to which private health plans in 
the Exchange are subject in order to realize these objectives. HCAN 
urges the Committee to clarify that this data should include 
demographic information about plan enrollees, including race, 
ethnicity, primary language, ethnic subpopulation, socioeconomic 
position, sexual orientation, gender identity, gender, and age. 
Additionally, health plans should report data on key health plan 
performance indicators (e.g., nonpatient specific claims and outcomes 
data; consumer satisfaction and disenrollment rates; provider 
satisfaction; initial and post-resubmission claims denial rates) 
stratified by demographic characteristics.
Sec. 1709. Assistant Secretary for Health Information
    The statistics on key health indicators as determined by the 
Assistant Secretary should be stratified by race, ethnicity, primary 
language, gender, age, and other key demographic information. HCAN 
strongly supports the establishment of uniform categories for the 
collection of race and ethnicity as specified by OMB Directive 15, 
including the five racial categories and dichotomous question of 
Hispanic ethnicity, as well as the development of standards for 
collecting primary language data. In addition, Congress should require 
health plans and other entities to collect disaggregated data on ethnic 
subpopulation and tribal affiliation whenever possible.
    Because standardized data collection is a prerequisite to comparing 
data across plans, HCAN urges Congress to mandate that standardized 
categories for the collection of race and ethnicity data, as well as 
other key subpopulation information, for all health plan data 
collection and reporting. HCAN supports providing States with funding 
to upgrade data collection systems in order to comply with these 
standards for data collection and reporting.

III. Language Access and Cultural Competence
Sec. 122. Essential Benefits Package Defined
    In addition to the broad categories of services outlined in this 
section as essential benefits, HCAN urges the Committee to include 
language access services--such as qualified medical interpretation and 
translation--as an essential benefit.
Sec. 133. Requiring Information Transparency and Plan Disclosure
    HCAN is pleased that health plans must provide timely disclosure of 
plan documents and any plan changes in plain language, and urges the 
Committees to require health plans to make these materials available in 
multiple languages in order to best serve individuals whose English 
proficiency is limited.
Sec. 204. Contracts for the Offering of Exchange-Participating Health 
        Benefits
    HCAN strongly supports the requirement for Exchange-participating 
health plans to provide for health care services that are culturally 
competent and linguistically appropriate. We urge the Committees to 
expand this requirement to all health plans, public and private, 
operating outside of the Exchange.
Sec. 204. Outreach and Enrollment of Exchange-Eligible Individuals and 
        Employers in Exchange-Participating Health Benefits Plan
    HCAN applauds efforts to provide culturally and linguistically 
competent education and outreach about the Health Insurance Exchange to 
vulnerable communities by the Commissioner or other appropriate 
entities. Allowing the Commissioner to partner with community-based 
organizations and leaders will substantially increase awareness and 
enrollment.
    In addition to the populations identified by the Committees as 
critical outreach populations--children as well as individuals with 
disabilities, mental illnesses, or other cognitive impairments--HCAN 
recommends the inclusion of historically underserved communities, such 
as racial and ethnic minorities, women, LGBT individuals, and residents 
of rural and tribal areas.
Sec. 1222. Demonstration to Promote Access for Medicare Beneficiaries 
        With Limited English Proficiency by Providing Reimbursement for 
        Culturally and Linguistically Appropriate Services
Sec. 1223. IOM Report on Impact of Language Access Services
    HCAN applauds the Committees' intention to improve Medicare 
recipients' access to culturally and linguistically appropriate 
services through a demonstration project as well as provide for an 
evaluation on the impact of this project. However, there is an existing 
wealth of research which demonstrates the benefits of culturally and 
linguistically appropriate care. In addition, Federal public programs 
such as Medicaid already provide reimbursement for language services on 
the basis of such evidence. Accordingly, HCAN suggests that the 
Committees should broaden the scope of this effort and provide 
reimbursement of these services to the entire Medicare program.
    Additionally, ensuring reimbursement for the provision of language 
services under public coverage programs at adequate reimbursement 
rates--with a minimum of FMAP of 75%--will give providers some new 
tools to meet their obligations to take reasonable steps to provide 
language services to limited-English-proficient patients.
Sec. 2241. Cultural and Linguistic Competence Training for Health Care 
        Professionals
    HCAN supports efforts to increase effective cultural and linguistic 
competency training for health care professionals. We recommend that 
these education and training programs raise awareness and address the 
role of gender, social and cultural biases in clinical decisionmaking 
to prevent nonclinical or nonbiological judgments based on sex, race, 
ethnicity, sexuality, gender and gender identity, which inappropriately 
affect the amount and kind of treatment received.
    In addition to these programs, HCAN recommends improving funding 
for the training of interpreters and translators who are qualified to 
assist limited-English-proficient patients.

IV. Health Care Workforce Diversification
Sec. 2241. Centers of Excellence
Sec. 2242. Scholarships for Disadvantaged Students, Loan Repayments and 
        Fellowships Regarding Faculty Positions, and Educational 
        Assistance in the Health Professions Regarding Individuals From 
        Disadvantaged Backgrounds
Sec. 2243. Nursing Workforce Diversity Grants
Sec. 2244. Coordination of Diversity and Cultural Competency Programs
    HCAN applauds the Committees' efforts to increase the number of 
health care professionals from underserved communities, and hopes that 
Congress will make adequate investments in these programs in order to 
achieve the greatest impact on the workforce.
Sec. 2261. Health Workforce Evaluation and Assessment
National Center for Health Workforce Analysis
    We support the establishment of these national centers to establish 
and measure benchmarks for the health care workforce, including Federal 
programs. We applaud the Committees' requirement for members of the 
Advisory Committee to include representatives from underserved and 
underrepresented communities. These benchmarks should reflect the 
national priority of achieving a diverse workforce with adequate 
representation of racial and ethnic minorities and other critical 
populations.
                              ATTACHMENT B
   Summary of Immigration Recommendations to the House Tri-Committee 
                           Health Reform Bill
            Proposed by the National Immigration Law Center
                             June 29, 2009
    Last week the National Immigration Law Center recently offered 
several recommendations aimed to improving immigrant inclusion in 
health care reform. Below is a summary, presented in order of the 
sections as they appear in the bill.
Expanding Examples of ``Vulnerable Individuals'' (p. 67)
    In the section on ``Outreach and Enrollment of Exchange-Eligible 
Individuals and Employers in Exchange-Participating Health Benefits 
Plan,'' adding ``individuals with limited English proficiency'' to the 
list of ``vulnerable individuals'' to whom outreach should be targeted 
would help insure the likelihood of participation in health coverage by 
those who are limited-English proficient (as well as hearing-impaired), 
as follows:
    ``(1) Outreach.--
    Such outreach shall include outreach specific to vulnerable 
populations, such as children, individuals with disabilities, 
individuals with mental illness, individuals with other cognitive 
impairments, and linguistically isolated individuals.''
Definition of Affordable Credit Eligible Individual (p. 103)
    The draft bill makes affordable credits only to ``an individual who 
is lawfully present in a State in the United States (other than as a 
non-immigrant described in 101(a)(15) of the INA).'' The blanket 
exclusion of ``non-immigrants'' leaves out several categories of 
persons who are authorized by law to live and to remain in the United 
States, such as survivors of trafficking, domestic violence and other 
serious crimes who are cooperating in prosecuting these crimes (T and U 
visa holders), persons with fiance petitions (K visa holders), citizens 
of ``compact of free association states'' (Micronesia, Palau, Marshall 
Islands) and several other categories of ``non-immigrants'' who are 
permitted to live and work here permanently or are on a pathway to 
lawful permanent residence.
    To ensure that lawfully present individuals who are also residing 
in the United States are eligible:

Sec. 242(a)(1) should be revised to read:

    ``(1) In General.--For purposes of this division, the term 
``affordable credit eligible individual'' means, subject to subsection 
(b), an individual who is lawfully residing in the United States.''
    ``Lawfully residing in the United States'' is precisely the 
language used to define which immigrant children and pregnant women are 
eligible for federally funded health coverage under the recently 
enacted section 214 of the Children's Health Insurance Program 
Reauthorization Act of 2009 (``CHIPRA,'' H.R. 2). The terminology has 
been vetted and battle-tested.
Streamlining Coverage for Families (p. 104)
    The bill generally takes a family-based approach to application and 
enrollment in health coverage, which helps reduce paperwork and which 
ensures that individuals and their dependents can get the coverage they 
need. A similar approach should be employed in administering the 
affordability credit.

Sec. 242(a)(2) should be revised to read:

    ``(2) TREATMENT OF FAMILY.--Notwithstanding any other provision in 
this Title and except as the Commissioner may otherwise provide, an 
affordable credit eligible individual may apply for a credit under this 
subtitle for the purpose of securing family coverage. Individuals 
seeking family coverage shall include any dependents seeking coverage 
on the application.''
Tax on Individuals Without Acceptable Health Coverage (p. 136)
    The political viability of the government enacting an individual 
mandate imposing a financial penalty on uninsured persons hinges on a 
question of fairness. If individuals and families subject to a penalty 
have access to affordable coverage, the public will view it as fair to 
expect them to fulfill a responsibility to enroll. Unlike the Senate 
HELP bill, which expressly exempts from penalty ``any person for whom 
affordable health care coverage is not available,'' the House bill 
exempts a small number of enumerated groups.
    Included among these groups are ``nonresident aliens'' (p. 138). 
However, there is no parallel between ``nonresident aliens'' and the 
various categories of immigrants lacking access to affordable coverage 
because under the discussion draft they are ineligible for both 
Medicaid and an affordable credit. The term ``nonresident alien'' is 
not what it implies. It is a term of art in the Tax Code that 
essentially means a noncitizen who is neither a lawful permanent 
resident nor a person who has had a ``substantial presence'' in the 
United States during the year, a test that gets to physical presence 
and is unrelated to immigration status. Even undocumented immigrants 
are considered ``resident aliens'' for tax purposes so long as they 
meet the substantial presence test. For more information, see: http://
www.irs.gov/taxtopics/tc851.html.
    Therefore, under the House bill, millions of immigrants would have 
no access to affordable coverage and yet would appear vulnerable to 
being penalized for failing to obtain acceptable health care for 
themselves or their families. Although the bill does signal that future 
regulations may enable individuals in this circumstance to apply for a 
hardship waiver (see p. 142), this does not offer protection sufficient 
to assuage concerns or controversy over the disjuncture. Immigrant 
parents with citizen children could be penalized for their own lack of 
coverage even if they enrolled the eligible children in coverage.
    As a practical matter, subjecting low-income immigrants to a tax 
penalty for failure to secure health coverage that they cannot afford 
will discourage tax compliance and collection. Approximately 1 million 
tax returns are filed with Individual Taxpayer Identification Numbers, 
most of which are assumed to belong to undocumented immigrants taking 
the extraordinary step of filing personal income tax returns despite 
their status. The prospect of having a penalty levied could change the 
equation for many of these individuals.
    This problem highlights the need to broaden pathways by which 
individuals and families are able to secure affordable coverage (and 
therefore be fairly subject to a penalty if they fail to do so) 
including:

      Enabling affordable credit individuals to secure family 
coverage;
      Enabling all low-income children to secure Medicaid and 
CHIP;
      Exploring mechanisms to ensure that all workers of 
employers who are ``paying'' can benefit from that contribution and can 
have access to affordable coverage; in such cases it can be structured 
so that it is the employer's payment, and not a Federal payment, that 
is being used to assist any immigrant worker who is not otherwise 
affordable credit eligible.

Medicaid and CHIP (Title VIII)
    Public opinion overwhelmingly supports access to coverage and care 
for legal immigrants on the same basis as citizens. Concerns regarding 
potential push-back from States due to increased expenditures ring 
hollow given the larger expansions of Medicaid for citizens proposed in 
the discussion draft, and the fact that almost half the States, 
including most of the States with the largest immigrant populations, 
have been providing coverage for immigrants with no Federal match 
during many of the years following enactment of welfare reform. 
Restoration of eligibility would provide them welcome fiscal relief. 
This is the time to provide access to health care for low-income 
immigrants.
    To remove the discriminatory barriers to health coverage for legal 
immigrants imposed by the 1996 welfare law, including the 5-year 
waiting period, the restrictive and outdated list of ``qualified'' 
immigrants, and sponsor-related barriers, and to ensure timely and 
effective care for all children and pregnant women, the following 
sections should be inserted in Title VIII:

``Medicaid''

    Section 1903(v) of the Social Security Act (42 U.S.C. 1396b(v)) is 
amended--
    (1) by striking paragraph (4) and inserting the following new 
paragraph:
    ``(4)(A) Notwithstanding sections 401(a), 402(b), 403, and 421 of 
Public Law 104-193, payment shall be made under this section for care 
and services that are furnished to individuals, if they otherwise meet 
the eligibility requirements for medical assistance under the State 
plan approved under this subchapter other than the requirement of the 
receipt of aid or assistance under subchapter IV of this chapter, 
supplemental security income benefits under subchapter XVI of this 
chapter, or a State supplementary payment), and are:
    (i) lawfully residing in the United States, or
    (ii) children under age 21, including optional targeted low-income 
children described in section 1905(u)(2)(B), or
    (iii) pregnant women during pregnancy (and during the 60-day period 
beginning on the last day of the pregnancy).''
    (B) No debt shall accrue under an affidavit of support against any 
sponsor of such individual on the basis of provision of medical 
assistance and the cost of such assistance shall not be considered as 
an unreimbursed cost.

``Chip''

    Section 2107(e)(1) of the Social Security Act (42 U.S.C. 
1397gg(e)(1)) is amended by striking subparagraph (H) and inserting the 
following new subparagraph:
    ``(H) Paragraph (4) of section 1903(v) (relating to individuals 
who, but for sections 401(a), 403, and 421 of Public Law 104-193 would 
be eligible for medical assistance under Title XXI.''

Conforming Amendment:

    42 U.S.C. 1320b-7(f) is amended as follows:
    (f) Medical assistance to aliens for treatment of emergency 
conditions and for medical assistance provided to children and pregnant 
women.
    Subsections (a)(1) and (d) shall not apply with respect to aliens 
seeking medical assistance for the treatment of an emergency medical 
condition under section 1903(v)(2) [42 U.S.C. Sec. 1396b(v)(2)] or to 
children and pregnant women seeking medical assistance under section 
1903(v)(4).''

Medicare

    Similarly, Medicare should be made available to all lawfully 
present individuals who are otherwise eligible for the program. The 
language below on Medicare should be included in the section on 
Medicare.
    42 U.S.C. 1395i-2(a)(3) is amended by striking subparagraph (B) and 
inserting:
    ``(B) an individual who is lawfully present in the United States.''

                                 
        Statement of Kenneth L. Sperling, Hewitt Associates LLC
    Mr. Chairman and Members of the Committee: Thank you for the 
opportunity to submit our response to the Discussion Draft of the House 
Tri-Committee Health Reform Proposal, addressing the reform of 
America's health care system and expansion of health care coverage. 
Hewitt Associates is a global human resources outsourcing and 
consulting company, providing services to major employers in more than 
30 countries and employing 23,000 associates worldwide. Headquartered 
in Lincolnshire, Illinois, we serve more than 2,000 U.S. employers from 
offices in 18 States plus the District of Columbia.
    As the Nation pursues a path leading to universal coverage, we can 
learn a great deal from the experience of large employers. Employers 
are the single largest provider of coverage for working Americans and 
their families, and the system is highly valued by both employers and 
employees. Nationwide, employer-sponsored health care plans provide 
health care coverage to 160 million participants. The latest data from 
the Kaiser Family Foundation from 2008 shows that 99 percent of 
employers with 200 or more employees offered health benefits in 
2008.\1\ As we look to expand coverage and improve the health of all 
Americans, we believe the most important consideration is how to 
accomplish this worthy goal in a way that preserves, strengthens, and 
stabilizes existing employer-based coverage.
---------------------------------------------------------------------------
    \1\ 2008 Kaiser/HRET Employer Health Benefits Survey.
---------------------------------------------------------------------------
    Hewitt commends the Committee for putting forward a Discussion 
Draft to enable the collection of further input as the legislative 
process advances. Our statement focuses on four key provisions in the 
Discussion Draft, with recommendations on how to avoid disrupting 
existing employer provided health insurance:

    I. Insurance Market Reform
    II. Public Health Insurance Option
    III. Shared Responsibility
    IV. ERISA

    Our statement draws from Hewitt's proprietary data and the 
experience of Hewitt's consultants and actuaries who have extensive 
knowledge of--and direct experience with--the employer-sponsored health 
care system. Health care reform is clearly needed and welcomed by large 
employers if it achieves the objectives of expanding access to high-
quality, affordable health care to all Americans. We are pleased to 
continue to make available our comprehensive data and extensive 
knowledge of the large employer marketplace, coverage, and cost 
drivers.
I.  Insurance Market Reform
    We commend the Committee for developing an extensive reform 
proposal for the individual and group health insurance markets. We 
believe that the rating requirements and guarantees of availability and 
renewability of coverage in the Discussion Draft will broaden access to 
health care coverage within a framework that generally seeks to 
continue to support employer-based coverage. Additionally, we strongly 
support the requirement that all Americans have an individual 
responsibility to secure acceptable health care coverage when it is 
both available and affordable.
    The employer-sponsored model works well because it allows the 
pooling of risks and because large-scale group purchasing lowers costs, 
enabling those who are less healthy to secure affordable coverage for 
themselves and their families. As proposed, the Exchanges would extend 
these advantages that employees of large employers currently enjoy to 
individuals and small groups. Employer-based plans offer coverage that 
is guaranteed and renewable, typically waives preexisting condition 
exclusions, and does not increase premiums or limit coverage based on 
health status. Incorporating an individual coverage requirement into 
the broader insurance market will level the playing field between 
large-employer plans and other forms of coverage. It will also provide 
more coverage choices to Americans.
Proposed Requirements of Health Insurance Plans
    Insurance market reforms are indispensable for creating a viable 
Exchange and a balanced health insurance marketplace. However, Hewitt 
believes that these reforms should not apply to large employers 
providing coverage outside the Exchange. Hewitt recommends the 
Committees consider the following refinements to the proposed reform 
requirements:

      Permit rating variations based on tobacco use and 
adherence to programs promoting wellness and disease prevention. Large 
employers have experimented with both of these approaches in an effort 
to influence employee behavior and reduce the health risk in their 
populations. We believe employers would support other health insurance 
programs following similar rating approaches.
      Reconsider the rebate requirement for insurers whose 
medical loss ratios exceed the allowable limits. While insurers should 
be expected to provide coverage commensurate to the premium payments 
they receive, the rebate requirement is likely to unintentionally 
increase costs to all participants. Managing the rebate payments will 
increase insurers' administrative costs, and insurers may increase 
their risk charges to build extra reserves to fund the rebate payments.
         At a minimum, employer-sponsored group health plans that are 
self-insured should not be subject to this requirement because the goal 
of the rebate mechanism--to preserve affordable coverage to employees 
and their dependents--is already in practice in the self-insured 
marketplace. The provisions of ERISA prohibit any excess contributions 
to be used for any purpose other than benefits for employees and their 
dependents. Our experience has been that when actual claim costs prove 
to be lower than expected in a self-insured group health plan, 
employers reflect the benefit of this favorable experience by not 
increasing payroll contributions and/or cost-sharing provisions in the 
following year. To impose onerous rebate requirements on these plans 
would simply add administrative cost with no substantive benefit. 
Health insurers that are contracted to provide administrative services 
under these plans, similar to the third-party contracts in place for 
the Medicare program, do not receive any additional benefit from 
favorable self-insured loss ratios.
      Preserve flexibility for ERISA group health plans outside 
the Exchange. Employers are in the best position to determine their 
employees' health care needs. We recognize and support the idea of an 
actuarially determined minimum benefit for plans provided through the 
Exchanges, but recommend that no specific benefit requirements or 
designs be imposed on large employers outside the Exchange. For this 
particular group, which already offers near universal group health plan 
coverage for their workforces, we recommend that the option of 
sponsoring such plans continue to be voluntary. Accordingly, we suggest 
that the market reforms not apply to ERISA group health plans.
      Improve the application of the Grace Period. Employers 
will need substantial time to adjust their plans, and it will take time 
to implement individual and small-group market reforms. To avoid 
disruption of employer group health plans and added costs, we suggest 
that the proposed grace period apply to all employer-sponsored plans, 
including flexible spending accounts (FSAs). We also believe any rules 
in the Discussion Draft should only be applied after the expiration of 
the grace period. Additionally, we recommend that any individual 
enrolled in an employer-sponsored group health plan during the grace 
period should be deemed to have satisfied the Individual Responsibility 
requirement in the Discussion Draft.
Health Insurance Exchanges
    We support the Committee's suggestion that Exchanges be designed to 
address access to coverage for small businesses and individuals--
precisely the group that could most benefit from this concept.
    There is much to be learned from the Massachusetts Connector model, 
a pioneering Health Insurance Exchange. A May 2008 review of the 
Massachusetts health care reform plan by the Kaiser Family Foundation 
estimated the number of people with insurance in Massachusetts has 
increased by more than 340,000 since late 2006, representing more than 
half of the estimated 650,000 people who were previously uninsured.\2\
---------------------------------------------------------------------------
    \2\ Massachusetts Health Care Reform: Two Years Later, Kaiser 
Commission on Medicaid and the Uninsured, May 2008. Others note that at 
the same time, the costs of the Massachusetts program have risen as 
well, requiring subsequent and likely ongoing adjustments.
---------------------------------------------------------------------------
    We also strongly support the ability of private entities to 
facilitate Exchanges because they can best leverage existing processes, 
technology, and relationships to quickly and efficiently deliver the 
educational, informational, and enrollment assistance to support the 
participants of the Exchanges. As such, we also support the 
nonregulatory role that the proposed Exchanges will assume and suggest 
that oversight and regulation reside at the State or Federal level with 
independent, nonpartisan agencies.
Benefit Plan Values and Requirements
    Hewitt's extensive actuarial and consulting experience with large 
employers may assist the Committees in defining minimum coverage that 
would ensure a broad range of medical benefits are provided by the 
health insurance plans offered in the Health Insurance Exchanges.
    We suggest that all health care benefits be subject to a reasonable 
and objective standard of medical necessity to prevent overutilization 
of services. This is particularly important in the area of diagnostic 
imaging and screening. As new technologies have become readily 
accessible, the industry has seen large increases in cost and 
utilization without conclusive evidence of commensurate effectiveness.
    We have identified several concerns with the Committees' proposed 
benefit tiers and associated actuarial values and make the following 
recommendations:

  Combine actuarial value with a benchmark plan design.

     We suggest that any proposed benefit levels in employer-sponsored 
group health plans be determined by combining an overall actuarial 
value percentage with a reference to a published benchmark plan design. 
While the overall actuarial value percentage concept proposed in the 
Discussion Draft is valid, different actuarial models used to determine 
the percentage of charges paid may vary. This could lead to a cliff 
effect with plans satisfying or failing the requirements depending on 
the actuary valuing the plans. Our approach could mitigate this issue 
by allowing for a small range of overall actuarial values, e.g., the 
stipulated percentage actuarial value plus or minus 2 percent, combined 
with referencing a stated actuarial value to a known and public plan 
design (e.g., the Federal Employees Health Benefit Plan Standard 
option).
     There is precedent for this approach. Both Medicare Part D and 
Massachusetts Health Reform minimize the differences in actuarial 
variation by using a reference plan approach to define appropriate 
actuarial values. Combining the absolute percentage requirement with a 
reference plan ensures that various actuarial models are consistent in 
their measurement. Exhibit 1 provides an illustration of this 
combination and some examples of reference plans.

                      Exhibit 1: Illustrative Reference Plans at Different Actuarial Values
----------------------------------------------------------------------------------------------------------------
                                                         HMO Design          PPO Design           PPO Design
                   Plan Provision                     Actuarial Value:    Actuarial Value:     Actuarial Value:
                                                             95%                85%                  70%
----------------------------------------------------------------------------------------------------------------
Copayment: Primary                                                $15                  N/A                  N/A
  Care Physician
----------------------------------------------------------------------------------------------------------------
Copayment: Specialty                                              $25                  N/A                  N/A
  Care Physician
----------------------------------------------------------------------------------------------------------------
Copayment: Hospital                                              $200                  N/A                  N/A
  Admission
----------------------------------------------------------------------------------------------------------------
Annual Deductible                                                None             $300 per           $2,000 per
                                                                                individual           individual
----------------------------------------------------------------------------------------------------------------
Coinsurance (paid by                                             100%   80% for in-network   80% for in-network
  plan)                                                                           services             services
----------------------------------------------------------------------------------------------------------------
Out-of-Pocket                                                     N/A           $2,000 per           $4,000 per
  Maximum                                                                       individual           individual
----------------------------------------------------------------------------------------------------------------
Copayment: Generic                                                 $2                   $5           Subject to
  Drugs                                                                                              deductible
                                                                                                and coinsurance
----------------------------------------------------------------------------------------------------------------
Copayment:                                                         $8                  $15           Subject to
  Preferred Brand                                                                                    deductible
  Drugs                                                                                         and coinsurance
----------------------------------------------------------------------------------------------------------------
Copayment: Non-                                                   $16                  $30           Subject to
  Preferred Brand                                                                                    deductible
  Drugs                                                                                         and coinsurance
----------------------------------------------------------------------------------------------------------------


    We also suggest that actuarial value determinations specifically 
exclude out-of-network providers for any health plan that meets 
standards to ensure network adequacy. The recent Congressional Research 
Service paper uses only in-network benefits design in its actuarial 
value calculations.\3\ Under other circumstances, for any plan that 
does not meet the network adequacy standard and where a significant 
percentage of care is delivered outside the network (e.g., more than 10 
percent), it may be appropriate to include out-of-network expenses in 
the determination of the plan's actuarial value.
---------------------------------------------------------------------------
    \3\ Chris L. Peterson, ``Setting and Valuing Health Insurance 
Benefits,'' Congressional Research Service, R40491, April 6, 2009.
---------------------------------------------------------------------------
    It is also important to define the types of services that should be 
included in the actuarial valuation. For example, major service 
categories such as dental, vision, and hearing, and alternative medical 
services should be specifically identified, as should contraceptives 
and high-cost biotech pharmaceuticals for the prescription drug 
benefit.

  Implement an additional benefit tier.

     Hewitt has actuarially valued the health care plans of the 325 
large employers that participate in the Hewitt Health Value Initiative 
TM (HHVI), a database containing detailed census, cost, and 
plan design data representing 13.1 million participants and $51 billion 
in 2009 health care spending. The data in Exhibit 2 shows that the 
majority of large employers offer benefit plans that are at least as 
comprehensive as the Committees' suggested basic plan. Note that less 
than 2 percent of employees are enrolled in plans with an actuarial 
value equal or greater to 95 percent, and nearly 4 percent of employees 
are currently enrolled in plans that would fail to meet the 70 percent 
actuarial value standard in the Discussion Draft.\4\
---------------------------------------------------------------------------
    \4\ Actuarial value calculated using an assumption of covered 
expenses paid by the plan.


 Exhibit 2: Comparison of Actuarial Value of Large Employer Plans to the
                           Proposed Basic Plan
------------------------------------------------------------------------
                                               Percentage of  Employees
     Plans with an  Actuarial Value of:                Enrolled
------------------------------------------------------------------------
     Less than 65%                                                 0.7%
------------------------------------------------------------------------
     65-69%                                                        3.0%
------------------------------------------------------------------------
     70-74%                                                        9.2%
------------------------------------------------------------------------
     75-79%                                                       18.4%
------------------------------------------------------------------------
     80-84%                                                       25.4%
------------------------------------------------------------------------
     85-89%                                                       28.7%
------------------------------------------------------------------------
     90-94%                                                       12.8%
------------------------------------------------------------------------
     95% or more                                                   1.8%
------------------------------------------------------------------------


    We suggest adding an additional benefit tier using an actuarial 
value of 65 percent to accommodate those individuals and small 
employers who prefer to enroll in lower-value plans to pay less in 
monthly premiums. Such a design would provide comprehensive insurance 
protection against catastrophic loss, while providing a more affordable 
monthly premium than higher-valued options. Providing this flexibility 
would avoid forcing individuals and small businesses to provide 
coverage that they cannot afford and do not feel they need. The 
Massachusetts health care program includes similar options in their 
Bronze plans. If a 62 percent tier were adopted, it would permit 
certain Bronze plan options available through the Massachusetts 
Connector to meet the minimum value requirement.
    Many High-Deductible Health Plans (HDHPs) would fall below this 
benchmark if contributions made to Health Reimbursement Arrangements 
(HRAs) or Health Savings Accounts (HSAs) are not taken into account 
when calculating actuarial value. We strongly recommend that such 
contributions be considered in determining actuarial value. IRS rules 
provide guidance for the maximum deductible and out-of-pocket expenses 
allowed for HDHPs within an HSA. The 2009 limits are a minimum 
individual deductible of $1,200 ($2,400 family) and a maximum out-of-
pocket of $5,950 ($11,900 family). A plan with these deductibles and 
out-of pocket maximums would have an actuarial value of 71 percent 
using Hewitt's actuarial model. Any contribution an employer makes to 
the HSA should also be considered in the actuarial value calculation 
and would further raise the value. Every $100 contributed to an HSA as 
part of the plan raises the actuarial value by about 1 percentage 
point, assuming all coverage tiers are given the same contribution.

  Apply minimum health benefit standards to total actuarial 
value and revisit cost-sharing provisions.

     For employer-sponsored group health plans, we suggest that the 
standard be based on the total actuarial value of the plan design, not 
on specific benefit-by-benefit comparisons. The use of total actuarial 
value should also include certain provisions to prevent ``gaming'' of 
the values. For example, for health plans offered in the open market 
and through the Exchange, we encourage the Committees to take steps to 
prevent insurers from developing plan designs that meet the total 
benefit percentage requirements but limit some services in order to 
prevent high-risk individuals from joining. Total actuarial equivalence 
is currently used for Medicare Part D employer health plan comparisons, 
while plans marketed to individuals are required to perform more 
detailed comparisons. Massachusetts also uses a total actuarial value 
approach.
     We encourage the Committee to remove the copayment language from 
the Discussion Draft and allow for both copayment and coinsurance 
provisions as deemed appropriate by the health plan sponsor. The 
Discussion Draft suggests that the Essential Benefits Package should 
use copayments in lieu of coinsurance whenever possible. While 
copayments are administratively easier for both the individual and the 
medical provider, this practice removes all transparency around the 
cost of the service being provided. Employers have successfully used 
coinsurance designs in prescription drug coverage, for example, to 
educate employees about the cost of brand-name drugs versus lower-cost 
alternatives. Using coinsurance provisions, the Medicare Part D program 
experienced an 88 percent generic substitution rate in its first 6 
months of operation that significantly contributed to the favorable 
cost experience of the program.\5\
---------------------------------------------------------------------------
    \5\ Generic Drug Utilization in the Medicare Part D Program, Office 
of the Inspector General, Department of Health and Human Services, 
November 2007.
---------------------------------------------------------------------------
     The Discussion Draft allows a variation of up to 10 percent in 
cost-sharing between basic, enhanced, and premium plans. In our 
experience with large employers and the options provided to their 
employees, this range will not be wide enough to allow for meaningful 
premium differences. In general, there should be an 8-10 percent 
difference in actuarial value between each plan level in order to offer 
meaningful choice. Limiting the variation as proposed will not provide 
this degree of actuarial value difference and corresponding premium 
savings to the individual.

  Preserve existing employer plan options.

     We suggest the Committees be mindful that a wide range of health 
care plan designs exist today. We recommend that the requirements 
should be flexible enough to allow employees to keep their existing 
plans if they so choose. We support the Committee's proposal of a 5-
year grace period for group plans. As previously noted, we suggest that 
the grace period apply for all purposes and to all employer plans, 
including FSAs. Many large employers offer participants a choice of 
health care plans with varying employee premium contributions for 
greater cost-sharing in health care services at point of care. These 
are often choices of delivery model (HMO or PPO) or choices of plan 
cost-sharing. This is similar to the Federal Employee Health Benefit 
Plan Basic and Standard options. Typically, HMO plans have richer 
benefits, with lower copayments and no deductibles. PPO plans generally 
have up-front deductibles and coinsurance. Exhibit 3 shows typical plan 
provisions of HMO and PPO designs, and their associated actuarial 
values for the network benefit design.


     Exhibit 3: Typical Plan Provisions for HMO and PPO Plan Designs
------------------------------------------------------------------------
                                    HMO Design           PPO Design
        Plan Provision           ActuarialValue:    ActuarialValue:  81%
                                       89%
------------------------------------------------------------------------
Copayment: Primary Care                      $25                    N/A
 Physician
------------------------------------------------------------------------
Copayment: Specialty Care                    $30                    N/A
 Physician
------------------------------------------------------------------------
Copayment: Hospital Admission               $250                    N/A
------------------------------------------------------------------------
Annual Deductible                           None    $500 per individual
------------------------------------------------------------------------
Coinsurance (paid by plan)                  100%     90% for in-network
                                                               services
------------------------------------------------------------------------
Out-of-Pocket Maximum                        N/A   $2,500 per individual
------------------------------------------------------------------------
Copayment: Generic Drugs                     $10                    $10
------------------------------------------------------------------------
Copayment: Preferred Brand                   $25                    $25
 Drugs
------------------------------------------------------------------------
Copayment:Non-                               $40                    $40
 PreferredBrandDrugs
------------------------------------------------------------------------


    Note that the designs shown in Exhibit 3 are representative of 
typical designs today with 50 percent of large employers offering an 
HMO plan and 85 percent offering a PPO plan. Both of these designs have 
lower actuarial values than the proposed Premium option in the 
Discussion Draft. Other popular plan types include Health Reimbursement 
Arrangements (19 percent) and Health Savings Accounts (30 percent). In 
addition, IRS rules provide guidance for the maximum deductible and 
out-of-pocket expenses allowed for HDHPs with HSAs. The 2010 limits are 
a minimum individual deductible of $1,200 ($2,400 family) and a maximum 
out-of-pocket of $5,950 ($11,900 family). Within these limits, a broad 
range of plan design values could apply. The richest HDHP-qualifying 
plan, for example, would have a $1,200 deductible and pay 100 percent 
benefits after that point. The actuarial value for a plan such as this 
would be 84 percent under Hewitt's actuarial model. Conversely, the 
leanest HDHP-qualifying plan would have a $5,950 deductible and pay 100 
percent benefits after that point, and have an actuarial value of 50 
percent. An employer contribution to an HSA would raise the actuarial 
value, assuming this was allowed in the methodology.

II. Public Health Insurance Option

    There has been much debate about the merits of a public health 
insurance option to compete with private insurance plans. While the 
Committee has proposed options for a public plan for both individuals 
and small businesses through the Exchanges, the market dynamics of any 
public plan will likely extend to large employers outside the 
Exchanges.
    It is well known that private payers are subject to cost-shifting 
from hospitals and doctors to compensate for below-market 
reimbursements from Medicare and Medicaid. The Lewin Group estimates 
that Medicare reimburses hospitals 71 percent of private-plan payments; 
for doctors it is 81 percent.\6\ Structuring a public plan option with 
payments equal to or slightly greater than Medicare rates would only 
further exacerbate current cost-shifting. As private-plan costs 
continue to rise under this pressure, more employers will be squeezed 
out of the employer health care system as coverage becomes 
unaffordable. Over time, this cost-shifting cycle threatens to unravel 
the entire employer-based system.
---------------------------------------------------------------------------
    \6\ The Cost and Coverage Impacts of a Public Plan: Alternative 
Design Options, The Lewin Group, April 2009.
---------------------------------------------------------------------------
    In light of the risks associated with a public plan and the 
expected availability of competitive options through the Exchanges, we 
recommend the Committees remove the public plan as a feature of health 
care reform. Alternatives to the public plan, such as a trigger 
mechanism where a public plan is implemented only if targeted goals are 
not reached within 5 years (e.g., if sufficient competition does not 
exist in a market) may be appropriate if insurance reforms do not fully 
meet the needs of individuals in certain markets. Additionally, any 
public plan triggered by insufficient competition should be required to 
play by the same rules as commercial health insurance carriers. The 
Blue Dog Coalition provided a list of minimum conditions that we also 
support, especially the conditions of free market adherence and a level 
playing field with private plans.

III. Shared Responsibility

    Large employers have widely differing opinions on a proposed 
employer mandate to provide health insurance coverage. Almost all large 
employers already offer and subsidize comprehensive coverage, (either 
voluntarily or through collective bargaining agreements) for employees 
and their dependents. About half of the total cost of this coverage 
benefits spouses and children. Large employers tend to absorb a larger 
proportion of these costs--either because the spouse is not employed, 
the spouse's employer does not offer coverage, or the large employer's 
plans are more comprehensive. The 2008 Kaiser/HRET survey shows that 58 
percent of employees working for larger employers (those with 200 or 
more workers) enroll dependents, compared to 47 percent of employees 
working for smaller employers (those with less than 200 workers). 
Requiring all employers to provide health coverage would reduce some of 
the costs borne by large companies for dependent coverage, but a 
mandate on large employers--who are already offering coverage--seems 
unnecessary based on the near-universal voluntary participation in this 
market today.
    Further, requiring employers to extend health care benefits to 
part-time employees would have a severe impact on certain industries 
that are struggling to survive in the current economy. Employers 
compete for talent based on their work environments, compensation, 
benefits, career opportunities, and a host of other factors. The 
decision to offer health care benefits to a part-time workforce must 
rest with employers. Alternatively, it would be more appropriate to 
offer individuals who fall into this category access to coverage 
through the Exchanges, as well as subsidies based on their income if 
their employer chooses not to subsidize health insurance benefits.
    We recommend that the Committees remove the ``pay or play'' 
employer requirements in the current proposal and consider alternative 
mechanisms to ensure employers retain their current health care 
benefits. Under a ``pay or play'' scenario, every employer would have 
no choice but to carefully analyze its cost to provide coverage with 
the ``pay'' alternative--be it a dollar assessment or a percentage of 
payroll. We believe the result will be a bifurcation of the employer-
sponsored system. According to Hewitt's database, large employer health 
insurance costs are projected to be $8,863 per employee (including 
dependents) in 2009. However, there is a broad range around this 
average, with a low of $5,323 per employee to a high of $13,553 per 
employee. Those with costs above the level of assessment would consider 
eliminating their employer-sponsored plans, creating adverse selection 
against the plans in the Exchange and driving up costs for Exchange 
participants.
    The Massachusetts health care program is an example of a ``pay or 
play'' approach where most employers have chosen to ``play'' even 
though the assessment was relatively minor at $295 per employee. This 
was primarily because of the administrative complexity of removing 
Massachusetts employees from large employers' national programs. We 
believe the result of a national ``pay or play'' requirement would be 
dramatically different, as it would provide incentives for many 
employers to exit health care entirely if the ``pay'' alternative was 
sufficiently attractive.
    Due to the concerns outlined above and the potential unintended 
consequences of an employer mandate, we suggest strong consideration of 
an individual mandate but no employer mandate at this time.

IV. ERISA

    Multi-State employers have been able to build uniform benefits 
programs for all employees regardless of their work location by relying 
on the uniform Federal regulation offered under ERISA preemption. This 
allows employers to determine which programs are best for their unique 
workforce and offer the same programs on a uniform basis in all of the 
States where they do business. The Discussion Draft proposes subjecting 
ERISA group health plans to the potential for state insurance mandates 
if States are willing to contribute toward the costs of those mandates. 
At the same time, employers become subject to various State rights of 
action for not meeting the requirements of those mandates. We strongly 
urge the Committees to reconsider this provision. Weakening ERISA would 
create a grave risk that large employers would drop their benefits 
programs as they become overly burdensome and costly to administer.
    The Discussion Draft creates a three-tiered system of rights and 
remedies for employer compliance under Federal health care reform. This 
system creates three problems for employer group health plans:

      First, the availability of compensatory and punitive 
damages against an employer plan will, at best, encourage the payment 
of questionable claims to avoid the costs of litigation. At worst, it 
will provide an incentive for frivolous litigation. Either outcome will 
result in increased health care costs.
      Second, it is possible that State and Federal courts will 
issue conflicting decisions and develop differing bodies of law 
regarding similar coverage determinations made by employer group health 
plans, making it impossible to administer group health plans 
consistently across State lines and from employee to employee. Even for 
plans that do not participate in the Exchanges and are not subject to 
State law remedies, Federal courts may rely on decisions made in State 
courts to reach decisions regarding coverage determinations made by 
employer group health plans.
      Finally, the public plan option was designed to compete 
with the private sector on merit, not liability. Employer group health 
plans will be subject to compensatory and punitive damages that will 
not apply to the public plan option, which further tilts the playing 
field in favor of a public plan option.

Conclusion
    We applaud the proposals to improve access to affordable health 
insurance for individuals and small businesses. The creation of Health 
Insurance Exchanges with insurance market reforms and a viable and 
competitive insurance marketplace will go a long way toward achieving 
universal coverage.
    We strongly encourage the Committees to reconsider provisions that 
could draw individuals out of their employer plans and into the 
individual market or raise employers' costs to unsustainable levels. 
Inadvertently unwinding the employer-based system would increase, not 
decrease, overall health care costs, and the effect this would have on 
a fragile U.S. economy could ultimately turn the public against even 
the most positive reform efforts.
    We hope our observations, data, and suggestions are helpful to the 
Committees.

                                 
                   Letter from Jaci Mairs, R.N., J.D.
    I am a 55-year-old woman, a lawyer who became a registered nurse at 
midlife and now I am a student again working on a Masters of Nursing in 
Women's Health. Recently I applied for private health insurance with 
several companies. I consider myself to be healthy, but was very 
surprised when my applications were declined due to preexisting 
conditions. Luckily I have other options. However, many other women are 
not so fortunate and women in general do not receive adequate coverage 
by our current health care system.
    Women's health care needs are generally greater than men's, 
particularly during their reproductive years. However, in curious 
contrast to that, our current system makes it more difficult for women 
to obtain and afford the health care services they need.
    Our health care system is designed to rely heavily on employer-
provided health care insurance. This works well when the population is 
gainfully employed with large employers who provide insurance, and in 
positions which qualify for insurance. This does not work well overall 
for women as a gender. Employment statistics tend to overlook the rates 
of full-time employment versus part-time employment which frequently 
does not carry health care benefits. Only approximately 40% of all 
women are employed full-time, whereas more than half, approximately 60% 
of men are employed full-time. Additionally, many of those women are 
working full-time work in smaller companies which do not provide health 
insurance to their employees. The other 6 out of 10 women--those who 
are either employed part-time or not employed at all--have little 
access to employer-provided insurance on their own behalf. That 
majority of women must generally rely on private insurance, public 
programs, or insurance provided by a spouse (in some instances a 
significant other).
    To make matters worse, private insurance which is available for 
purchase is likewise biased against women. Many companies charge as 
much as 1\1/2\ times more in premiums for women during their 
reproductive years than for men. (H.R. 2635, currently pending in the 
U.S. House of Representatives, would rectify this disparity). 
Amazingly, the majority of insurance companies exclude coverage for 
childbearing, and many exclude pap smears and mammograms, major reasons 
women need health care coverage. Over 10 States permit insurance 
companies to exclude coverage for FDA-approved contraceptives. And, at 
least 9 States allow insurance companies to deny applications from 
victims of domestic violence (while numbers vary, women are the vast 
majority of victims of convicted domestic violence offenders).
    Finally, women overall make less in income than men and therefore 
cannot afford health care to the same extent. Women employed full-time 
make approximately 80% that of men working full-time. More working 
women work part-time, which is generally paid less than full-time work. 
And, women as a group work fewer hours than men. In a recent survey, 
more than 50% of all women reported delaying or avoiding health care 
services as opposed to 39% of men.
    I urge this Committee and our U.S. Congress to consider these very 
significant issues and work responsibly together to finalize and adopt 
legislation which would create a health care system that guarantees 
equal and adequate health care for all. Thank you for your 
consideration.

                                             Jaci Mairs, R.N., J.D.

    Jaci Mairs is a registered nurse working on the Perinatal Unit at 
Truman Medical Center, Hospital Hill, in Kansas City, Missouri, and is 
also a student at UMKC working on a Masters of Nursing in Women's 
Health. She is also a licensed attorney and formerly the Court 
Administrator and Legal Counsel for the Circuit Court of Jackson 
County, Missouri, for over 20 years. Opinions in this essay are solely 
those of the author and have not been reviewed or approved by any of 
the institutions mentioned above.
                    WOMEN AND THE HEALTH CARE DEBATE
  Women's health care needs are generally greater than men's, 
particularly during their reproductive years.
  Our current system makes it more difficult for women to 
obtain and afford the health care services they need.
  Our health care system is designed to rely heavily on 
employer-provided health care insurance.
  This does not work well overall for women as a gender.
  Approximately 40% of all women are employed full-time, 
whereas 60% of men are employed full-time.
  Many of those women employed full-time work in smaller 
companies which do not provide health insurance to their employees.
  The remaining 6 out of 10 women--those who are either 
employed part-time or not employed at all--have little access to 
employer-provided insurance on their own behalf.
  That majority of women (60%) must generally rely on private 
insurance, public programs, or insurance provided by a spouse (in some 
instances a significant other).

     Private insurance which is available for purchase is likewise 
biased against women.

  Many companies charge as much as 1\1/2\ times more in 
premiums for women during their reproductive years than for men. (H.R. 
2635, currently pending in the U.S. House of Representatives, would 
rectify this disparity).
  The majority of insurance companies exclude coverage for 
childbearing, and many exclude pap smears and mammograms, major reasons 
women need health care coverage.
  Over 10 States permit insurance companies to exclude coverage 
for FDA-approved contraceptives.
  At least 9 States allow insurance companies to deny 
applications from victims of domestic violence (while numbers vary, 
women are the vast majority of victims of convicted domestic violence 
offenders).

     Women overall make less in income than men and therefore cannot 
afford health care to the same extent.

  Women employed full-time make approximately 80% that of men 
working full-time.
  More working women work part-time, which is generally paid 
less than full-time work.
  Women as a group work fewer hours than men.
  In a recent survey, more than 50% of all women reported 
delaying or avoiding health care services as opposed to 39% of men.

                                 
                        Statement of Max Heirich
    The current emphasis within American health care on ever-more-
expensive disease care is not getting the job done: It costs too much, 
it leaves too many people out, and it leaves the health status of the 
American population far behind that of other industrialized countries. 
We need greater emphasis on health-building--keeping people healthy and 
helping people at risk for chronic disease improve their health. An 
effective health care system must deal with disease while also 
protecting people from environmental health risks (e.g., air pollution, 
second-hand smoke, toxic wastes, etc.) and it should help create a 
physical and social environment that encourages health-building. 
Wellness and prevention efforts address a full spectrum of human 
needs--physical safety and physical, mental, emotional, social and 
spiritual well-being.
    This paper addresses two questions: First, is there evidence that 
wellness and prevention programs actually improve health status and 
save costs? Second, what are critical areas where cost control is 
needed, and for each, could wellness and prevention projects strengthen 
person-centered care and provide noncoercive cost control while 
improving health outcomes? (An appendix lays out seven areas where cost 
control is needed and identifies prevention and wellness projects 
relevant to each problem area.)
    Obama's proposals for health care reform and bills from the House 
Tri-Committee and the Senate HELP Committee all include an enlarged 
budget for wellness and prevention efforts, as did the economic 
stimulus package. Advocates argue that programs to keep people healthy 
and to detect disease early will save money. However a recent report 
from the Congressional Budget Office (CBO) cautions that prevention and 
wellness proposals will not save money. Moreover, it suggests there is 
little evidence that prevention efforts actually change health status. 
Who is right?
    CBO is both right and wrong on this one: Much of what passes as 
``prevention''--e.g., pharmaceutically-based chronic disease 
management, screenings to identify people with serious health problems 
such as cancer and diabetes, etc., and preventive care given in 
doctors' offices (usually at $75 or more per visit)--is useful, but 
these services are NOT money-savers.
    For years people have tried to deliver ``preventive'' care in 
doctors' offices, providing vaccinations, disease screenings, and 
management of chronic illness via prescribing drugs (e.g. statins for 
cholesterol control). Ron Goetzel, a highly respected, costs-of-
prevention analyst, has argued that for cost-effectiveness you need 
care delivered by less expensive health personnel than MDs, programs 
that do not rely primarily on use of pharmaceuticals, and programs that 
intervene in new ways outside medical settings (which have their own 
built-in costs). Many current prevention efforts are delivered by 
doctors in medical offices, relying primarily on expensive diagnostic 
tests and then pharmaceutical interventions or surgery. They may save 
lives; they do not save money.
    More recently, people have tried to implement less-costly chronic 
disease management via phone or computer, but with limited ongoing 
success. Low-cost wellness programs have also been tried, featuring 
self-report surveys of personal health risks, followed up by 
educational materials and invitations to use a free phone service for 
more personal health counseling. The impact of these programs also has 
been limited. The CBO assessment is correct about these kinds of 
prevention efforts. Most do not save money and many have limited 
effectiveness. But these programs are not the whole wellness and 
prevention picture. Innovators have continued to develop new 
strategies. A growing body of evidence (perhaps not seen by CBO) points 
to promising demonstrations that both improve health and save money.
    The best evidence on the effectiveness of prevention programs comes 
from the worksite health promotion literature. This literature is also 
suggestive of the types of prevention programs that are likely to be 
most successful. These are programs that provide a socially supportive 
context for lifestyle changes, not simply medical interventions. 
Michael P. O'Donnell, the critically respected editor of the American 
Journal of Health Promotion, reports: (1) ``A systematic scientific 
review showed that the impact of lifestyle changes on all-cause 
mortality in coronary artery disease patients compares favorably with 
cardio-preventive drug therapies.'' (2) ``In a large clinical trial 
with a population at high risk for developing type 2 diabetes, 
lifestyle interventions achieved a 58% reduction in onset of diabetes. 
They were nearly twice as effective in preventing diabetes as 
pharmaceutical treatment with metformin (which achieved a 31% 
reduction).'' (3) ``A large-scale longitudinal study found that people 
with healthy lifestyles have greater longevity than the general 
population and end-of-life morbidity is compressed for them.'' [I.e., 
they have shorter hospital stays, with less expensive end-of-life 
care.] Looking more broadly, (4) ``Comprehensive scientific reviews 
identified 378 peer-reviewed studies showing that worksite health 
promotion programs improve health knowledge, health behaviors, and 
underlying health conditions.'' (5) ``The most definitive review of 
financial impact found that 18 [of 56] studies found that a program 
reduced medical costs, and 14 studies found they reduced absenteeism 
costs . . . 13 studies calculated benefit/cost ratios and all showed 
that savings from these programs are much greater than their cost, with 
medical cost savings averaging $3.48 and absenteeism savings averaging 
$5.82 per dollar invested in the programs. . . . A systematic review of 
60 scientifically valid studies showed that a comprehensive wellness 
program, on average, reduces health care expenditures by 26.5%.''
    The most effective prevention and wellness programs focus on health 
improvement through lifestyle change. These successful programs do two 
things: They reach out proactively, encouraging individual changes in 
health behavior, and they create and strengthen a supporting culture of 
wellness. Targeted populations improve their health status, lowering 
disease care use and thus saving money. More is needed to improve 
Americans' health than lifestyle change alone, however. The public also 
needs protection from environmental health risks (from air pollution, 
second-hand smoke and the like). Local public and private actions are 
needed to create and sustain a culture of wellness by providing social 
support for becoming and remaining physically active, managing daily 
stress, and improving nutrition.
    The 2009 economic stimulus bill included funds for pilot projects 
addressing health protection issues. Upcoming health care reform 
legislation can build on these demonstrations and improve access to 
primary disease care for currently underserved populations. I am 
convinced that health-building prevention and wellness programs that 
are evidence-based and cost-beneficial can become part of a realistic 
framework for achieving cost control, helping our health care industry 
evolve into a more effective health care system. (The appendix 
discusses seven areas where person-centered, noncoercive cost-control 
is needed, and proposes demonstration projects that could be relevant--
dealing in new ways with catastrophic-level health care costs, chronic 
diseases, mental health or trauma, acute care in hospitals, the need 
for neonatal intensive care and its costly aftermath among low-income 
mothers, the high cost of dying, and possible ways to simplify hospital 
administrative costs.)
    The House discussion-draft health care reform bill wisely calls for 
demonstration projects in primary care, prevention, and wellness as a 
first step. And it welcomes nurse-based primary care and prevention 
efforts, especially for those making services available to now-
underserved populations. The bill also has some omissions, which could 
be remedied simply. Here are some proposals for strengthening it:

    1.  Include projects using Integrated Medicine (which combines 
standard care and complementary and alternative medicine) for potential 
demonstrations-evaluations.

    2.  Enlarge Task Force mandates to include identification and 
evaluation of demonstration projects at worksites, and Integrated 
Medicine projects in hospitals and primary care (now under way) for 
outcomes, cost-benefit, and feasibility for wider use. (See appendix.)

    3.  Recruit effective leaders of these innovative projects to serve 
on Task Forces.

    4.  Assign coordination of innovation and assessment efforts 
undertaken by the Task Forces, NIH, AHRQ, and other governmental groups 
to the proposed new Assistant Secretary for Health and Human Services. 
That office would review assessment of outcome effectiveness, and cost-
benefit, identifying evidence-based best practices.

    5.  Give the new Assistant Secretary for Health and Human Services 
responsibility for developing reimbursement incentives that encourage 
use of evidence-based best practices. In addition, that office should 
identify cost-effective practitioners of high quality, who would 
receive full reimbursement for whatever treatment strategy best meets 
the needs of their individual patients. We want to create patient-
centered best practices, not one-size-fits-all care.

    Max Heirich, [email protected], professor and research scientist 
emeritus, U of Michigan, NIH research grantee, co-founder of UM Health 
Policy Forum, a consultant on prevention, wellness, cost-control and 
integrated medicine to GM, Ford, Merck, NIH and the White House 
Commission on Complementary and Alternative Medicine Policy.
                     GETTING PRACTICAL--AN APPENDIX
     Patient-Centered and Noncoercive Cost-Control in Health Care:
 Making Successful Approaches to Wellness, Prevention and Disease Care
                Relevant to American Health Care Reform

A. Seven Areas where Patient-
Centered, Noncoercive Cost Control is needed:

  1.  Patients with ``catastrophic costs'' for care

  2.  Chronic Disease Prevention and Management

  3.  Mental Health Services and Stress Management

  4.  Hospital Operating Expenses

  5.  Costs for Neonatal Intensive Care Use and Post Care for Infants 
of Low-income Mothers

  6.  The high cost of dying

  7.  Hospital Administration Costs

B.  Pilot projects building on promising demonstrations:

    1. Outreach to ``catastrophic-cost'' patients in a publicly-funded 
health care option: For an 8-year period during the 1980s, when health 
benefits costs were increasing at twice the rate of the general 
inflation, Federal Express discovered that the economist Pareto's 
prediction applied to their workforce, i.e., that 20% of any population 
will generate 80% of costs for service to it. Fed Ex hired Options and 
Choices, a benefits management vendor, to reach out proactively to 
employees they identified each year as their ``Pareto group.'' 
Specially trained nurses proactively reached out to them and remained 
in contact. The nurses helped these employees manage their disease more 
effectively, provided an impartial sounding board as patients thought 
through the advantages and disadvantages of various treatment options 
being recommended, and motivated these employees to work at actively 
improving their health, coaching and encouraging them as they attempted 
to do this. This program was well-received by employees. Result: 
Federal Express kept its health benefits budget increases equal to the 
general rate of inflation, during a period of time when health benefits 
costs elsewhere were increasing at twice that rate.
    We propose a pilot project targeting a subset of enrollees in a 
public health insurance plan (i.e., a sample of the 20% of enrollees 
whose care accounts for 80% of the costs of disease-care utilization). 
If this could be done with the Federal Express workforce, which is 
scattered across the country, a pilot project for those in a public 
health insurance plan should be feasible. Costs for proactive disease-
management/wellness outreach services to a ``Pareto group'' of highest 
cost users of disease-care services would range between $200-$400 per 
year per targeted high-cost user, depending on location and difficulty 
of contacting them. Savings could be substantial, and per capita costs 
for the pilot group could be compared with per capita costs of the 
``pareto'' catastrophic-cost group of enrollees in the same geographic 
areas who were not in the pilot study group.

    2. Reducing disease-care costs by keeping people healthy: A 
combined disease-management/wellness program that could be scaled up 
for much wider use with an entire workforce or a local community. 
Holtyn and Associates, a health and wellness program vendor, works with 
a wide range of industries, whose employees come from diverse 
ethnicities and educational levels of the workforce. They have worked 
extensively in Michigan and also across the Nation. Holtyn and 
Associates programs regularly get 75% to 80% or higher participation in 
health improvement efforts and achieve 50% or more reduction in health 
risks in these populations within 1 to 3 years. Client organizations 
have found sharply reduced costs for health benefits, in contrast to 
peer organizations in their community. Holtyn was the recipient of a 
CDC grant to develop community wellness programs, and CDC recently 
sponsored an assessment of another of the Holtyn programs; still other 
of their programs have won national awards. Currently, in cooperation 
with Blue Cross/Blue Shield, Holtyn and Associates have jointly 
developed a protocol to integrate disease-management with health 
promotion and wellness counseling at worksites. Holtyn's client 
organizations report cost savings from decreased hospital admission 
rates (currently by 11%) as employees improve their health. Holtyn is 
currently working with school system employees in several Michigan 
communities. As part of a systematic program evaluation by this client, 
in 2012 data from 12,000 participants will be analyzed by the client's 
health economists, using state-of-the-art assessment tools, analyzing 
changes in health status, disease-care utilization, and health benefits 
costs.
    Key ingredients of the Holtyn programs include proactive outreach 
for health risk assessments; triaged followup for personalized health-
improvement by counselors skilled in motivational interviewing; 
organization of activities that create a ``culture of wellness'' in a 
business, neighborhood, or other setting; use of the Internet as part 
of instruction with clients; and sponsorship of low-cost incentives 
(e.g., ``health lotteries'') which motivate participants to participate 
in ongoing efforts at health improvement in order to qualify for access 
to incentives. Feasibility for wider use: Holtyn's approach can 
incorporate a variety of health improvement goals for special 
population groups, and can be scaled up fairly quickly, with due 
attention to maintaining quality of the programs. Holtyn has worked 
closely with the Michigan Department of Community Health to design and 
implement a training and certification program for wellness vendors in 
Michigan. In this program, certified wellness vendors screened, 
counseled and provided education services to over 10,000 businesses and 
approximately 350,000 employees over a 12-year period. Personnel who 
developed and supervised this program are still working with the 
Michigan Department of Community Health. In larger demonstration/
evaluation projects, State health department employees could train and 
certify vendors and assess outcomes. If participants in the 
demonstration were part of the public health insurance plan, Federal 
evaluators could assess cost-savings, as well.

    3. De-medicalizing stress management for special-needs populations: 
Working with low-income populations, communities and others dealing 
with major traumas, including Post Traumatic Stress Disorder (PTSD), 
the Washington, DC Center for Mind-Body Medicine (Dr. James S. Gordon, 
psychiatrist, founder and director) has developed a comprehensive 
program for training health and mental health professionals, educators 
and community leaders in simple ways to deal with their own stress and 
psychological trauma and to provide effective programs of self care and 
mutual care for entire communities. In Kosovo, CMBM trained 600 
professionals in ways to deal with trauma and stress using such mind-
body techniques as relaxation, meditation, guided imagery, biofeedback, 
and yoga as well as self expression in words, drawings and movement in 
a supportive small group setting. This has become central to the entire 
community mental health system and now serves some 2 million people. 
CMBM has developed similar programs in Israel, Gaza and post-Katrina 
southern Louisiana.
    The Center initially provides training and support to leaders in 
relevant institutions--administrators, teachers, clinicians--and then 
works with them to bring the approach to troubled children and adults. 
CMBM reports that this model also has been effective and appropriate 
for use with children and adults who are significantly disadvantaged 
financially and who often are having difficulty holding a job or 
succeeding in school: That the techniques and approaches taught give 
many participants a sense of mastery where they have felt hopeless and 
powerless; that it allows them to have successful learning experiences 
which have usually been unavailable to them; and that it provides them 
with a supportive community which helps them to relieve their immediate 
stress, and to which they can turn in times of crisis.
    We propose one or several pilot programs implementing these 
techniques with different at-risk populations. One pilot program could 
work within the VA system targeting military personnel with multiple 
deployments. Another with long-term unemployed or victims of natural 
disasters who are enrolled in the public insurance program. Both types 
of programs would permit evaluation of improvements in health outcomes, 
improvements in broader social outcomes, and cost-effectiveness.

    4. Targeted use of Integrated Medicine in hospitals: Developing 
optimal healing environments can shorten hospital stays with improved 
outcomes for patients and staff. In the past 10 years hospitals have 
become much more interested in the practice of ``integrated medicine,'' 
which combines traditional scientific medicine with complementary and 
alternative medical approaches to healing. (``Healing is the process of 
recovery, repair, and return to wholeness, as contrasted with cure, the 
eradication of disease.''--Samueli Institute). By 2005, 26.5% of 
American hospitals reported that they were using some form of 
integrated medical practice. Some allow alternative practitioners to 
work directly with patients. Others form collaborative teams of 
medically-trained staff and alternative practitioners that work jointly 
with patients and their families. Other hospitals have introduced 
programs that encourage the self-conscious creation of healing 
intentions among the hospital staff, patients, and their families while 
still other hospitals restructure the hospital experience itself to 
optimize healing potential. The Samueli Institute has identified 
hospital Integrated Medicine practices that show promising results: 
e.g., a 56% reduction in risk-adjusted mortality among cardiac surgery 
patients in a hospital that has developed a collaborative teamwork 
approach; shortened length of stay, improved outcomes, as well as 
improved staff morale and lessened staff turnover in a hospital that 
uses mind/body programs to create a healing intention among staff, 
patients and family members; and similarly improved functional health 
outcomes where complementary and alternative practitioners join the 
treatment team. We recommend pilot projects to evaluate the feasibility 
of expanding hospital-based Integrated Medicine practices. Pilot 
projects should implement and evaluate two types of programs: (1) those 
in which alternative practitioners work cooperatively with traditional 
practitioners, and (2) those in which hospital employees are trained to 
use and integrate a variety of alternative techniques into the 
traditional hospital practice.

C.  Pilot projects to implement best practices in additional areas 
        where improved cost-control and health outcomes are needed:

    1. Expand participation in WIC programs to reduce need for neonatal 
intensive care and expensive post-care among infants born to low-income 
mothers: Several well-designed public health programs now provide 
psychosocial support, good nutrition, parenting education, and free 
prenatal medical care for young, low-income, first-time mothers. A 
variety of high-quality Women-Infant-Children (WIC) programs address 
these issues. Some show measurable impact on infant and child mortality 
among women who are enrolled in the program. All of these programs 
struggle to increase awareness and participation of at-risk pregnant 
young women. If more expectant mothers participated in these 
successful, existing programs, there would be significant reduction in 
health care costs and improved health outcomes. Use of intensive care 
facilities for low birth-weight babies would decline: as more low-
income mothers have good nutrition and prenatal care, their gestation 
periods are more likely to reach full term. This also would lessen the 
number of young children with developmental problems, and lower the 
costs for servicing their special needs. Task Force pilot projects 
could borrow strategies from the four examples given above, and other 
sources, to identify kinds of innovations that could increase 
participation in WIC programs and could encourage creation of 
demonstration projects that do this.
    For example, the Holtyn model might be introduced at a community 
level, including a featured health lottery, with the health lottery 
advertised widely on TV (as public service announcements and special 
reports). Filling out a health risk appraisal would be step one of a 
two-step process to qualify for participation in the lottery; the 
second step, which could be scheduled immediately, would involve (free) 
biometric measurements of your health status, with a brief, 
personalized health counseling session as it ends, and request for 
permission to stay in touch, assessing the best ways to do so. The 
health risk appraisal could be available in public libraries, at the 
public health department or other service centers where staff can help 
people with low literacy levels answer the questions. (The health risk 
appraisal would include two questions for women: ``When did you have 
your last monthly period?'' and ``Are you pregnant?'' to flag women who 
might be appropriate candidates for WIC referral as part of followup 
counseling.)

    2. De-medicalize end-of-life care costs:

    a. Demonstration projects with geriatric patients and their 
families: Helping clinics and staff develop skills and protocols that 
encourage patients and their families to assess what is most important 
to them in maintaining quality of life through its end. These programs 
would include introduction to living wills, the availability of 
hospice, and strategies for decisionmaking that are appropriate to the 
patient's and family's own values about what matters most to them as 
the end of life approaches. Doing this as part of primary geriatric 
care could lessen later use of heroic interventions at great cost that 
delay end-of-life only shortly. Hospice use might increase earlier in 
the dying process.

    b. Demonstration projects with hospital staff who offer end-of-life 
care, strengthening communication skills and encouraging earlier 
discussion with patients and their families about quality-of-life 
choices available to them: A high proportion of Medicare costs are 
spent trying to delay a dying process which nonetheless occurs within a 
few days or months. Medical staff make heroic interventions at great 
cost in an effort to extend life. Often it is only when all 
interventions clearly have failed that staff help the patient and 
family address the question of how they would like to spend the 
remaining time that the patient will have to live. Hospice programs are 
widely available and are chosen by many patients at the very end. But 
the kind of communication that helps patients and families look clearly 
at a dying process that already is underway and that encourages them to 
decide how they want to use their remaining time often occurs only 
after heroic interventions that will simply delay a dying process a bit 
have been exhausted and failed. Demonstration projects could be 
encouraged, developed, and evaluated that help staff communicate with 
end-of-life patients (and their families), to explore what is likely to 
lie ahead and encourage them to make their own choices about how to 
balance quantity and quality of time that remains and how to approach 
the healing aspects of dying as well as living. The Samueli Foundation 
has identified projects in integrated medicine already in use at some 
hospitals which help staff and patients deepen their own approach to 
healing intentions in other contexts. Task Force Demonstration projects 
dealing with improving quality at the end of life should be evaluated 
for their effectiveness in providing help and satisfaction to patients 
and families and for their impact on use of costly, heroic end-of-life 
interventions. The proposed new Assistant Secretary for HHS should 
encourage wider use of those approaches which prove to be most useful. 
This might well reduce end-of-life medical expenditures while improving 
the quality of life for many dying patients.

    3. Simplifying hospital administration costs: Single-payer plans 
now used in some other countries have strikingly lower costs for 
hospital administration because they use hospital budgets that 
reimburse on an annual basis, rather than for individual care episodes. 
In several countries that have multiple payers for disease care, 
hospital budgets are set annually through negotiations between 
hospitals, physicians, and the set of insurers who pay for their 
services. Annual budgets can be adjusted for individual hospitals, 
depending on types of services provided, whether it is a teaching 
hospital, the population mix it serves, and other relevant factors. The 
various payers then divide these costs among themselves, based on their 
share of the patient load, adjusted for demographics and health-risk 
differences in their client base.
    In the United States, hospital costs now make up 30% of total 
health care spending (over $600 billion annually), and hospital 
administrative costs make up 20% to 30% of the hospital costs, varying 
from hospital to hospital. In contrast, in Canada, which has hospital 
facilities similar to those in the United States, but which uses annual 
budget hospital reimbursement, administrative costs for hospitals 
average 9 to 11% annually. (Canadians seem to be generally pleased with 
their hospitals: In 2002, Michigan, New York, and Washington hospitals 
treated only 154 Canadians who came to border-area U.S. hospitals for 
elective care. Among ``America's Best Hospitals'' only one reported 
treating more than 60 Canadians a year. In a survey of 18,000 
Canadians, only 20 had gone to the United States seeking care in the 
past year.)
    Dramatic cost savings could result from such an innovation. 
However, I think this major a change in reimbursement procedure should 
be tried in a few States before recommending its use or nonuse more 
widely throughout the American health care system. Congress could ask 
the Assistant Secretary for HHS (proposed in the House health care 
reform bill discussion draft) to encourage a few States to serve as a 
pilot demonstration testing the feasibility of creating annual budgets 
for hospitals through negotiations between all the relevant payers and 
the relevant care providers, and the HHS office could assist in 
evaluating the impact of reimbursement through annual budgets on 
hospital administrative costs and total expenditures for hospital care.

    Max Heirich, professor and research scientist emeritus, U of 
Michigan, NIH research grantee, co-founder of the UM Health Policy 
Forum, author and past consultant on prevention, wellness, cost-control 
and integrated medicine to Ford, GM, Merck, NIH, and the White House 
Commission on Complementary and Alternative Medicine Policy, and author 
of Rethinking Health Care: Innovation and change in America (Westview 
Press).

                                 
  Medicaid and Medicare Advantage Programs Association of Puerto Rico
Mr. Chairman and Members of the Ways and Means Committee:

    Thank you for the opportunity to provide our comments on the Tri-
Committee Draft Proposal for Health Care Reform.
    We write as members of the Medicaid and Medicare Advantage Programs 
Association of Puerto Rico (MMAPA). MMAPA is comprised of the five 
largest Medicare Advantage (MA) plans in Puerto Rico: Triple-S Salud 
(SSS), MCS (Medical Card Systems, Inc.), MMM (Medicare y Mucho Mazs), 
American Health Medicare, Humana Puerto Rico. Together we account for 
88.5% of MA enrollees in Puerto Rico.
    Puerto Rico relies far more on MA to serve the health care needs of 
its seniors than does the United States. Almost 70% of the Medicare 
beneficiaries in Puerto Rico participate in MA, compared to 25% in the 
States. The population in Puerto Rico is needier, in terms of both 
economics and health. Per capita income in Puerto Rico is $13,468, half 
the per capita income of the poorest State, Mississippi, with a per 
capita income of $27,702. The Special Needs Plans (SNPs) for dual 
eligibles in Puerto Rico have an enrollment more than four times 
greater than the national average (52% vs. 12%). Approximately 88% of 
women and nearly 79% of men 60 years and older in Puerto Rico suffer 
from at least one chronic illness, and more than 50% of Medicare 
beneficiaries have four or more chronic health conditions. The 
prevalence of diabetes among Medicare beneficiaries is more than 50% 
higher than the national average, and the prevalence of congestive 
heart failure twice the national average. These facts, and others we 
will cite, make the sustainability of MA in Puerto Rico of great 
importance.
    MMAPA fully supports the goals of health care reform that you, your 
colleagues in Congress, and the President are pursuing. We are 
particularly enthusiastic about the goal of making the delivery system 
more effective and efficient, particularly improving access and 
quality, and about many of the policies you propose to reform the 
system to this end.
    Indeed, we believe that we serve as proof that these reforms will 
work. The MA program in Puerto Rico has provided an opportunity to put 
to the test the development of efficient coordinated care plans to 
serve a population that is very poor and with significant health care 
needs. Early results of satisfaction surveys and HEDIS indicators 
reflect that the programs developed by plans are promoting high quality 
health care and the provision of preventive and wellness services.
    MA plans in Puerto Rico provide the following benefits, not 
available through traditional Fee for Service (FFS) in Puerto Rico:

    1.  Enhanced access to physicians and hospitals with waiver of 
deductible and coinsurance.
    2.  Access to a pharmacy benefit. (The MA program is largely 
responsible for the access of Medicare beneficiaries to Part D benefits 
due to the socio-economic status of the beneficiaries in Puerto Rico.)
    3.  Dental, Vision and Hearing benefits not covered by FFS 
Medicare.
    4.  Focus on primary care-based networks and clinical management.
    5.  Preventive exams not previously covered by FFS Medicare.
    6.  A real effort to provide beneficiary orientation about 
prevention and health education, including the management of chronic 
diseases.

    We have made significant progress toward another of your goals: 
monitoring and reducing waste, fraud, and abuse. MA plans in Puerto 
Rico have developed administrative programs that have created 
monitoring tools and processes that the Medicare FFS program does not 
have, and probably will not be able to develop in the near future. Many 
recommendations for improving the Medicare FFS program today are 
related to establishing such administrative programs with providers. 
One important example is the provision of DME services, where in the 
past traditional FFS Medicare has encountered critical problems of 
fraud and abuse.
    Between 2004 and 2008 we have made demonstrable improvements in 
health care delivery and health status for our enrollees. Some examples 
are: colorectal cancer screenings have increased by 70%; breast cancer 
screenings by 26%. Hypertension control has increased 24%. Our flu 
vaccination programs have reduced flu hospitalizations by 60% and flu-
related deaths by 80%.
    It is in this context of great need, and significant improvements 
in the health status of Puerto Rico's Medicare population through MA 
plans, that we say to you that we are deeply concerned about your 
proposal to reduce MA rates to 100% of FFS costs. We believe that this 
policy is likely to have negative consequences in many areas of the 
United States. We know it will have negative consequences in Puerto 
Rico.
    Today, Medicare premiums account for approximately 50% of the total 
health insurance market in Puerto Rico. A policy change that 
significantly reduces MA funding will affect the entire health care 
system of the Island. The proposed reduction is equivalent to a 
reduction of approximately 10.3% of the total estimated health care 
expenditures for Puerto Rico in 2009, compared to the impact of 0.5% 
that the change represents at a national level.
    The impact of this policy on the MA plans in Puerto Rico is 
potentially devastating, due in large part to the fact that the FFS 
cost calculation for Puerto Rico is seriously flawed and results in a 
FFS cost figure that is inaccurately and substantially too low. In its 
June Report to the Congress, the Medicare Payment Advisory Commission 
(MedPAC) alerts the Congress to possible inaccuracies in the Adjusted 
Average Per Capita Cost (AAPCC) calculations, the Part A estimates, and 
the risk scores for Puerto Rico. They identify the major source of 
these inaccuracies as the fact that only 30% of FFS Medicare 
beneficiaries in Puerto Rico have Part B coverage (compared with a 
national average of 97%). We believe that there are several other 
sources as well, including discounted Part A payments, the absence of 
the 
SSI program in Puerto Rico, and the absence of the Low Income Subsidy 
(LIS) for Part D on the Island.
    Under the current calculation, Puerto Rico's FFS cost is so much 
lower than the average FFS cost for the Nation as to strain credulity. 
The MA rate for Puerto Rico is already 88% of the national average 100% 
FFS cost.
    We urgently request that you act on MedPAC's suggested solution to 
the anomalously and inaccurately low FFS cost calculation by affirming 
that the Secretary of Health and Human Services has the authority to 
establish a calculation that addresses the special circumstances 
mentioned in the MedPAC report and others. This would be good policy in 
any case, but certainly if you propose to reduce Puerto Rico's MA rates 
to 100% of local FFS, the FFS calculation and resulting cost figure 
should be accurate. If necessary, after the effective date for this 
policy, until the problems in the calculation have been addressed and 
resolved, we request that Puerto Rico's MA rate be based on 100% of the 
national average FFS cost.
    The MA program in Puerto Rico is producing positive health care 
outcomes for the almost 70% of Medicare beneficiaries enrolled in MA 
plans. The MA program is allowing for more adequate provider 
reimbursement, network administration, and the development of clinical 
management programs. We are implementing your objectives of enhancing 
preventive care, and coordination and efficiency of all care. A 
reduction in rates such as you propose would seriously impair our 
ability to provide these important services and results. We hope that 
you will help preserve our ability to continue our work on the Island.
    We stand ready to provide you with any additional information or 
assistance you might require. We look forward to working with you to 
achieve health care reform that will ensure the availability of 
affordable, effective, and high quality health care for all our 
citizens.

            Sincerely,

                                                              MMAPA

                                 
    Statement of the Medical Banking Project, Legislative Committee

I. BANKS ARE IMPROVING COST, QUALITY AND ACCESS TO HEALTH CARE, TOO!

    EMBEDDED WITHIN THE FABRIC OF A $2.5 TRILLION HEALTH CARE SYSTEM IS 
THE BANKING AND FINANCIAL SERVICES COMMUNITY. This network of 
organizations process these health care dollars using the most 
efficient payment system in the world, settling billions of dollars 
every minute for millions of patients and health care groups who value 
and demand confidentiality, privacy, speed and efficiency.
    This national resource, which could be deployed to solve numerous 
systemic inefficiencies throughout the health care claim and payment 
process, moves massive volumes of funds and data in between all the 
health care stakeholders--providers, payers, employers, consumers and 
others--both within America and around the world. Yet in our dialog to 
move health care into a more electronic environment in America, banks 
and financial services firms are often sitting outside of the 
discussion. Why is that?
    Many people equate the banking health care contribution to HSAs 
alone, yet the reality is that banks currently invest in health care IT 
so they can move mountains of paper out of the health care system. This 
conversion to electronic processing allows important data to be 
available much more quickly to the health care providers and 
subsequently to consumers. This important function that banks perform 
today for the health care industry bears repeating: Our banking system 
does not only move money, but it also moves data between all the health 
care stakeholders.

II. SUPPORTING GREEN TECHNOLOGY AND CONVERTING NEW VALUE TO CHARITY 
CARE

    A missing ingredient in the national dialog to improve our health 
care system is how banks can harness and enhance highly secure, 
existing technology to ramp health care onto the digital platform of 
the 21st century. Leveraging proven and secure banking systems, we can 
dramatically reduce the costly paper chase in health care, saving at 
least $35 billion annually in waste,\1\ and, those annual savings can 
be used to supplement the cost of treating the uninsured.\2\ In 
addition, by moving health care into a real time platform we can save 
billions of dollars in administrative inefficiency and help to make 
critical information available instantly.\3\ Use of this technology not 
only supports a powerful Green Technology platform for America but it 
delivers exceptional public value as well by giving providers cost 
savings to apply to uninsured families and the expansion of health care 
delivery.
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    \1\ MBProject Research Report, 2001. The report calculates that the 
aggregate annual savings of implementing one model in medical banking 
(the specialized lockbox) is $35 billion. The data are based on the 
cost to process a payment electronically versus via paper. An earlier 
study was done in 1994 by the Bankers EDI Council that determined the 
savings to be $11 per remittance. This level of savings confirms the 
MBProject study.
    \2\ MBProject asserts that operationalized savings among providers 
will supplement uncompensated/charity services. In 2005, PNC Bank 
commissioned an independent survey to study the effect of better 
administrative practices using banks. The target group was 135 national 
health care providers and health care plans (approximately 35 were 
plans). The respondents indicated they would save between $1 million 
and $10 million annually using a medical banking platform. Sixty-seven 
percent indicated they would use the savings for funding indigent and/
or charity care.
    \3\ Institute of Medicine, To Err Is Human, 1999. Adverse drug 
events that result in death of the patient could be mitigated using 
current electronic health care records.

III. DELIVERING HEALTH CARE RECORDS AND HEALTH CARE INFORMATION FOR THE 
---------------------------------------------------------------------------
MASSES

    Today, online banking is one of the most trusted and well used 
portals, with over 55 million American households currently online. 
Americans use online banking with confidence everyday, because banks 
use some of the most sophisticated identity and access management 
engines outside of the defense industry. In addition to online banking, 
many employers lament that if their employees used their online health 
care portals more, they could learn how to live healthier lives. 
Linking online banking with lifestyle portals offered by employers 
could create a cultural shift that is clearly necessary for helping 
individuals learn about healthier lifestyle practices.
    This ``Health-Wealth'' portal of the future opens up enormous 
possibilities to fast forward eHealth for generations to come in 
America. Through secure online banking systems that we routinely use to 
access our money, online banking customers could access their personal 
health care records along with other online tools and information that 
foster better health. The integration of banking and health care is not 
just about HSAs, although that is a key program; it is also about how 
to engage the consumer to live a healthier lifestyle. Banks and 
financial institutions have spent much time and money designing easy-
to-use online systems and this base of knowledge can be used to support 
a major national drive to optimize community health care, a key goal of 
the Obama Administration.

IV. HOW IS THIS NEW FIELD OF ``MEDICAL BANKING'' BUILDING OUT?

    THE MEDICAL BANKING PROJECT has pioneered new thinking that links 
banking and health care infrastructure to dramatically impact cost, 
quality and access to health care. Supported by some 45 corporations, 
universities and government agencies (CMS, Veterans Healthcare 
Administration, Department of Defense, Centers for Disease Control) the 
Project spearheads industry initiatives that demonstrate the potential 
of medical banking. These include:
    The Gold Seal Program for instilling public trust in medical 
banking programs. The emphasis of this program is HIPAA privacy and 
security practices, as well as other critical data protection 
regulations.

      The Specialized Payment Platform for moving massive 
volumes of paper out of the system. This platform promotes real time 
payments at point of service, implements key processing standards and 
enables digital workflows.
      The Health-Wealth Portal for aggregating financial and 
health care resources into the online banking platform. The portal can 
offer single sign on advantages to the consumer as well as convenience 
for choosing and financing a person's health care.

    As President Obama noted in a major policy speech, fiscal success 
is predicated upon the health of a community. Healthier communities are 
more productive and dynamic, thus banks have an interest in supporting 
the health care of the communities they serve. Along with serving their 
communities, banks offer the health care industry a large opportunity 
for cost savings and improved efficiencies, and therefore it makes 
perfect sense to align these two critical industry segments to improve 
American health care.
    We would like to offer our assistance to Members of Congress and 
others to help further understand how the banking community can 
contribute to the formation of solutions that solve the pressing health 
care policy issues that are currently being faced by our Nation.
                   MBProject Members In Good Standing
                         (as of June 30, 2009)
ACS EDI Gateway, Inc.
BancTec, Inc.
Benchmark Revenue Management, Inc.
Bank of New York Mellon Treasury Services
Canopy Financial
CareMedic Systems, Inc.
Centers for Disease Control and Prevention (CDC)
Centers for Medicare & Medicaid Services
Claimtrust, Inc.
Conmergence
Converge Capital
C Vision, Inc.
DestinationRx
DoD/Telemedicine and Advanced Technology Research Center [TATRC]
Donnell Systems (OCIE)
Edifecs, Inc.
HSA Bank
InstaMed
Internet Payment Exchange, Inc. (IPAYX)
MaxSurge Healthcare Solutions, Inc.
Medical Recovery Services, Inc.
Metavante Corporation
Milliman Inc.
U.S. Dept. Office of Civil Rights
PFPC
PNC Bank
PNC Financial Service Group
PricewaterhouseCoopers, LLP
RemitDATA, Inc.
Revenue Management Solutions, LLC
Sentry Data Systems
Starbourne Communications Design
Sun Microsystems
Systemware, Inc.
The SSI Group, Inc.
Thelma U.S.
TransUnion
TransEngen, Inc.
US Bank
Veterans Health Administration
Wachovia, A Wells Fargo Company
Walt Disney Company
WAUSAU Financial Systems

                                 
 Mark H. Ayers, National Coordinating Committee for Multiemployer Plans
Greetings:

    On behalf of the approximately 26 million American workers and 
families who depend on joint labor-management, multiemployer health and 
welfare trust funds for their medical and other health benefits, I am 
pleased to submit these comments on the recent House Tri-Committee 
Health Reform Discussion Draft to supplement the record of your 
Committee's June 24, 2009 hearing.
    Let me first congratulate you and the Ways and Means Committee as a 
whole, along with Chairman George Miller's Education and Labor 
Committee and Chairman Waxman's Energy and Commerce Committee, for 
taking on one of the most important challenges confronting our Nation: 
The need for a national health care system that provides universal 
access to affordable, quality health care, that responsibly controls 
costs, and that distributes costs fairly, without unnecessarily 
disrupting established employment-based health plans that are meeting 
their participants' needs. National, systemic reform has long been an 
aspiration. Hopefully it will soon become reality beginning with 
enactment of comprehensive legislation in this Congress.
    However, great care must be taken in crafting legislation to avoid 
harming our members' ``Taft-Hartley'' multiemployer health and welfare 
funds. These long-established collectively bargained funds are a large 
and essential part of the employment-based health plan system that 
national health reform is trying to preserve. As you know, even the 
best intended and carefully considered legislation can have unintended, 
counterproductive consequences.
    We have been heartened by President Obama's recent public 
statements that health reform should ensure that workers ``who already 
have health care aren't suddenly seeing their costs go up to pay for 
other peoples' costs going down'' and that reform should be designed so 
that ``everyone's costs can go down effectively.'' The President has 
often said that health reform should only fix what is broken in the 
health care system, not create solutions looking for a problem or that 
cause more problems than they fix.
    Nevertheless, we have grave concerns that provisions of the 
Discussion Draft, if enacted into law without changes, would have the 
opposite effect for our health and welfare funds and the millions of 
working families who depend on them. It appears that the Discussion 
Draft may result in substantially higher costs for our health and 
welfare funds and the covered workers; yet the ``small employers'' who 
compete against the responsible employers participating in our funds 
(over 90% of whom employ fewer than 20 workers and more than half who 
employ fewer than 10) would continue to escape any responsibility and 
continue to shift the costs of their employees' health care to our 
funds and workers. The effect of the Discussion Draft would be to 
discourage participation in our health and welfare funds by employers 
and individuals to the serious detriment of the covered workers and 
their families.

The Importance and Special Nature of Multiemployer Health and Welfare 
        Funds

    One of the proudest achievements of collective bargaining over the 
past 50 years is the thousands of labor-management, multiemployer 
health and welfare trust funds that provide to covered, union-
represented workers and their dependents various benefit coverages, 
including medical, hospitalization, preventive and wellness care, 
prescription drugs, dental care, and vision care. These trust funds are 
often referred to as ``Taft-Hartley funds'' because they are regulated 
by the Labor Management Relations (``Taft-Hartley'') Act of 1947, as 
well as by the Employee Retirement Income Security Act (``ERISA'') and 
the Internal Revenue Code (``Code'').
    These health and welfare trust funds cover workers in industries as 
diverse as airlines, building and construction, transportation, retail, 
food, clothing, textiles, service, mining, entertainment, hotel and 
restaurant, maritime, longshore, and manufacturing. But for these trust 
funds, millions more working families would be uninsured and at risk 
for financial ruin in the event of a serious illness. The transient, 
project-based, mobile and seasonal employment patterns that 
characterize many of these industries would prevent workers from 
obtaining health coverage absent a central, pooled fund through which 
portable coverage is provided to workers as they move from employer to 
employer.
    Multiemployer funds solve the problem of real portability as 
workers change jobs; they don't have to ``take their coverage with 
them'' because they remain in the same health and welfare fund as long 
as they are employed by contributing employers. Further, many funds 
have reciprocal agreements so that coverage can be continued even for 
employment with an employer obligated to contribute to another fund. 
Without the unifying arrangement provided by a Taft-Hartley fund, 
frequent changes in employment would make coverage by any one employer 
infeasible, and most are small so that employers would not maintain an 
employee health plan on their own, especially for transient workers.
    In assessing the impact of any health reform proposal on Taft-
Hartley, multiemployer health and welfare funds and their participants, 
one must be mindful of the special characteristics of, and challenges 
faced by, these funds, including the following.

    Collectively-Bargained Trust Funds: A Taft-Hartley, multiemployer 
health and welfare fund is established and maintained through 
collective bargaining between one or more labor unions and more than 
one employer. As a matter of Federal law, a fund must be structured as 
a trust that is a separate legal entity, distinct from its sponsoring 
union(s) and contributing employers. The fund must be governed by a 
joint board of trustees on which labor and management are equally 
represented. Generally, the labor trustees are elected union officials 
and the management trustees are representatives of contributing 
employers. But, in performing their fund-related duties, the trustees 
have a fiduciary responsibility solely to the fund and its participants 
and beneficiaries, and not to the contributing employers or sponsoring 
union(s).

    Plan Design: Among the board of trustees' responsibilities is 
structuring the fund, engaging appropriate service providers, and 
designing the plan of benefits to be provided by the fund to covered 
workers and dependents (``participants and beneficiaries''). The 
trustees, of course, rely on professional assistance in performing 
these duties.
    In designing the benefit plan, the trustees take into consideration 
the fund's available and projected financial resources as well as the 
needs and wants of the participants and beneficiaries, among other 
relevant facts and circumstances. This balancing of interests requires 
a lot of innovation and flexibility to maximize value and adjust to 
changing circumstances, including the ability to adjust benefits to 
affordable levels and modify eligibility rules.
    Because a Taft-Hartley, multiemployer health and welfare fund is a 
legal entity unto itself, the fund's administration is wholly separate 
and distinct from any individual employer's operations or human 
resources functions. For example, a fund has no involvement in a 
contributing employer's payroll operations including income tax 
withholding or payroll tax payments. The cost of fund administration is 
paid entirely from the fund's assets by the trustees, not by any 
contributing employer.

    Funding: A Taft-Hartley, multiemployer health and welfare fund is 
financed by collectively bargained employer contributions and 
investment of its pooled reserves. Financing methods can vary from 
industry to industry according to employment patterns, cash flow, and 
financial structures in an industry. In many industries, like building 
and construction, contributions are required at a set rate for each 
hour worked in employment covered by the collective bargaining 
agreement and submitted to the fund monthly. While there are industry-
based variations (some assess contributions based on days, weeks or 
shifts worked rather than hours, for example) contributions are almost 
always based on the activity levels of each employer's covered 
workforce. The contribution rate is generally set in the collective 
bargaining agreement for the term of the agreement (sometimes allowing 
for re-openers in special situations).
    Even though contributions are calculated based on each 
participant's work, the contributions made for any particular 
participant may bear no correlation whatsoever to the actual cost of 
that participant's or his family's coverage by the fund. Taft-Hartley 
funds create multiemployer pools over which costs are spread without a 
determination as to the cost of each contributing employer's employee 
group. That aggregate cost (plus the costs of fund administration, 
reasonable reserves, and coverage for nonworking participants) must be 
covered by total employer contributions based on the participants' 
covered employment. Typically no distinction is made between employers 
based on the differing demographics of their respective workforces.
    Typically, in the bargaining process between the union(s) and 
employers, the health and welfare fund contribution rate is just one of 
multiple ``money issues.'' In essence, once a total amount of 
compensation per hour is negotiated, that sum has to be allocated among 
wages, health and welfare fund contributions, pension fund 
contributions, and other employee benefits. The reality, not just 
economic theory, is that workers trade off wages for health and welfare 
fund contributions, recognizing that they and their families need the 
coverage. That is, the workers collectively pay for their own health 
and welfare coverage, although the law treats the contributions as 
employer contributions. Very few, if any, workers want to give up take 
home pay for more health coverage than they need. This process makes 
workers very sensitive to the cost of their and their families' health 
care.

    Eligibility Rules: Health and welfare funds necessarily have 
eligibility rules for determining whether a worker and/or dependent is 
eligible for benefits during any given period of time. Funds have 
developed various industry-specific systems for maximizing coverage, 
taking account of the employment patterns of the industry and the 
funds' financing needs. Typically, these systems feature eligibility 
periods during which a worker's covered employment with any 
contributing employer builds credit toward eligibility in a future 
period (e.g. covered employment in the first calendar quarter earns the 
worker benefit eligibility for claims incurred in the second quarter). 
Since eligibility is based on the level of covered work in a prior 
period, sometimes individuals are not actually working in covered 
employment during their period of coverage. This pattern of 
establishing eligibility after the necessary contributions are received 
by the fund is essential to the structure of Taft-Hartley funds.
    It is common for covered employment to fluctuate and for workers to 
have temporary periods of underemployment or unemployment in the normal 
course of an industry's employment pattern. When no or insufficient 
covered employment with a contributing employer is available for a 
worker, he and his family may lose eligibility under the fund unless 
the fund provides means for bridging gaps in employment. Many funds, 
particularly in the building and construction industry, maintain 
``hours bank'' arrangements under which some of a worker's hours of 
covered employment are ``banked'' and used to pay for benefit 
eligibility during periods of unemployment.
    Some funds allow workers to self-contribute to make up a shortage 
in hours of covered employment during an eligibility period. And, of 
course, the health and welfare funds also offer self-paid COBRA 
continuation coverage for participants and beneficiaries who lose 
eligibility.
    During times of high unemployment, like now, the funds face a major 
challenge to maintain unemployed workers' and dependents' eligibility 
without current employer contributions to finance the coverage. And too 
often the worker exhausts a fund's system for bridging gaps in 
employment before finding new covered employment. When that happens, a 
fund's trustees may try to address the situation by modifying the 
continuation of coverage rules; but that is only possible if the fund 
has accumulated and maintained sufficient reserves of assets.

    ERISA Preemption: There are thousands of Taft-Hartley, 
multiemployer health and welfare funds in the United States. Many of 
them are multi-State in coverage; that is, they cover workers employed 
in two or more States. This is largely attributable to mobile work 
patterns, expanding union geographical jurisdictions, and changes in 
collective bargaining structures. Some funds provide regional coverage, 
others provide national coverage. The geographical scope of health and 
welfare funds is expected to increase over time as funds merge to 
increase their purchasing power and contain costs.
    Multi-State coverage by health and welfare funds would not be 
feasible without the uniform, Federal regulatory scheme provided by 
ERISA and related laws and, in particular, the protection provided by 
ERISA preemption against multiple, conflicting and costly State laws. 
As Congress wisely determined in enacting ERISA, dual Federal and State 
regulation of even intra-State funds would be counterproductive.
    Most Taft-Hartley health and welfare funds are fully or partially 
self-funded. That is, benefits are paid by the fund from its pooled 
assets, rather than by an insurance company. Many of these funds 
carry``stop loss'' insurance to spread the risk of catastrophic claims.
    On the other hand, some funds still purchase insurance policies for 
all or some of the benefits. The fund negotiates and pays the group 
premiums to the insurance company for the eligible participants and 
beneficiaries, and the benefits are paid from the insurance company's 
assets.
    The proliferation of burdensome State mandated benefit laws, as 
well as insurers' need for profit and other insurance related costs, 
drove many funds from the group insurance market and into self-funding. 
State laws became a problem for insured funds once the U.S. Supreme 
Court misinterpreted ERISA's preemption provisions as allowing States 
to regulate the content of insurance contracts including contracts with 
ERISA-regulated health plans.

    Administration: Some Taft-Hartley, multiemployer health and welfare 
funds, particularly larger funds, are self-administered; that is, they 
employ an in-house staff to perform all of the administrative functions 
such as collecting contributions, determining eligibility, processing 
and paying benefit claims, handling appeals, recordkeeping, and 
reporting and disclosure. But, many contract with third-party 
administration companies, or have ``administrative services only'' 
contracts with insurance companies, for all or some of the fund's 
administrative functions. Many also contract with insurers or other 
organizations that maintain provider networks or group purchasing 
arrangements.
    Importantly, all of a health and welfare fund's administrative 
costs are paid from the fund's pool of assets; the same pool from which 
benefits are paid. In other words, a dollar paid in administrative 
costs (including regulatory compliance) is one less dollar available 
for paying benefits.

    Retirees: Taft-Hartley, multiemployer health and welfare funds 
commonly provide coverage to retirees, particularly for pre-Medicare 
retirees, although many also provide supplemental coverage for Medicare 
eligibles. Retirees self-contribute to the funds for a portion of this 
coverage normally, but their cost is often subsidized by the 
contributions made for active workers; that is, the retirees contribute 
less than the actual cost of their coverage.
    Retiree coverage is becoming rare in nonunionized private sector 
employment, and many workers are compelled to remain actively employed 
just for health insurance coverage. However, many Taft-Hartley health 
and welfare funds cover workers in industries, like building and 
construction, who engage in physically demanding labor and become 
unable to continue working in covered employment before the age of 
Medicare eligibility. Pre-Medicare retiree health coverage is very 
important to these workers. But, subsidized retiree coverage is also 
expensive for the funds and active workers; a higher collectively 
bargained contribution rate for active workers' covered employment is 
needed to support the retiree coverage.

    Unfair Competition and Cost-Shifting: Taft-Hartley, multiemployer 
health and welfare funds are especially harmed by unfair cost-shifting. 
First, the funds are charged higher prices by providers or otherwise 
forced to subsidize the uncompensated medical care provided to 
uninsured workers and their dependents by hospitals and other 
providers. Second, a fund's contributing employers are commonly 
competing against nonunion employers that do not maintain employee 
health plans and whose employees are uninsured. These irresponsible, 
nonunion employers have an unfair cost advantage over union employers 
that contribute for their employees to the health and welfare funds. 
This unfair competition by nonunion employers results in a loss of the 
covered, union employment that generates contribution income for the 
health and welfare funds and benefit eligibility for the workers and 
their families. This unfairness is exacerbated by the fact that the 
uninsured, nonunion workers and dependents receive uncompensated 
medical care, the cost of which is shifted to employee health plans 
including health and welfare funds.
    Faced with persistent, systemic health care cost inflation over the 
past 20 years, Taft-Hartley, multiemployer health and welfare funds 
have endeavored to develop innovative means for cost containment 
including preferred provider arrangements, promoting preventive care 
and wellness, engaging in disease management, and forming group 
purchasing coalitions to maximize bargaining power.
    These serious efforts have made a difference. But, they have not 
been enough to contain costs sufficiently because most of the causes of 
inflation in health care costs are beyond the funds' control, like 
unfair cost shifting by irresponsible employers and by government 
programs. As a result, health and welfare funds have been compelled to 
press the collective bargaining parties--actually, the active workers--
to shift more wages into health and welfare contributions.
    The fact is that national, systemic reform legislation is needed to 
deal with unsustainable health care cost inflation. And, true universal 
health insurance coverage is an essential element of that reform.

Discussion Draft and Multiemployer Health and Welfare Funds

    Costly New Mandates and Restrictions: Application of the benefit 
and regulatory mandates of Title I to a multiemployer health and 
welfare fund (a group health plan that is a multiemployer plan under 
section 3(37) of ERISA), especially to a self-funded health and welfare 
fund, would substantially increase the costs of the fund's benefits and 
administration. Higher costs to the funds for benefits, administration, 
and legal compliance necessarily translate into a greater portion of 
the workers' pay package being dedicated to health and welfare fund 
contributions and less in cash wages. There is no other source of 
revenue to offset higher health plan costs than the workers' pay, as 
explained above.
    The health and welfare funds are not insurance companies motivated 
by profit; to the contrary, the funds are nonprofit, tax-exempt trusts. 
The funds are not single employer health plans whose terms and 
conditions are unilaterally set by company executives and that can draw 
on the company's treasury whenever they need money. To the contrary, 
our health and welfare funds are pools of workers' money governed by a 
joint labor-management board of trustees who are legally required to 
operate the fund for the sole and exclusive benefit of the participants 
and beneficiaries.
    Participation by an employer in a health and welfare fund, and its 
compliance with its collectively bargained contribution obligations to 
the fund, must be deemed to satisfy any employer responsibility (``play 
or pay'') requirement. And, coverage by a health and welfare fund by a 
participant or beneficiary must be deemed to satisfy any individual 
responsibility mandate.
    Some multiemployer health and welfare funds might eventually wish 
to purchase coverage for their participants and beneficiaries through 
the Health Exchange. They should be permitted to do so, once the 
Exchange is opened to large employers. And, if any fund does so, it 
will thereby choose to assume the costs, mandates and responsibilities 
associated with Exchange participation.

    Health Choices Commissioner: The Discussion Draft would create an 
expansive new regulatory regime and Federal agencies (e.g. Health 
Choices Commissioner) on top of the existing, complex regulatory regime 
of ERISA, multiplying the regulatory and administrative costs that a 
health and welfare fund's participants and beneficiaries would have to 
bear. The Commissioner, in particular, would be granted very broad, 
discretionary power to regulate the benefit programs and operations of 
the funds, and impose unlimited additional obligations and costs.

    Opting-Out of Funds: Multiemployer health and welfare funds are 
very concerned about any legislation that would entitle individual 
participants to opt-out of fund coverage so they can buy coverage 
through a Health Exchange. We are absolutely opposed to such an opt-out 
if the participant's exercise of such a right could be construed under 
the law as relieving an employer of its collectively bargained 
obligation to contribute to the health and welfare fund or as requiring 
the employer to make a payment to the Health Exchange or government 
agency in addition to paying contributions to the health and welfare 
fund.
    Such leakage would undermine the financial foundation of health and 
welfare funds, and the fundamental labor law concepts of exclusive 
bargaining representation and mandatory subjects of bargaining. 
Younger, healthier, unmarried workers would be incentivized by the 
legislation to opt-out of their health and welfare funds and buy 
cheaper coverage through the Health Exchange. The pool of higher risk 
covered lives left in the funds would be costlier to cover, of course.
    This draining effect would be exacerbated if individual workers 
would receive government subsidies to buy coverage through the Health 
Exchange.
    As noted above, multiemployer health and welfare funds are 
creatures of collective bargaining. The workers as a group, through 
their union as the exclusive bargaining representative, negotiate a 
collective bargaining agreement that requires the employer(s) to 
contribute to the health and welfare fund for the work performed by all 
employees covered by the agreement. An individual employee is not 
permitted to exempt himself from the collective agreement, cut his own 
deal with the employer, and relieve the employer of its obligation to 
contribute to the fund for the work performed by the employee.
    Moreover, any requirement that the opt-out individual's employer 
pay an assessment to the Health Exchange or other entity, in addition 
to complying with the employer's obligation to contribute to the health 
and welfare fund would incentivize employers to bargain out of the 
fund.

    Employer Responsibility--``Small Employer'' Exemption: We strongly 
support enactment of Federal legislation that would require all 
employers to contribute significantly to the cost of providing health 
care coverage for their workers and the workers' families. As noted 
above, the cost of health care for the workers of irresponsible 
employers and their dependents is being shifted to health and welfare 
funds and their participants and, through them to the small employers 
who must compete with those firms. Moreover, these free-riding 
employers enjoy a big, unfair competitive advantage over responsible 
employers that contribute to our health and welfare funds. In other 
words, the workers covered by our funds are being required to pay the 
health care costs of their nonunion competitors by the current system.
    We are pleased to see that the Discussion Draft would require 
employers to ``play or pay.'' However, we are alarmed to hear that the 
Committee intends to exempt ``small employers'' and extend the 
exemption to employers who have less than 25 employees. Such an 
exemption would allow, indeed encourage, the unfair competition and 
cost-shifting that led us to support national health care reform.
    As noted above, many, if not most, employers participating in 
multiemployer health and welfare funds are small employers; often with 
fewer than 10 employees. To exempt the business competitors of our 
employers from any responsibility for their employees' health coverage 
would be to grant irresponsible employers a great competitive advantage 
over responsible small employers. This would discourage employers from 
remaining in or joining our health and welfare funds.
    In addition, a ``small employer'' exemption would provide even more 
financial incentives for employers to misclassify workers as 
``independent contractors'' and avoid any ``play or pay'' 
responsibility.

    Government Subsidies: The individual and employer subsidy programs 
that would be created by the legislation should be designed to (a) 
enable workers and dependents (participants and beneficiaries) to keep 
their health and welfare fund coverage and (b) encourage employers to 
continue participating in and contributing to the funds.
    We read the Discussion Draft as providing for subsidies for 
employers who obtain health plan coverage for their employees outside 
of the Health Exchange, including employers that contribute to 
multiemployer health and welfare funds. If this is, in fact, the 
drafters' intent, we applaud it, but ask for an opportunity for input 
on how to make the subsidy program effective in a multiemployer fund 
context.
    With regard to individual subsidies, we read the Discussion Draft 
as providing such subsidies only for individuals who buy health plan 
coverage through the Health Exchange. We urge that any individual 
subsidy be extended to participants and beneficiaries in multiemployer 
health and welfare funds that would otherwise qualify by virtue of 
their income level.
    We applaud the Discussion Draft's commitment to provide for a 
subsidy program for pre-Medicare retirees. A great many of the workers 
covered by our health and welfare funds, particularly in the building 
and construction industry, are physically unable to continue working at 
their trades until Medicare eligibility age.
    The individual ``COBRA'' subsidy program under the American 
Recovery and Reinvestment Act of 2009 is helping to maintain health and 
welfare fund coverage for unemployed workers, and the Medicare Part D 
subsidy program is helping retirees to maintain their prescription drug 
coverage under our funds. Both of these programs were designed to be 
workable for our funds and participants. Similar, widely available 
subsidy programs for active workers and pre-Medicare retirees should be 
included in health reform legislation. We would be pleased to discuss 
with the Committee's staff how such programs can be designed to be 
workable in the multiemployer fund context.
    There are other aspects of the Discussion Draft on which we have 
comments and concerns. But, in view of the Committee's strict guideline 
for submissions, let me conclude by again congratulating you for taking 
on the daunting task of crafting national, systemic health care reform 
legislation. We look forward to the Committees, the House, and 
eventually the Congress passing reform legislation that helps 
multiemployer health and welfare funds and their millions of 
participants and beneficiaries. We would be pleased to assist you in 
working out any details of legislation as relates to our health and 
welfare funds.
    If you have any questions concerning this matter, please feel free 
to contact NCCMP Executive Director Randy DeFrehn at (202) 756-4644.

            Respectfully,

                                                      MARK H. AYERS
                                                           Chairman

                                 
              Statement of the National Yogurt Association
    Chairman Rangel, Ranking Member Camp and Members of the Committee, 
thank you for the opportunity to offer testimony in opposition to the 
proposed enactment of a sugar-sweetened beverage excise tax to finance 
comprehensive health care reform.
    As the voice of the yogurt industry, the National Yogurt 
Association (NYA) is the national nonprofit trade organization 
representing the manufacturers and marketers of live and active culture 
(LAC) yogurt products as well as suppliers to the yogurt industry. NYA 
sponsors scientific research regarding the health benefits associated 
with the consumption of yogurt with LACs, and serves as an information 
resource to the industry and general public.
    The yogurt industry is committed to improving its customers' health 
through the unique properties of its products. In addition to 
containing many essential minerals and vitamins, yogurt with LACs 
offers the additional benefits of assisting digestion and boosting the 
immune system.
    If Congress moves to enact an excise tax on sugar-sweetened 
beverages to finance health care reform, drinkable yogurt (i.e., 
smoothie-style drinks made with yogurt) containing LACs should be 
excluded due to their many health benefits.
Yogurt Drinks Are Positive Lifestyle Options
    Obesity is widely acknowledged to be a serious risk to public 
health, and excessive sugar consumption has been linked to rising 
obesity rates. However, some products that contain sugar, including 
drinkable yogurt with LACs, have public health benefits that outweigh 
the negatives associated with the added sugar they may contain.
    NYA members strive to produce food products that deliver the 
valuable health benefits of yogurt with LACs. Drinkable yogurt products 
are a convenient way for adults and children who consume these products 
to get the minerals, vitamins and LACs they need. Flavoring yogurt 
drinks in ways that appeal to consumers' taste allows more people to 
benefit from their many beneficial health properties.

Yogurt Drinks Are Nutrient Dense

    Yogurt drinks are nutrient-dense foods that contain many essential 
minerals and vitamins, including riboflavin (vitamin B2), vitamin B12, 
phosphorous and potassium. In addition, yogurt drinks are often a good 
source of protein and calcium, which is important to developing and 
maintaining strong, healthy bones. The 2005 Dietary Guidelines for 
Americans notes that studies on milk and other milk products, such as 
yogurt, showed a positive relationship between the intake of milk and 
milk products and bone mineral content or bone mineral density.

Benefits Associated With Live and Active Cultures (LACs)

    In addition to the high nutritional value offered by yogurt drinks, 
research indicates that the LACs in yogurt drinks may offer additional 
health benefits. Many yogurt drinks are cultured with standard yogurt 
cultures, Lactobacillus bulgaricus and Streptococcus thermophilus. 
However, many yogurt drinks on the market today contain other LACs 
including Lactobacillus acidophilus, Bifidobacterium bifidus, 
Lactobacillus casei and Lactobacillus GG. These cultures aid in the 
digestion of food and the absorption of nutrients.
    Research also suggests that certain specific strains of these 
``probiotic'' LACs may play an active role in preventing 
gastrointestinal infections, fighting certain types of cancer, boosting 
the body's immune system and reducing nasal allergies.

Yogurt Drinks Are a Good Alternative for Those Who Are Lactose Intoleran
        t

    Many yogurt drinks are produced using the same cultures as 
refrigerated cup yogurt. Research has confirmed that, during the 
fermentation process carried out in producing yogurt from milk, lactase 
enzyme generated by the LACs breaks down lactose in milk and remains 
present through consumption, thus allowing those who are lactose (milk) 
intolerant to eat yogurt without certain side effects such as bloating 
and diarrhea.
    Lactose intolerance is relatively common among certain ethnic 
populations, particularly those of Asian, African and Native American 
descent. The high rate of lactose intolerance in these populations 
partly explains the Institute of Medicine (IOM) finding that Asians and 
African Americans are especially at risk for low intakes of dietary 
calcium. The IOM has recognized that individuals with lactose 
intolerance are able to tolerate yogurt better than milk, and noted 
that in public comments, yogurt, soy milk and tofu were frequently 
requested as calcium-rich options.\1\
---------------------------------------------------------------------------
    \1\ IOM, ``WIC Food Packages: Time for a Change,'' at 119 (December 
2005), available at http://www.fns.usda.gov/oane/menu/Published/WIC/
FILES/Time4AChange(mainrpt).pdf (last accessed May 22, 2009).

---------------------------------------------------------------------------
Conclusion

    Yogurt drinks with LACs provide consumers with a dietary option 
that delivers a unique combination of properties with definite positive 
health benefits. They are a rich source of many necessary vitamins and 
other key nutrients, and provide individuals who are lactose intolerant 
an alternative source of these vital nutrients, such as calcium.
    NYA recognizes the challenge facing the Committee in finding 
funding streams to pay for health care reform. However, given the many 
health benefits of yogurt drinks with LACs, these products should be 
excluded from the proposed excise tax on sugar-sweetened beverages. 
Yogurt drinks provide health benefits to consumers, and should not be 
subject to the proposed tax and categorized along with products of 
lesser nutritional value.
    NYA appreciates the opportunity to offer this testimony.

            Respectfully Submitted,

                                                    Kraig R. Naasz,
                                                  President and CEO
                                        National Yogurt Association

                                 
             Letter From the Nurse Practitioner Roundtable
Dear Chairmen and Ranking Members of the Tri-Committee:

    The members of the Nurse Practitioner Roundtable (American Academy 
of Nurse Practitioners, American College of Nurse Practitioners, 
National Association of Pediatric Nurse Practitioners and National 
Organization of Nurse Practitioner Faculties) would like to thank the 
Members of the Ways and Means Committee, the Energy and Commerce 
Committee and the Education and Labor Committee for their thoughtful 
undertaking of the issues of Health Care Reform in their currently 
proposed legislative draft which we have reviewed. We wish to express 
our support of the comments submitted by the nursing community under 
separate cover, and would like to take this opportunity to thank you 
for the improvements included in this bill that specifically address 
issues of importance to nurse practitioners and their patients.
    We are particularly appreciative of your recognition of nurse 
practitioners as primary care providers in many venues, including the 
medical home. We are also appreciative of your recognition of the worth 
of nurse-managed centers and school-based clinics by providing funding 
for these clinics that provide a valuable service, particularly to the 
uninsured.
    There are, however, some sections where unchanged language could 
impair the ability of nurse practitioners to provide their full scope 
of services, thus limiting patient access and incurring increased 
costs. Below are sections that we would appreciate having adjustments 
made that would clarify and strengthen our ability to provide health 
care to the citizens of our Nation. An appendix of suggested language 
adjustments is attached.
I. Preserving Patients' Choice
    Many patients elect to see a nurse practitioner for their primary 
care. Certain sections in this draft retain language that would 
obstruct patients from making that choice by referring to physician 
offices:

Division A. Affordable Health Care Choices, Title I, Subtitle C, 
Section 122(b)(4) Essential Benefits Package (p 24)

    We would suggest adding ``health care professional'' to the list of 
allowable settings in the essential benefits package. This wording is 
consistent with (b)(3) of this section and the beginning of the 
sentence in (b)(4).

Division B. Medicare and Medicaid Improvements, Title II, Subtitle B, 
Section 1221 Ensuring Effective Communication in Medicare (p 333-334)

    Nurse practitioners are major providers for the underserved 
populations, many of whom have language disparities. It is important 
that they be included in any feasibility studies for support for LEP 
activities, not just physician offices. We suggest adding practitioners 
(as defined by 1842(b)(18)(c).

Division B. Medicare and Medicaid Improvements, Title II, Subtitle C, 
Section 1235 (p 362)

    It is important that nurse practitioners be authorized to sign 
orders for life sustaining treatment. While the language in this 
section appears to be inclusive, the lack of specificity for who would 
be authorized to write this order is concerning. If the language in 
this section cannot be changed, we would request that the expectation 
that nurse practitioners are among those authorized to sign such orders 
be included in report language.

Title III, Division B, Section 1308(a)(4)(B) Coverage of Marriage and 
Family Therapist Services and Mental Health Counseling Services (p 414)

    We would suggest substituting the words ``with other health care 
providers'' in the title and in line 15, adding attending or primary 
care physician ``or nurse practitioner,'' since nurse practitioners are 
often a referring health care provider for marriage and family therapy 
and would be the attending or primary care provider for referred 
patients.

Title III, Division B, Section 1308(a)(4)(B) Coverage of Marriage and 
Family Therapist Services and Mental Health Counseling Services (p 419)

    We would suggest substituting the words ``with other health care 
providers'' in the title and on page 419 in line 1, adding attending or 
primary care physician ``or nurse practitioner,'' since nurse 
practitioners are often a referring health care provider for mental 
health counseling and would be the attending or primary care provider 
for referred patients.
II. Ensuring That Proposed Programs and Studies Capture the Full Scope 
        of Primary Care Services
    New health delivery and quality improvement models and studies of 
these models must include nurse practitioners in order to obtain an 
accurate picture of health care delivery in the United States. We are 
appreciative of the inclusion of Nurse Practitioners in the Medical 
Home proposals in this legislation, noting that nurse practitioners are 
uniquely equipped to handle the demands of a patient-centered care-
coordination model. We ask that you incorporate the following 
additional changes in other proposed health care delivery models to 
include nurse practitioners as providers and that data is collected on 
the quality and efficiency of nurse practitioner care and used to 
further health care reform:

Division B, Title III, Section 1301 Accountable Care Organization Pilot 
Program (p 368)

    Advanced Practice Nurses (APRN) need to be included in the piloting 
of this program. APRNs play a valuable role in cutting costs while 
providing quality health care. Nurse practitioners widely practice as 
primary care providers, often in underserved and rural areas with 
outcomes equivalent to their physician colleagues. APRNS need to be 
added to the word physician throughout this section and explicitly 
referenced in report language for the Secretary.

Division B, Title IV, Subtitle A, Section 1401 Comparative 
Effectiveness Research (p 429-430)

    Nurses and nurse practitioners are the backbone of the health 
delivery system, yet their representation is not evident in the 
proposals for comparative effectiveness. We recommend that practicing 
nurses, including nurse practitioners, be included in membership on the 
oversight commission described in this section.

Division B, Title IV, Subsection C. Quality Measurements. Section 1441: 
Establishment of National Priorities and Performance Measures for 
Quality Improvement (p 553)

    The need for all health care providers, including nurses and nurse 
practitioners, to participate in the development of national priorities 
and performance measures for quality improvement and data reporting is 
critical. We ask that emphasis be placed on that inclusion in the 
report language for this legislation.
III. Program Savings
    We are particularly concerned about the section that speaks to a 
requirement for a face to face encounter with a physician in order to 
be certified eligible for home health care. This perfunctory and 
unnecessary activity is perpetuated by the fact that home health 
agencies cannot accept nurse practitioners' referrals for home health 
care. Instead nurse practitioners must find a physician to authorize/
certify their patients eligible for home nursing care, even though they 
can be the attending provider for that patient once the home care is 
certified.

Division B. Medicare and Medicaid Improvements. Title VI, Subtitle C, 
Section 1639 Face to Face Encounter with Patient Required Before 
Physicians May Certify Eligibility for Home Health Services Under 
Medicare (p 633)

    This provision, as written, adds tremendous and unnecessary cost to 
the Medicare system which could be alleviated by authorizing home 
health agencies to accept certifications from nurse practitioners and 
other qualified health care providers. We would recommend that in this 
section, nurse practitioners be authorized to certify patient's 
eligibility for home care services, thus reducing the need for 
additional face to face encounters with physicians. If such a 
requirement is still necessary, then both physicians and nurse 
practitioners would be required to have a face to face encounter with 
any patient they certify for home care services. This revision would 
reduce costs tremendously, since nurse practitioners could certify 
patients eligible for home care at a lower reimbursement rate without 
requiring an additional unnecessary encounter with a physician at a 
higher rate of reimbursement.
IV. Assuring Access to Quality Health Care Providers
    We appreciate that the Tri-Committee has recognized that health 
care reform cannot focus solely on health care coverage. It is 
important that patients of all ages receive health care services from 
the providers of their choice.

Division B. Medicare 
and Medicaid Improvements. Title I, Part 3, Subtitle C, Section 1152 (p 
235)

    Bundling for payment for post acute care services must take into 
account fair payment for services by a variety of providers. The 
proposed legislation states that among the details to be considered in 
a post acute care payment reform is whether physician services should 
be included in the bundle. It is our recommendation that nurse 
practitioners be treated in the same manner as physicians in this 
payment plan.

Division B, Title VIII, Part 3, Section 1825. Inclusion of Public 
Health Clinics Under the Vaccines for Children Program (p 697)

    The importance of immunizing children cannot be forgotten. 
Resources for providing vaccines should be all inclusive in order to 
provide the best coverage possible. We therefore recommend that nurse 
managed clinics and school based clinics be included in this program as 
well as rural health clinics and public health clinics.

Division C, Title II, Subtitle A, Chapter 1, Section 2201 National 
Health Service Corps (p 773 et seq)

    We wish to thank you for your support of additional funding for the 
National Health Service Corps (NHSC). The NHSC plays an essential role 
in bringing primary care services to underserved areas. Many nurse 
practitioners and the communities they serve have benefited from this 
program and with enhanced funding many more will be able to complete 
their educational programs and provide needed health care services. We 
would ask that in report language, HRSA be instructed to return to its 
original policy of allowing pediatric nurse practitioners to qualify 
for NHSC scholarships, as well as the loan repayment program.

Division C, Title II, Chapter 2, Subpart XI, Section 2213 Training in 
Family Medicine, General Internal Medicine, General Pediatrics, 
Geriatrics and Physician Assistantship (p 745)

    Nurse practitioners are missing from this section that provides for 
the development of primary care training programs for physicians and 
physician assistants. As you know, nurse practitioners have a long and 
successful track record for serving as primary care providers. However, 
their funding source in Title VIII is often not realized and they can 
be overlooked when funding increases for primary care education are 
considered. We ask that Title VIII (42 U.S.C) be amended with the same 
language with reference to nurse practitioner preparation.

Division C, Title XXXI, Subtitle C, Section 3131 Task Force on Clinical 
Preventive Services (p 805)

    The cornerstone of nurse practitioner practice is health promotion 
and disease prevention. Nurse practitioners have been demonstrated to 
be experts with highly successful outcomes in health promotion and 
disease prevention interventions. It is with this in mind that we 
recommend that nurse practitioners be included on the Clinical 
Preventive Services Task Force and on the Community Preventive Health 
Services Task Force. If language cannot be changed within the bill, 
then we highly recommend and request that this recommendation be made 
in report language.

Division B. Medicare and Medicaid Improvements, Title VIII, Part 3, 
Access, NEW SECTION 1826 (end of p 697)

    Since its inception, nurse practitioners have been identified as 
primary care providers at State's discretion in the primary care case 
management program. This has led to barriers in recognition which could 
be resolved by including Section 2(a) of the Medicaid Advanced Practice 
Nurses and Physician Assistant Act of 2009 which will be reintroduced 
by Representative Olver. (See attached).
    We thank you for the opportunity to provide comment on the Tri-
Committee Draft of the Health Reform Bill. We applaud your efforts and 
the constructive recommendations being made in this bill to provide 
access to high quality, cost effective care to the citizens of this 
Nation. Nurse practitioners stand ready to help in this effort. We 
cannot do that, if barriers to practice and access are not removed. We 
thank you for the recommendations you are making and ask that you 
seriously consider the additional recommendations we are making in this 
letter and the attached Appendix of line changes.

            Sincerely,

                            American Academy of Nurse Practitioners
                            American College of Nurse Practitioners
              National Association of Pediatric Nurse Practitioners
             National Organization of Nurse Practitioner Facilities

                                 
      Statement of Steve Slagle, Promotional Products Association 
                             International
    Chairman Rangel, Ranking Member Camp, and Members of the Committee, 
thank you for holding public hearings on this vitally important topic.
    My name is Steve Slagle, and I am President and CEO of the 
Promotional Products Association International (hereinafter ``PPAI''), 
the international trade association representing an industry comprised 
of over 22,000 promotional products companies, many of whom are small 
businesses.
    Our members market logoed items (e.g., ink pens, coffee mugs, legal 
pad portfolios, USB thumb drives, PC mouse pads, etc.) to manufacturers 
of prescription drugs, as well as medical device and medical supply 
companies, who in turn, distribute these logoed items to physicians as 
a form of advertising, not as gifts. Consequently, I write to you in 
opposition to the Physician Payments Sunshine Provisions in your 
proposed draft (i.e., Division B, Title III, Subtitle D, pages 560-
575.).

    Specifically, PPAI objects to the ``unreasonable'' $5 de minimis 
exclusion contained in the draft proposal (Id. at 573). Conversely, 
PPAI supports a ``reasonable'' de minimis exclusion (e.g., $25) similar 
to the one proposed in the 110th Congress stand-alone bill 
(i.e., H.R. 5605).

    As you know, these draft provisions require manufacturers and 
distributors of covered drugs, devices, biologicals, or other medical 
supplies under Medicare, Medicaid, or CHIP, to report payments or other 
``transfer of value'' to physicians and other health care entities. The 
intent of these provisions is to provide greater transparency of the 
financial relationships between physicians and drug and/or medical 
device/supply companies as such relationships may influence prescribing 
practices and/or research, which in turn, affects health care costs.
    The draft, as currently written, would require manufacturers of 
drugs, devices, biologicals or medical supplies to physicians to report 
payments or other transfers of value where the aggregate amount 
transferred exceeds $100 in a calendar year. Unfortunately, the draft 
does not provide a ``reasonable'' de minimis exclusion (e.g., $25) for 
each transfer of value. As a result, a logoed item valued at $5 or more 
must be tracked by our customers in order to determine when and if the 
$100 annual aggregate limit has been met, thereby triggering the 
reporting requirement.
    Although PPAI supports the intent of the proposed draft, our 
members are deeply concerned that this legislation will have the 
unintended and adverse economic impact on our industry by effectively 
restricting and prohibiting the distribution of promotional products to 
health care professionals. To avoid the administrative burdens of 
recordkeeping and reporting in order to comply with the mandate of 
these provisions, it is highly foreseeable that our customers (e.g., 
pharmaceutical companies, medical device and/or supply companies, etc.) 
will simply discontinue purchasing logoed items and shift their 
marketing budgets to other advertising mediums (e.g., print, radio, 
television, Internet, etc.). Again, promotional products are a form of 
advertising and are not compensation, gifts, honoraria, etc.
    Logoed items of relatively nominal value (i.e., $25 or less) do not 
unduly influence professional behavior of health care professionals in 
the manner that this legislation is intended to curb. If so, then the 
solution to such behavior influences best lies in the ethics curriculum 
and training of medical students, as well as the continuing educational 
requirements of health care professionals.
    Promotional products are tangible forms of advertising that help 
keep the brand name in front of the recipient over time, reinforcing 
the advertising message with each use. Promotional products convey 
important marketing, advertising and communication messages and are no 
different from any other element in the advertising and marketing mix 
(e.g., television, radio, print mediums), except for the high message 
recall they deliver.
    This advertising medium is one of the most, if not the most, cost-
effective methods for small businesses to market their products and 
services. Restricting their use results in economic hardship for these 
small businesses and limits their ability to reinforce personal 
relationships with their customers, clients and prospects. In this 
period of economic uncertainty, now is more important than ever for 
small businesses to provide a personal connection with their customers.
    Such a costly and administrative burden on our customers will cause 
them to discontinue using promotional products as part of their 
advertising and marketing campaigns. This will have a lasting and 
devastating effect on the promotional products industry.
    Without a reasonable de minimis exception (i.e., $25), this 
legislation will lead to severe job loss in the promotional products 
industry, as well as substantial business closings to companies that 
rely heavily on a customer base of prescription drug manufacturers, 
medical supply, and medical device companies.
    Without including a reasonable de minimis exception (i.e., $25) in 
this legislation, Congress will actually add to the number of uninsured 
Americans by shrinking if not eliminating an industry made up of small 
businesses who actually provide health care to their employees, and who 
are already struggling to survive in this economic downturn.
    For the reasons stated above, PPAI strongly encourages you to amend 
the draft proposal by substituting a ``reasonable'' de minimis 
exclusion (i.e., $25) per transfer of value. Please note that an 
``unreasonable'' de minimis exclusion (i.e., $5) would have an equally 
profound impact on promotional product companies as if there were no de 
minimis exclusion at all.
    Again, thank you for allowing the public to review and respond to 
your proposed draft. We hope that you will take our viewpoints into 
consideration as your prepare your actual legislation for introduction 
and legislative activity.
    If we can be of any assistance to you in this regard or otherwise, 
please do not hesitate to contact us.

                                 
                   Statement of RNG Consulting, Inc.
    ``An investment in knowledge always pays the best interest''--
Benjamin Franklin.
    The purpose of this proposal is to introduce an alternative to the 
existing way in which health information is communicated to the 
patient. It should be emphasized that this proposal is meant to 
compliment doctor/patient interactions and not be viewed as an 
alternative to seeking personal medical treatment. The two areas of 
focus are as follows:

      Preventative medicine: A focus on maintaining health vs. 
treating illness.
      Disease state information: Assisting the patient in 
dealing with a diagnosis and information on avoiding further 
complications.

    The Internet is used by millions of people as a source of 
information. Often information dealing with health is not based upon 
evidence-based medicine. There are many sources that are unreliable. 
There are also many sources that are too technical. Most of the 
information is in the form of the written word rather than the spoken 
word. This proposal is for RNG Consulting Inc. to develop a government-
sponsored site that will provide patients access to reliable medical 
information. This site will use video format to relay information to 
patients to compliment doctor visits. These videos will be categorized 
by therapeutic area and include counselling by Medical Specialists. The 
Specialists will be thought leaders and effective communicators in 
their area of expertise. Preventative and disease management 
information will be provided to the patient in a timely manner at a low 
cost.
    The way in which a family doctor communicates disease state 
information to a patient has many limitations, such as:

      The doctor's knowledge of and comfort with the condition. 
Medical information is changing at an increasingly rapid pace and not 
all doctors take advantage of continuing education programs.
      The doctor's ability to communicate in a way that 
educates and motivates the patient. The patient should leave the office 
feeling empowered and confident.
      There are time limitations in the doctor's office. A 
patient needs time and counselling to develop the skills needed to 
manage their condition. Physicians often do not have the time necessary 
to provide this information.
      The patient may need several visits to absorb the 
information being communicated. Emotions play a part when discussing 
health and often information must be repeated.

    The above limitations cost millions in health care dollars. Video-
based information on the Internet will be cost effective. It will not 
require more spending. It will be smarter spending. Having an 
alternate, reliable source of information will allow physicians to 
spend more time on diagnosis and patient management.
    By implementing this form of communication, there will be immediate 
and significant reductions in health care costs. Ways in which savings 
could be realized are as follows:

      Information communicated to the patient will be evidence-
based. The cost of pursuing inaccurate, unsubstantiated information 
will be lessened.
      Patients could obtain information immediately following 
diagnosis, thereby bridging the time it may take to personally see a 
Specialist. The patient would be better educated by the time they saw 
the Specialist and therefore be able to have a more productive visit. 
They would be better prepared with appropriate questions.
      Many patients are limited in their access to Specialists, 
depending upon where they live. High-quality information will be 
available without the cost of transportation and time spent in travel. 
Disease could be managed more efficiently and effectively.
      An informed patient will be better equipped to avoid the 
complications of their condition and reduce costs associated with those 
complications. This supports the government priority to create 
incentives for people with chronic illnesses to receive treatment and 
help get people to focus on their own health.
      The cost of repeated visits to the family doctor would be 
reduced. If information required by the patient was not recalled the 
first time it was delivered, the patient could ``revisit'' the virtual 
Specialist.
      Family doctors could also view the videos and increase 
their knowledge base and develop skills for motivating patients to 
manage their health.
      Many websites are currently being managed by 
pharmaceutical companies, associations, health care facilities etc. By 
streamlining the information, millions of dollars could be saved. This 
shared responsibility will reduce waste and encourage care 
coordination. This would help save dollars and slow the rise in health 
costs.

    The time is right for this method of communication. We have seen 
the effectiveness of video presentations on the Health Reform website. 
When the President is speaking to the video camera, the public feels as 
if he is addressing them personally. The same result could be obtained 
with virtual visits to a Medical Specialist.
    The public is keenly aware of the need for Health Reform and the 
time is right to introduce alternatives to the way health care is 
currently being delivered. The White House paper stated ``we can agree 
that if we want to bring down skyrocketing costs, we'll need to 
modernize our system and invest in prevention.'' Web-based videos 
support these White House priorities.
    There is an aging population of baby boomers. This population is 
approaching a stage in life when health care needs typically increase. 
This population is familiar with the Internet and is information 
hungry. Web-based virtual physician visits will help contain increasing 
costs to the medical system.
    The website would be developed with a focus on the therapeutic 
areas that account for the most visits to the doctor, i.e., blood 
pressure, arthritis, diabetes, etc.
    Using the example of diabetes, some of the current challenges are 
as follows:

      The doctor may not have the time to explain what the 
diagnosis means and the severity of the complications if blood sugars 
are not controlled. The patient may suffer from fear and denial of the 
diagnosis. They may not understand that complications can be avoided if 
they aggressively manage their disease. They have questions that often 
require additional visits to the doctor. They may use the Internet as a 
source of information but may not visit reputable sites.
      If a patient is referred to a Specialist, there could be 
wait times and limitations due to the cost and distance of travel.

    The alternatives, using web-based videos are as follows:

      Immediately following diagnosis, the patient would have 
the opportunity for a virtual visit with the Specialist.
      A Specialist is experienced in communicating with 
patients in an effective and compassionate manner. They encounter 
patient resistance on a regular basis and know how to overcome it. They 
are able to create a sense of urgency without scaring the patient. 
Family doctors would also be able to increase their knowledge base and 
communication skills by emulating the Specialists.
      There would be links to lifestyle management (diet and 
exercise), specific information on disease management (proper blood 
glucose monitoring, appropriate use of prescriptions including insulin) 
and complications (foot care, eye health, kidney disease, 
cardiovascular disease, sexual health). A government-sponsored site 
would provide reliable, evidence-based medical information.
      The patient is able to revisit the virtual Specialist as 
many times as necessary in order to gain a sound understanding of their 
disease. An educated patient will manage their diabetes more 
effectively, thereby limiting complications.

    Web-based video supports the following statement from the May 11/09 
letter to the President from health care stakeholders . . . ``Billions 
in savings can be achieved through a large scale national effort of 
health promotion and disease prevention to reduce the prevalence of 
chronic disease and poor health status, which ultimately leads to 
unnecessary sickness and higher health costs.''
    In conclusion, our proposal will save millions of health care 
dollars, provide increased access to health information and disease 
prevention information and supports the government's goals for rapid, 
cost effective change in health care.

    RNG Consulting Inc. was founded in 2009. E. George Donaldson is the 
Director and Ruth A. Donaldson is the V.P. of Business Development. We 
have more than 39 years of experience in the health care industry and 
have expertise in medical education, conducting medical advisory 
boards, patient support systems, sales and marketing. We have the 
experience, knowledge and passion that is necessary to implement this 
proposal.

                                 
     Statement of Rochelle J. Ascher, Executive Intelligence Review
    EIR, the magazine founded by Lyndon H. LaRouche, Jr., has done an 
extensive study of the proposals for health care ``reform'' being 
proposed by the Obama Administration. As a result of our research, we 
have determined that the fundamental premises of the program, as 
represented by OMB Chief Peter Orszag, his health advisor Ezekiel 
Emanuel, and the President himself, are identical to those which 
underlay the genocidal program for eliminating the ``unrehabilitable 
sick'' in the Hitler regime.
    A historical review documenting this analysis immediately follows.
    There can be no compromise with the premises of this program. If it 
is successful, it will lead to genocide, and not only in health care, 
since OMB Chief Orszag has already announced that after health care, he 
intends to ``reform,'' (i.e. slash) Social Security next. Thus, as the 
first step to reversing direction, the Obama health plan must be 
totally scrapped.
    Instead, Congress must return to the policy laid out in the Hill-
Burton Act of 1946, which mandated the provision of the necessary 
logistical foundation--in terms of hospital beds and personnel--to 
ensure adequate medical care for the U.S. population. The Hill-Burton 
approach was essentially dumped in 1973, when a bipartisan grouping in 
Congress endorsed President Nixon's legislation beginning the 
establishment of Health Maintenance Organizations, the for-profit 
institutions which now control the bulk of the health care provision 
for the American population. Under the HMO regime, the physical 
infrastructure required for the health of the American population has 
been slashed, and the quality of care as well.
    Lyndon LaRouche has repeatedly led the charge against the HMO 
wreckers, and in support of an updated Hill-Burton approach. In 1992, 
the Democrats for Economic Recovery/LaRouche in '92 committee issued a 
25-page pamphlet, ``Solving the Health Care Crisis,'' against the HMOs. 
In 1996, LaRouche led a campaign under the banner, `` `Managed Health 
Care' Is a Crime Against Humanity.'' In 2000, LaRouche's political 
action committee issued a national 16-page dossier titled, ``Ban the 
HMOs Now! Before They Get You and Yours,'' providing draft legislation 
to revoke the HMO enabling acts. LaRouche has also endorsed the single-
payer plan put forward by Rep. John Conyers, as coherent with his 
approach.
    Today, there can be no more delay. The Nazi-like plan of cost-
cutting against ``useless eaters,'' which the President has put on the 
table, must be dumped, and the Hill-Burton approach adopted, without 
delay.
Hitler's T4 Program Revived in Obama's Health Care ``Reform''
    In July of 1939, a conference of medical professionals was held in 
Berlin, Germany. Participating were the professors and chairmen of the 
departments of psychiatry of the leading universities and medical 
schools of Germany, many of them, the most respected professionals in 
their fields. The subject? What would be the criteria for determining 
what patients would be considered to have ``lives unworthy to be 
lived,'' and what was the most ``practical and cheap'' manner of 
removing them from being burdens on the health care system--by death.
    Thus, the bureaucratic machine began to be cranked up for what is 
known as Adolf Hitler's program of genocide through ``euthanasia,'' a 
program which killed hundreds of thousands of non-Jewish Germans, and 
eventually, millions of Jews and non-Germans as well. That program, 
which had already begun years before, against concentration camp 
inmates and handicapped children, was officially put into effect in 
October 1939, when Hitler penned his own personal, and secret, 
authorization for the program, under the title, ``The Destruction of 
Lives Unworthy of Life'':

          ``Reichsleiter Bouhler and Dr. Brandt are charged with the 
        responsibility for expanding the authority of physicians, to be 
        designated by name, to the end that patients considered 
        incurable according to the best available human judgment of 
        their state of health, can be accorded a mercy death.''

    To carry out this program, Hitler and his fiendish Nazi associates 
would fully utilize the ``professional'' apparatus which had been put 
in place, as well as the popular, British-eugenics-spawned ideology 
which had been increasingly dominant in Germany since Hitler seized 
power with the aid of powerful British-Wall Street financiers. The 
killing would proceed with the utmost ``cost-effectiveness'' and 
professionalism, in order to save funds for the Nazi state's preferred 
projects, and not waste them on ``ineffective'' medical treatments.
    If that sounds familiar, it should. For the proposals which the 
Obama Administration has currently put on the table, follow them in 
virtual lockstep:
    First, the ``experts'' decide what is ``effective'' care, with 
``cost-effectiveness'' foremost in mind, ruling out ``inappropriate'' 
treatments.
    Second, these standards become the law, in terms of what medical 
care will be paid for.
    Third, other experts efficiently implement those decisions, through 
the existing hospital apparatus.
    The result, as in Nazi Germany, is that millions are, with the 
stroke of a pen, consigned to death.

The T4 Program

    The T4 program, which was established following Hitler's secret 
order, took its name from its Berlin office address, Tiergarten 4, 
which address housed the coordinating organization for the program, the 
Reich Work Group of Sanatoriums and Nursing Homes. In charge were 
Philip Bouhler, Chief of the Chancellory, and Dr. Karl Brandt, Hitler's 
personal physician and chief medical officer of the land.
    Their first task was to devise the questionnaires which would be 
used to categorize the targetted institutionalized populations. Four 
categories were specified:

    1.  Patients suffering from specified diseases who are not 
employable, or are employable only in simple mechanical work. These 
included schizophrenia, epilepsy, senile diseases, therapy-resistant 
paralysis, feeble-mindedness, and the like.
    2.  Patients who have been continually institutionalized for at 
least 5 years.
    3.  Patients who are criminally insane.
    4.  Non-German patients.

    While including these categorizations, the questionnaire overall 
gave the impression of a rather neutral statistical survey, which also 
delved into the patients' biographies, their financial situations, and 
the like. (See (EIR), June 5, 2009, page 12). It was accompanied by a 
questionnaire for the institution in which the patient was housed, 
which asked about staffing, beds available, and budgetary questions. A 
significant stress was also put on detailing the patients' abilities to 
work.
    The first questionnaires went out in October 1939, the month Hitler 
signed his order, to State hospitals, and other public and private 
institutions where mental patients, epileptics, the mentally retarded, 
and other handicapped persons resided. The responsibility for filling 
them out, often in a very short period of time, fell on the physicians 
at those institutions.
    The questionnaires were then sent to panels of three or four 
psychiatric experts, who indicated their opinion about whether the 
patient (whom they had never seen, much less examined, and whose 
medical history they were unfamiliar with) was to live or die. Each 
``expert'' made his or her decision independently, and passed on the 
questionnaire to the next.
    The choice for the experts was effectively only one of two options: 
A plus sign in red, which meant death; or a dash in blue, which meant 
life. Occasionally, a psychiatrist would put a question mark in the 
space provided.
    The questionnaires were then sent to a chief expert, who passed the 
final judgment. At this ``higher'' level, there was no alternative 
other than life or death. In fact, the ``senior expert'' was not bound 
by the recommended decisions. From his judgment, there was no appeal. 
From that point on, it was merely a matter of sending back the decision 
to the relevant institution, where the final dispensation of the 
patient was carried out, and, if so ordered, sending him or her to one 
of the designated ``killing centers.''
    These centers were supervised by medical personnel, who oversaw the 
killing, and were responsible for devising the fraudulent death 
certificates which were sent to the families of those who had been 
determined to have lives ``not worthy to be lived.''

Councils of Experts

    Shift now to today, where we are in the first phases of the Nazi 
euthanasia program (called ``reform'') being promoted by the Obama 
Administration and its behavioral psychologist ``experts.'' It starts 
with the dictum that there are insufficient resources to provide 
medical care for all, especially those at the ``end of life,'' or not 
able to be ``effectively'' rehabilitated. In other words, the Nazi 
assumption that there are lives ``not worthy to be lived'' (or, not 
worth spending our money on, if you will). At least according to the 
priorities for spending which the Administration has set--i.e., the 
banks must be saved first.
    The second step is for the Administration to set up those ``panels 
of experts'' who will determine the criteria for who will get medical 
care, and who won't. Already, the so-called Obama stimulus package has 
created one such panel, the Federal Coordinating Council for 
Comparative Effectiveness Research. This 15-member council is comprised 
of highly credentialed ``experts,'' many of them medical doctors, who 
are tasked with ``coordinating research'' on the relative values of 
treatments. While explicitly claiming that the Council will not 
directly pronounce judgments on treatments and payments, it is clear 
that the research that they are supervising is intended to do precisely 
that.
    Particularly ominous is the fact that one of the Council's members, 
Dr. Ezekiel Emanuel, is trained in ``bioethics,'' a discipline 
dedicated precisely to determining criteria for deciding who should 
live, and who should die. Emanuel has a long history of promoting 
policies of cutting ``marginal'' care, as well as promoting living 
wills.
    Crucially significant as well, is that Obama's head of the Office 
of Management and Budget, Peter Orszag, has already set out his 
genocidal judgment that around 30% of current health care services and 
procedures are unnecessary.
    The model for their work, as reflected in statements by many of the 
relevant officials, is the British National Institute for Health and 
Clinical Excellence (NICE), the Orwellian-named agency which has 
central control over what medical care will be provided to British 
subjects within the British National Health Service. NICE's directives 
have systematically denied Britons quality care, on the basis of its 
being ``too expensive,'' and have singled out, especially, the elderly, 
for being undeserving of intensive medical care.
    The Comparative Effectiveness Council is clearly only the beginning 
of the genocide--if this Nazi plan is not stopped cold. Let's look at a 
number of other proposals. One has been made by former Sen. Tom 
Daschle, the man whom President Obama wanted to appoint Secretary of 
Health and Human Services, and special health czar in the White House 
(his appointment was derailed over tax problems). Daschle's plan, as 
laid out in his 2008 book (Critical: What We Can Do About the Health 
Care Crisis), centers around the creation of an all-powerful Federal 
Health Board, which would be able to act (without political 
interference,) as the Federal Reserve does in the monetary system.
    Daschle's Federal Health Board would have a board of governors 
(``clinicians, health benefit managers, economists, researchers, and 
other respected experts'') which would command a huge staff of analysts 
that would come up with policy diktats in the areas of health insurance 
and medical care. The board would determine which treatments are, in 
its view, ``the most clinically valuable and cost effective.'' They 
would promote ``quality,'' by ``using evidence-based guidelines and 
cutting down on inappropriate care.'' In addition, the Board would 
``align incentives with high-quality care,'' an obfuscatory term which 
means paying doctors to keep costs down, and withholding payments for 
unapproved (read: ``expensive'') procedures.
    Daschle calls the Federal Health Board a ``standard setter,'' but, 
in fact, it would become the dictator as to who lives, and who dies.
    Paralleling Daschle's proposal is a piece of legislation which was 
introduced by Sen. Jay Rockefeller (D-W.Va.) on May 20. Rockefeller 
proposes that the Medicare Payment Advisory Commission (MedPAC, created 
in 1997), move beyond its current mandate to advise on rates of payment 
for the 44 million enrollees in Medicare, to set lists of approved 
treatment standards, and enforce compliance with regulations on health 
care delivery and reimbursement. Rockefeller's press release states 
that he wants MedPAC to be made up of ``independent experts,'' as an 
``executive agency modelled after the Federal Reserve.''
    He adds: ``We must take Congress out of its current role. . . . It 
is inefficient and ineffective; we are not health care experts, and 
being a deliberative body means that we cannot keep pace with the 
rapidly transforming health care marketplace.''
    President Obama has personally expressed approval of this proposal, 
which he said would have already saved $200 billion, if the 
dictatorship had been in place.
Knew or Should Have Known
    When the Nazi doctors, and others, were tried for crimes against 
humanity and genocide at the Nuremberg Tribunal after World War II, 
many claimed that they only had the most noble intentions; others, that 
they were only following orders. In fact, they were wittingly serving 
as ``expert'' or bureaucratic cogs in a mass-murder machine, of whose 
outcome they were fully aware.
    While there is no doubt that the degeneration of our culture, in 
terms of the valuation of life, has proceeded quite a distance over the 
last decades, thus preparing our population to accept Nazi euthanasia 
today, the apparatus parallel to that which Hitler set up (can still be 
stopped). It must be done now--before the medical and economic 
``experts'' carry out genocide again.
                                Appendix
 (The following draft legislation was put forward by Lyndon LaRouche's
           Committee for a New Bretton Woods in May of 2000.
          It still forms the core of what must be done today.)
          The Proposed `Right to High Quality Health Care Act'
                       (Declaration of Purpose:)
    The purpose of this legislation is: (a) to affirmatively establish 
the right of every person to the highest quality health care available; 
(b) to abolish Health Maintenance Organizations, Managed Care 
Organizations, and the practice of managed care by health insurers; and 
(c) to reassert the principles of the Hill-Burton Act (42 U.S.C. 
Section 291 et seq.) as the primary policy governing U.S. health 
policy.
    This Act is necessitated by the immediate crisis in the health 
conditions in the United States, where millions of citizens are denied 
access to necessary health care services due to the financial practices 
of Health Maintenance Organizations, Managed Care Organizations, the 
practice of managed care by health insurers, and the lack of adequate 
medical facilities in many communities in the country. This has created 
a health care emergency in the United States.
    Under the Preamble to the United States Constitution, the Federal 
Government is required to ``promote the General Welfare,'' thus 
necessitating immediate action by the Federal Government to address 
this health care emergency.
    The lack of access to adequate health care, and the practices of 
the Health Maintenance Organizations and Managed Care Organizations, 
are in violation of Article 25 of the Universal Declaration of Human 
Rights of the United Nations, and Article 12 of the International 
Covenant on Economic, Social, and Cultural Rights, which establish the 
universal right to adequate health care, and require governments to 
take steps to assure access to quality medical care. The United States 
is a signatory to these declarations and covenants.
    The practice of denying needed medical treatment to certain persons 
in order to cause their death, was prosecuted as a crime against 
humanity by the United States in the post-World War II Nuremberg 
Tribunals.
(Section 1)
    A.  It is hereby established and affirmed that every person has a 
right to the highest quality health care available.
    B.  Any practices by health insurers, that deny any person the 
right to the highest quality health care available, for financial, or 
any other reasons, are hereby prohibited.
(Section 2)
    A.  42 U.S.C. Section 300e, et seq., providing for the 
establishment and operation of Health Maintenance Organizations, is 
hereby repealed.
    B.  It shall be unlawful to operate a Health Maintenance 
Organization, Managed Care Organization, or any health insurance 
program that practices managed care, or seeks to control costs by 
limiting necessary health care services provided to patients.
(Section 3)
    A.  It is hereby reaffirmed that the provisions of the Hill-Burton 
Act, 42 U.S.C. 291 et seq., are the governing principles for U.S. 
health care policy.

            Submitted by:

                                                Rochelle J. Ascher,
                                    (Executive Intelligence Review)

                                 
                       Letter by Ron Manderscheid
    Universal coverage is a foundational issue for national health 
reform. Currently, about 8 million children (10%) and 38 million adults 
(about 20% of those under age 65) are without coverage. Up to another 
20 million adults may be added to this group as a result of the current 
fiscal recession, although the American Recovery and Reinvestment Act 
of 2009 will offer this latter group some temporary relief.
    Underinsurance is also being considered. Most Americans have very 
little insurance coverage for health promotion or disease prevention 
interventions. Most also have very little coverage for substance use 
conditions.
    Without universal coverage to address the needs of those who are 
not insured or underinsured, large amounts are spent inappropriately 
each year on hospital emergency room visits. To demonstrate this 
contrast, a visit to a doctor may cost $100, while a visit to an 
emergency room may cost $1,000. Clearly, an insurance system that 
promotes the former is a better investment.
    Other features of national health reform being considered include 
creation of a medical home that would reduce care fragmentation; 
incorporation of public health measures that will address personal and 
population health promotion and disease prevention; and new financing 
strategies to pay for reform.
    Over the past several months, I have prepared a series of pieces on 
national health reform for The Manderscheid Report published by 
Behavioral Healthcare. These are identified below.
    I encourage the Committee to take positive action on National 
Health Reform, including prevention and care for mental and substance 
use conditions.

                                            Ron Manderscheid, Ph.D.
                                  Bloomberg School of Public Health
                                           Johns Hopkins University

The Manderscheid Report in Behavioral Healthcare:

      December 2008: Change is coming!
      We must ensure our agenda is on lawmakers' radar.
      January 2009: Aiming for a healthier population by 2020
      Moving our fields toward prevention, early intervention, and 
population health.
      Online Exclusive January 2009: Making `health' a noun
      February 2009: Promoting universal coverage.
      Become an advocate for universal health insurance.
      March 2009: Focusing on populations' health.
      Population health insurance would focus on prevention instead of 
illness.
      Online Exclusive March 2009: Celebrating 50 years of 
SRCMHS' leadership and innovation.
      The annual conference always has been ahead of the curve.
      April 2009: Stepping back from deinstitutionalization?
      The jury is still out, but new data show some disturbing trends.
      May 2009: Time to stop being one-dimensional.
      We're focused on disease while neglecting health.
      Online Exclusive May 2009: A hearth for our health.
      Health promotion can be the `hearth' within a medical home.

                                 
         Letter by Nancy Schwab, Wendy Warner, Bill Berlinghof,
     Catherine Borowiec, Mark Schmid, Connie Guldin, and Mike Fritz

                                              June 13, 2009

To: Members of Congress

    We, the small business owners listed below, want you, our elected 
representatives in Congress, to know that the Health Savings Account 
program has been a tremendous value to our firms and our workers. We 
have been able to significantly lower our health care premiums from 
what was offered by other plans, improve our benefit package and help 
ourselves, our families and our employees to save for their health care 
needs. Also, our workers are now more involved in making their own 
important decisions about the health care they need for themselves and 
their families.
    Our agent, Ross Schriftman (who has his own H.S.A.) has informed us 
of the pending changes that are being proposed in the Senate Finance 
Committee and the House Ways and Means Committee. These changes will 
restrict and possibly even eliminate our ability to offer the kind of 
health care benefits we have come to enjoy.
    Limiting contributions to the deductible will reduce the amount of 
money we and our staff can put aside to meet our long-range health care 
needs. This change will break the Administration's pledge that people 
can continue to keep the same health plan they have under the health 
care reforms taking place.
    The proposed changes may also result in our employees paying taxes 
on contributions made to their accounts. Why on earth would anyone in 
Congress want to do this to American workers?
    Requiring us to substantiate what our workers use their funds for 
will put tremendous administrative burdens on our small firm and create 
an unfavorable relationship with our workers who don't want us watching 
over their shoulders concerning their own personal savings accounts. 
Please don't put us in such a difficult position.
    We can not afford to go back to higher premium plans so we may be 
forced to drop our health plans. This will result in more people having 
to rely on whatever government programs are available for their health 
care or go without health insurance. We know that this is not the 
intention of the President or of Congress.
    Please do not change what is working. Allow us to continue to enjoy 
the health benefits that we have.
    Thank you for your consideration.

            Sincerely,

                                                Nancy Schwab, Owner
                             The Artful Framer and Westside Gallery

                                     Dr. Wendy Warner, OBGYN, Owner
                                                Medicine in Balance

                                             Bill Berlinghof, Owner
                                Renaissance Ceramic Tile and Marble

                            Catherine Borowiec, Secretary/Treasurer
                                          Neurotech Solutions, Inc.

                                                 Mark Schmid, Owner
                                               Penn Turf Management

                                                      Connie Guldin
                                                    Guldin Painting

                                                Mike Fritz, Manager
                                                  A.T. Cigars, Inc.

    P.S. Attached is Ross' written testimony to the PA House Insurance 
Committee several years ago demonstrating the following of H.S.A. for 
the average American worker and the potential increased revenue that 
the Federal Budget can realize when employers switch to these lower-
cost plans.

                                 
        Statement of The Alliance for Academic Internal Medicine
    The Alliance for Academic Internal Medicine (AAIM)--the 
organization that represents program directors, administrative leaders, 
and faculty and staff responsible for the training of over 22,000 
residents and almost 10,000 fellows in the specialties of internal 
medicine--would like to thank the House Committee on Ways and Means for 
the opportunity to submit this statement for the record.
    For the past several months, congressional Committees, including 
the House Committee on Ways and Means, have worked tirelessly to 
research and evaluate potential solutions to solving the problems 
behind the Nation's desperate need for health care reform. Achieving 
affordable, accessible, and high-quality health care is at the core of 
the reform debate. However, in order to fully and effectively implement 
any potential health care reform policy, it is necessary to recognize 
the severe physician shortage the United States currently faces, 
particularly in primary care.
    According to the Association of American Medical Colleges, by 2025, 
there will be a shortage of at least 124,000 physicians by baseline 
projections. The physician population in shortest supply is primary 
care physicians. The shortage will continue to worsen as the demand for 
primary care physicians increases far more rapidly than the supply 
under current standards.
    Primary care physicians are critical to the health care delivery 
system and the health and wellness of the Nation. They are the ``first 
contact'' physicians responsible for providing comprehensive, 
coordinated, and continuous care for a patient's health care needs. 
Services provided by a primary care physician include care for all 
stages of life, acute care, chronic care, preventive service, and end-
of-life care.
    In response to a projected physician workforce shortage, AAIM 
recommends:

      Strategically increasing the number of Medicare-funded 
positions for primary care specialties to adequately meet the Nation's 
health care needs. For these new positions, Medicare should support the 
entire duration of training, which is typically 3 years (or 4 years for 
combined programs such as internal medicine-pediatrics). In addition, 
AAIM believes new primary care slots should be added in geographic 
areas of demonstrated need. Ultimately, all health care insurers should 
have a role in explicitly contributing to GME funding.
      Enhancing the attractiveness of primary care careers by 
altering the physician reimbursement system, increasing job 
satisfaction for current and future primary care practitioners, 
providing incentives for geographic distribution of primary care 
physicians to areas of greatest need, and applying innovations to 
educational models.
      Increasing efficiency in the health care delivery system 
by broadening the use of electronic health records (EHRs) and other 
advances in health information technology and capitalizing on the use 
of physician extenders. Additional options for improving health care 
delivery should be considered.
      Without a robust and equipped primary care physician 
workforce, the Nation's health care system will become increasingly 
fragmented and inefficient. As a result, access to high-quality and 
affordable health care will not be possible. The Nation's health and 
pocketbooks cannot afford to suffer any longer.

                                 
      Statement by Cori E. Uccello, American Academy of Actuaries
    Chairman Rangel, Ranking Member Camp, and distinguished Members of 
the Committee:
    As Congress examines the details of proposals to reform the health 
system, the American Academy of Actuaries' \1\ Health Practice Council 
appreciates this opportunity to submit written testimony outlining the 
key issues that need to be considered when evaluating whether a reform 
proposal will lead to a viable health insurance system.
---------------------------------------------------------------------------
    \1\ The American Academy of Actuaries is a 16,000-member 
professional association whose mission is to serve the public on behalf 
of the U.S. actuarial profession. The Academy assists public 
policymakers on all levels by providing leadership, objective 
expertise, and actuarial advice on risk and financial security issues. 
The Academy also sets qualification, practice, and professionalism 
standards for actuaries in the United States.
---------------------------------------------------------------------------
    The Academy's Health Council has identified three key criteria for 
whether particular reform approaches will lead to a sustainable health 
care system with increased access to affordable health insurance. In 
particular:

      For insurance markets to be viable, they must attract a 
broad cross section of risks;
      Market competition requires a level playing field; and
      For long-term sustainability, health spending growth must 
be reduced.

    This statement provides the considerations underlying each of these 
key factors as well as comments on whether the provisions in the Tri-
Committee health reform draft proposal conform with these criteria.
Insurance Markets Must Attract a Broad Cross Section of Risks
    For health insurance markets to be viable, they must attract a 
broad cross section of risks. In other words, they must not enroll only 
higher-risk individuals; they must enroll people who are lower risks as 
well. If an insurance plan draws only those with higher than average 
expected health care spending, otherwise known as adverse selection, 
then premiums will be higher than average to reflect this higher risk. 
Adverse selection is a byproduct of a voluntary health insurance 
market. People can choose whether or not to purchase insurance 
coverage, depending in part on how their expectations for health care 
needs compare to the insurance premium charged. The higher premiums 
that result from adverse selection, in turn, may lead to more lower-
risk individuals opting out of coverage, which would result in even 
higher premiums. This process is typically referred to as a premium 
spiral. Avoiding such spirals requires minimizing adverse selection and 
instead attracting a broad base of lower-risk individuals, over which 
the costs of higher-risk individuals can be spread. Attracting 
healthier individuals will ultimately help keep premiums more 
affordable and stable.
    How the various rules and regulations that apply to health 
insurance markets are defined can affect the degree of adverse 
selection. In particular, guaranteed-issue provisions, which prohibit 
insurers from denying coverage based on health status, can exacerbate 
adverse selection concerns by giving individuals the ability and 
incentive to delay purchasing insurance until they require health care 
services. Likewise, limiting or prohibiting premium variations by 
health status or other characteristics correlated with health spending 
can raise the premiums for younger and healthier individuals, relative 
to what they would pay if health status could be used as a rating 
factor. This could cause younger and healthier individuals to opt out 
of coverage, leaving a higher-risk insured population.
    Increasing overall participation in health insurance plans, 
especially among lower-risk individuals, could be an effective way to 
minimize adverse selection. One way to achieve higher participation is 
to require individuals to have insurance coverage. Other types of 
incentives are also available to increase participation, including: 
limiting open-enrollment periods with penalties for delayed enrollment, 
subsidizing premiums, and instituting automatic enrollment (i.e., opt-
out rather than opt-in provisions). The Medicare program includes some 
of these incentives. Nevertheless, an effective and enforceable 
individual mandate would likely achieve higher participation rates than 
these types of voluntary incentives. To be effective, however, 
penalties (or incentives) associated with an individual mandate need to 
be meaningful relative to the premium levels.
Relevant Provisions in the Tri-Committee Health Reform Draft Proposal
    The Tri-Committee health reform draft proposal contains many 
provisions that would impact the extent to which insurance markets 
would attract a broad cross section of risks. The proposal would 
require guaranteed issue and renewal for all health insurance coverage 
and would also limit premium variations to reflect age, geographic 
area, and family size. Furthermore, any premium variations by age would 
be limited to a 2-to-1 ratio between the highest and lowest premiums.
    Implementing these changes without making other changes to the 
incentives to purchase insurance coverage would exacerbate the extent 
of adverse selection, especially in the individual health insurance 
market. Individuals with higher than average health needs would be more 
likely to purchase coverage, while those with lower than average health 
needs would be more likely to forgo coverage, and the result would be 
higher premiums on average, relative to current premiums.
    However, the draft proposal also contains incentives for lower-risk 
individuals to purchase coverage. In particular, the proposal would 
require that individuals obtain coverage or pay a financial penalty of 
up to 2 percent of adjusted gross income. Employers would be required 
to offer and contribute to coverage for their employees or pay a fee 
based on 8 percent of payroll. In addition, premium subsidies would be 
available for low-income individuals and families to purchase coverage 
as well as tax credits to certain small businesses.
    The premium subsidies and coverage mandate would help to mitigate 
adverse selection arising from more restrictive issue and rating rules. 
It is important to recognize, however, that the impact of such 
requirements would vary across States, depending on their current 
market rules. For instance, in States that allow underwriting and 
premium variations by health status, the uninsured population may be 
less healthy, on average, than the insured population. Moving to 
guaranteed issue and prohibiting premium variations by health status 
would result in increased coverage among the less healthy population, 
potentially raising average premiums. The individual mandate would help 
moderate premium increases by ensuring that the healthy maintain (or 
obtain) coverage in those States.
    In contrast, in States that already prohibit underwriting and limit 
premium variations by health status or other factors that are 
correlated with health spending, the uninsured population may be 
healthier, on average, than the insured population. The individual 
mandate would increase the participation among lower-risk individuals, 
potentially lowering average premiums in those States.
    The effect of reform options, generally, on States with high-risk 
pools can also be complicated by whether the high-risk pool enrollees 
are incorporated into the individual market or whether the high-risk 
pools remain in place, even temporarily. According to the National 
Association of State Comprehensive Health Insurance Plans (NASCHIP), as 
of December 2007, 34 States had high-risk pools enrolling about 200,000 
individuals in the aggregate. These high-risk pools act as the insurer 
of last resort for otherwise uninsurable individuals, and the 
eligibility rules, covered benefits, cost-sharing requirements, plan 
administration, and funding can vary considerably by State. Premiums 
for individuals are typically capped at a certain percentage above the 
individual market premium for a similar benefit package, and the 
remainder of the cost is funded by the State. The Tri-Committee draft 
proposal indicates that individuals in State high-risk pools could 
potentially qualify as meeting coverage requirements. However, States 
may choose to discontinue their high-risk pools after the 
implementation of comprehensive national reform.
    The impact of an individual mandate can also vary by when it is 
implemented, compared with other market reforms. The Tri-Committee's 
draft proposal does not explicitly specify the timing of the 
implementation of the individual mandate compared with the imposition 
of guaranteed issue and modified community rating rules. To help ensure 
the enrollment of low-risk individuals, thereby minimizing adverse 
selection, it is important that the individual mandate be imposed in 
conjunction with the move to stricter issue and rating rules, not 
after.
    With respect to the degree of premium rate compression required in 
the draft proposal, achieving universal coverage through coverage 
mandates or other means reduces or eliminates altogether adverse 
selection in the health system as a whole by age, health status, and 
other characteristics that are correlated with health spending. If 
universal coverage could be achieved, it would be less necessary, from 
a plan solvency standpoint, to vary premiums by risk characteristics. 
The question of how to distribute the costs across the population would 
then become an issue of balancing the tradeoffs between individual 
financial equity and social equity. The draft proposal prohibits any 
premium variations except for those by age, geographic area, and family 
size. Moving to a narrow limit on premium variations by age, such as 
the proposed 2-to-1 limit, could result in dramatic premium changes, 
compared to what individuals are facing currently. In particular, 
younger individuals in States that currently allow underwriting and 
wider premium variations by age could see much higher premiums than 
they face currently (and may have chosen to forgo). The premium may 
also be high compared to the penalty of 2 percent of adjusted gross 
income, potentially reducing the effectiveness of the individual 
mandate. A broader allowable range in premium variations by age may 
cause less disruption, especially for younger individuals.
    Even if adverse selection is minimized in the health insurance 
system as a whole, some insurance plans could end up with a 
disproportionate share of high-risk individuals. One way to avoid 
adverse selection between plans is to ensure that all plans competing 
for the same participants operate under the same rules. An issue 
particularly relevant to this discussion relates to whether large 
groups would be eligible to purchase coverage through the Health 
Insurance Exchange. According to the draft proposal, initially only 
individuals and the smallest firms would be allowed to purchase through 
the Exchange. In subsequent years, however, larger firms would be 
allowed to purchase through the Exchange. An adverse selection concern 
arises if eligibility for the Exchange is extended to large firms which 
would normally self-insure. In particular, large firms with higher than 
average health spending could potentially benefit by joining the 
Exchange, whereas firms with lower than average health spending would 
continue to self-insure. Such adverse selection would increase the 
average premiums for those in the Exchange. It may be more appropriate 
to limit eligibility for the Exchange to firms that would not normally 
self-insure.
    Another issue related to potential adverse selection between plans 
is that plans could be at risk for financial losses if they enroll a 
disproportionate share of participants with above average health 
spending, especially when premiums are not allowed to vary by health 
status or other risk factors. Such threats to a plan's financial health 
could provide insurers an incentive to develop strategies to avoid 
enrolling less healthy individuals. To avoid these incentives and help 
ensure plans receive payments that are adequate relative to the risks 
they are bearing, the draft proposal includes a risk adjustment 
mechanism to adjust plan payments to take into account the health 
status and other risk characteristics of plan participants. This would 
help minimize the impact of adverse selection between plans in the 
Exchange. Nevertheless, it is important to recognize that risk 
adjustment mechanisms cannot fully mitigate the impact of adverse 
selection. In addition, some type of reinsurance mechanism could limit 
insurers' downside risk by protecting against unexpected high-cost 
claims.
Market Competition Requires a Level Playing Field
    For health insurance markets to be viable, plans trying to enroll 
the same participants must operate under the same rules. If one set of 
plans or insurers operate under rules that are more advantageous to 
high-risk individuals, then they will migrate to those plans; lower-
risk individuals will migrate to the plans more advantageous to them. 
In other words, the plans that have rules more amenable to higher-risk 
individuals will suffer from adverse selection. Over time, the premiums 
for these plans will increase to reflect this, leading to more adverse 
selection and threatening the viability of those plans.
    For example, if a regional health exchange or connector is created, 
and plans are offered inside and outside the exchange, the rules 
governing plans inside and outside of the exchange need to be the same. 
Otherwise either the plans inside the exchange or outside the exchange 
could get a disproportionate share of higher-risk individuals, 
depending on which set of plans is subject to rules that are more 
advantageous to those in poorer health. Level playing field issues 
arise not only with respect to health insurance exchanges, but also if 
insurance is allowed to be purchased across State lines or if a public 
plan option is offered alongside private plans.
    From an actuarial perspective, creating a fair and competitive 
marketplace requires several elements.

      All plan options must operate under the same rules. The 
issue and rating rules as well as any benefit package requirements must 
be the same for all health plans. In addition, any premium subsidies 
must be available for all plan options and any default enrollment 
mechanisms need to allocate eligible participants between all 
participating plans. Adhering to the same rules and regulations will 
help minimize selection between the plans, and will help ensure 
competition is based on efficiencies and quality of care rather than on 
differences in enrollee risk characteristics.
      Premium rates must be actuarially sound. Premiums must be 
adequate to cover claims incurred, all related operating expenses, cost 
of capital charges and a risk charge. To ensure plan solvency in the 
event that plan expenditures exceed premiums, private plans are 
required to carry capital/surplus (an excess of assets over 
liabilities) to cover potential deficits and to fund major investments 
in support of infrastructure. Premiums include a risk charge to absorb 
minor adverse fluctuations in claims and/or expenses from expected, and 
to accumulate target surplus (that is, a level of surplus appropriate 
to the risk). The danger of not having such mechanisms is that deficits 
in any given year would cause increases in premiums needed in 
subsequent years, above those needed due to increased health spending. 
Capital charges reflect the cost of obtaining operating capital.

    To ensure that any public plan premiums are self-supporting, and 
not reliant on general tax revenues, deficit spending, or 
intergenerational transfers, the public plan should include both a risk 
charge and a premium rate stabilization fund. Under this approach, 
public plan premiums would include capital charge and risk charge 
mechanisms to pay for the cost of capital and to fund a stabilization 
fund. A risk charge may look like a profit, but it is actually a cost 
of doing this business.

      Provider payments must be comparable for all plans. This 
is a particular issue if a public plan option is available. Setting a 
public plan's provider payment rates dramatically lower than those for 
private plans could help control plan costs, but could also result in 
cost shifting to private plans and reduced access to providers. Public 
plan provider payments should be set to balance the tradeoffs between 
ensuring adequate access to care and controlling plan costs.
      Any State requirements must apply equally to all 
participating plans. States place a variety of other requirements on 
private health plans, and these would need to also apply to a public 
plan option for the playing field to remain level. For instance, many 
States assess health plans to fund high-risk mechanisms, regulatory 
activities, and guarantee funds. States also require a variety of other 
nonbenefit requirements on health plans, ranging from consumer 
protections to market conduct examinations and audit and actuarial 
certification requirements. These requirements would need to apply to 
all participating plans, whether private or public, as appropriate.

Relevant Provisions in the Tri-Committee Health Reform Draft Proposal
    The Tri-Committee health reform draft proposal would establish a 
Health Insurance Exchange, and would create a new public plan option to 
be offered through the Exchange. Individuals would be able to purchase 
qualified coverage through the Exchange, and the ability for employers 
to purchase coverage through the Exchange would be phased in gradually 
by employer size, beginning with the smallest employers. Except for 
grandfathered coverage, qualified health insurance coverage would no 
longer be available in the individual market outside of the Health 
Insurance Exchange.
    The public plan would need to follow the same market rules and 
benefit requirements that apply to private plans. Although the stated 
intention of the public plan option is for it to be self-sustaining 
through premiums, it is unclear whether the draft proposal's provisions 
would ensure that. The draft reform proposal states that the premium 
rates shall include a contingency margin. But if this margin includes 
only a risk charge and not a capital charge, any ongoing costs of 
capital will not be reflected in the premium. In addition, the creation 
of a rate stabilization fund is not included in the draft proposal.
    The public plan option would also undermine the level playing field 
requirement that provider rates be comparable to the rates used by 
private plans. The draft proposal specifies that provider payments in 
the public plan would be set at Medicare rates (with 5 percent bonuses 
for certain providers), at least initially. This would create serious 
concerns regarding cost shifting to private plans as well as access to 
care issues for those enrolling in the public plan if providers refuse 
to see patients at the reduced rates. Even the largest private health 
insurance plans have commercial provider contracts significantly higher 
than 5 percent above Medicare rates, in almost all geographic markets.
For Long-Term Sustainability, Health Spending Growth Must Be Reduced
    According to National Health Expenditure data from the Centers for 
Medicare and Medicaid Services, health care spending increased 6.1 
percent in 2007. Although this is the lowest growth rate in a decade, 
it far exceeds the general rate of inflation, and exceeds the growth in 
the overall economy as well. If health spending continues to grow at 
this pace, as projected, health insurance premiums will continue to 
increase as well. Unless health care costs are controlled, efforts to 
achieve universal coverage could be undermined. Reining in health 
insurance premiums in the near term will be meaningless if rising 
health spending returns premiums to their original levels within a few 
years and continues to rise rapidly thereafter. To have the potential 
for sustainable success, health reform proposals need to include 
mechanisms that will control the rate of health spending growth. And 
because there is mounting evidence that the money being spent for 
health care is not providing enough value and that the vast variations 
in health spending across the country aren't correlated with variations 
in health care outcomes, spending growth should be addressed within the 
context of quality and value reforms.
    Several factors contribute to the growth in health spending, and 
there are options to address many of them, each offering promising 
opportunities to improve quality while reducing costs. The introduction 
of new technologies and treatments can increase health care spending by 
increasing utilization, particularly of higher-intensity services. More 
comparative effectiveness research should be conducted to better ensure 
that new technologies and treatments truly add value over their added 
costs. Another driver of health spending growth is the misalignment in 
current provider payment systems between provider financial incentives 
and the goal of maximizing the quality and value of the health care 
provided. Instead, the most common provider payment mechanisms reward 
more care, and more intense care. Restructuring provider payment 
systems could result in more coordinated, cost-effective, and higher-
quality care.
    Comprehensive insurance benefits, by lowering the cost of care to 
the insured, can also result in increased utilization of health care 
services. Although some utilization increases are for necessary care, 
some are for care that is unnecessary or of limited benefit. Plan 
design features such as cost-sharing requirements can be used to 
encourage more effective use of health care services. However, any 
incentives to make insureds, particularly those with chronic 
conditions, more sensitive to benefit costs should be balanced so that 
individuals are not discouraged from seeking needed care. Value Based 
Insurance Design (VBID), a relatively new concept in insurance benefit 
design, attempts to better target cost-sharing requirements so they 
more effectively encourage needed care, yet discourage unnecessary 
care.
Relevant Provisions in the Tri-Committee Health Reform Draft Proposal
    The Tri-Committee health reform proposal includes provisions that 
would shift the health care payment and delivery systems from rewarding 
quantity of care to rewarding quality of care. The proposal includes 
many cost containment and quality improvement strategies focused on the 
Medicare program and the public plan option, including provider payment 
and delivery system reforms that provide incentives for coordinated and 
cost-effective care. A comprehensive and coordinated approach to 
addressing quality and costs is needed to fundamentally transform the 
health system to ensure its long-term sustainability.
Conclusion
    The American Academy of Actuaries' Health Practice Council has 
identified three key considerations that are vital when determining 
whether particular reform approaches will lead to a sustainable health 
system with increased access to affordable health insurance. In 
particular, for insurance markets to be viable they must attract a 
broad cross section of risks; market competition requires a level 
playing field; and for long-term sustainability, health spending growth 
must be reduced. As Congress moves forward on a health reform proposal, 
it should ensure that its provisions adhere to these criteria.

                                 
               Statement of the ERISA Industry Committee
    The ERISA Industry Committee is an association committed to the 
advancement of the employee retirement, health, incentive, and welfare 
benefit plans of America's largest employers. ERIC's members provide 
comprehensive health benefits directly to some 25 million active and 
retired workers and their families. ERIC has a strong interest in 
proposals that affect its members' ability to continue to deliver high-
quality, cost-effective benefits.
    We must change the way we pay for and deliver health care in the 
United States. Reining in health care costs is absolutely essential to 
this country's future economic success. ERIC strongly supports reforms 
to the Nation's health care system that will increase its efficiency, 
reduce costs, and extend health care coverage to those who are 
uninsured or underinsured.
    ERIC has thought deeply about this subject. In 2007, we released A 
New Benefits Platform for Life Security that lays out our vision of a 
conceptual framework for overhauling our national approach to providing 
health and retirement security. Many of the positions we staked out in 
this Platform have been incorporated into proposals currently under 
consideration in Congress.
    Three basic principles are of fundamental importance to change and 
must be considered as we move forward.

1.  Do no harm. The current voluntary employment-based system provides 
health coverage to 170 million people, about 61% of the non-Medicare 
population. This system has served both employers and employees well. 
Employers have the flexibility they need to tailor their plans to the 
needs of their workforce while also aggressively pursuing the 
innovative changes that have led to substantial advancements in so many 
arenas, including the fields of wellness and prevention. Employees 
strongly support their employer provided benefits and benefit 
significantly from this system. They enjoy access to high-quality care 
with guaranteed issue, limited preexisting condition exclusions, a 
uniform premium structure, and the other advantages afforded 
participants in the large risk pools of group plans. Any health care 
reforms should build on the strengths of this system.

2.  Control costs. The relentless increases in the cost of health care 
threaten the viability of U.S. corporations in a global economy, while 
the upward spiral in the costs of Medicare and Medicaid threatens our 
national solvency. In addition, a substantial portion of the health 
care we now consume, perhaps as much as 20% to 40%, has no value. The 
centerpiece of health care reform must focus on reducing these costs. 
Reform that fails to focus on cost control will not only ultimately 
prove ineffective but will undermine health care coverage.

3.  Expand access. Forty-sevem million Americans do not have adequate 
access to health care. Of those, approximately half are unable to 
afford coverage. History will not judge kindly an affluent society that 
ignores this problem. We must remember, however, that inadequate access 
is aggravated, if not caused, by the high level of cost. Our 
effectiveness in solving the access problem depends on restraining the 
growth of health care costs.

    With these foundation principles in mind, we lay out what ERIC can 
support in a responsible health care reform initiative:

1.  ERIC strongly supports a competitive, pluralistic health care 
system in which employers and individuals have choices among several 
health plans that compete on the basis of quality, cost, and 
effectiveness. There is an urgent need to eliminate the significant 
waste in the current health care delivery system, establish a 
foundation for responsible cost management in the future, and 
systematically ensure quality health care for all Americans. Too many 
reforms pursued in the past have made changes at the edges of health 
care delivery when fundamental structural changes are needed. ERIC 
believes that a properly designed, responsibly regulated pluralistic 
system will be able to correct the deficiencies in the current system 
and produce significant improvements in costs, quality, and access.

2.  ERIC's New Benefits Platform supports the establishment of an 
insurance exchange or gateway that provides a fair and equitable method 
for the distribution of insurance products. If exchanges are 
established, they should follow uniform national standards.

3.  Employers should be given broad flexibility regarding how they 
choose to provide health benefits to their employees and their families 
but should be protected from systematic adverse selection by the plans 
in the exchange. Employers should be given the option of choosing to 
continue in the current system and arrange for and sponsor their own 
health plan alternatives. At the same time, employers should have the 
flexibility to provide financial resources to their employees to 
purchase health plans through the insurance exchange from among 
competing health plans. The employer should not be required under any 
circumstance to provide financial resources to employees to purchase 
insurance through an insurance exchange when the employer has chosen to 
continue in the current system. To allow this would create systematic 
adverse selection problems that could ultimately result in the demise 
of the employer-based system. This is inconsistent with the stated 
objectives of the President to support the continuation of the current 
system.

4.  Incentives in the current financing system must be changed from 
risk avoidance to responsible cost management. The foundation principle 
of a fair and equitable financing system for health care must be that 
the cost of disease and injury must be distributed across all plans 
offered through the exchange. In the end it is the expectation that 
health plans offered through the exchange should be strongly 
incentivized to differentiate their products and premiums based on 
efficiencies generated by better administrative practices derived from 
improved payment systems, disease management, utilization management, 
case management, lifestyle management and other innovative initiatives 
designed to lower cost, increase quality and improve accountability. 
Large employer plans have pursued these goals with notable success.

5.  Transparency and accountability of both providers and health plans 
must be improved.

    There has been much discussion on the need for better 
provider transparency in terms of both cost and quality. We are fully 
supportive of these initiatives.
    There has been less discussion about the need for better 
health plan transparency and accountability. It is widely recognized 
that the practices of some private health plans create an enormous 
frustration to both consumers and providers of health care. Medicare 
does provide a good example of more consistent administration of health 
plans. In a restructured system, it will be important to establish 
mechanisms where there can be standardization and full transparency of 
administrative practices of health plans that are offered through the 
exchange. This might include disclosure of health expense loadings, the 
number and cost of denied claims, the efficiency of claims 
administration and other administrative practices, and consumer 
assessments of each health plan.

6.  ERIC strongly supports payment reform. There is strong evidence 
that financial incentives must drive the changes that are desired. 
President Obama's Budget Director, Peter Orszag, recently stated that, 
for example, ``nearly 30% of Medicare's cost could be saved without 
negatively affecting health outcomes if spending in high and medium 
cost areas could be reduced to the level in low cost areas.'' In both 
the private and public sectors, we must stop rewarding providers for 
doing more and instead incentivize them to provide high-quality health 
care that delivers true value to the American consumer. It is 
irresponsible to perpetuate a system in which between 20% and 40% of 
the health care delivered has no value. Payment reform is essential to 
this objective.

7.  Every citizen should be required to obtain health care coverage, 
with standards established at the Federal level. Because a significant 
portion of the population is unable to afford adequate coverage, ERIC 
would support subsidies to assist financially disadvantaged 
individuals.

    We must also call attention to the areas in current legislative 
proposals where the ``Do no harm'' principle is most at risk.
Taxation of Benefits
    Several proposals have been made to curtail the favorable tax 
treatment for employees of employer-provided health benefits. One 
proposal would eliminate the exclusion entirely. Others would impose a 
cap based on the value of health insurance, an individual's income, or 
a combination of the two.
    ERIC has serious concerns with limiting the ability of an employee 
to exclude from income the value of employer-provided health insurance. 
If this exclusion were curtailed, many large employers would follow one 
of two approaches. Some would redesign their plans to meet the new cost 
standard in the legislation, below which taxation would not be imposed. 
This would necessarily mean that their employees would be provided with 
less generous health coverage.
    Other employers would choose to keep their existing plans; if the 
value of the plan exceeded the standard in the legislation, employees 
would face taxation on the ``excess'' value. If this were to occur, 
employment-based insurance would suffer. Young, healthy employees would 
either seek to exit their employers' plans in search of cheaper 
coverage rather than pay taxes on a more expensive plan or pressure 
their employers to reduce coverage. If younger workers sought cheaper 
coverage elsewhere, an employer plan that once had a favorable and 
balanced risk pool would now be left with an older, sicker, more costly 
population whose premiums would eventually become unsustainable. Loss 
of a large, viable risk pool would greatly diminish an employer's 
ability to offer efficient and innovative health care coverage to its 
employees. As the cost of providing benefits increased, more employers 
would exit the system.
    There are also equity and administrative issues associated with a 
tax cap that need to be carefully assessed. We are concerned that if a 
cap is to be imposed, it not discriminate against individuals by virtue 
of higher premium costs due to geography, the demographic composition 
of the group, or because they happen to work for a small firm.
A Public Plan
    ERIC has several serious concerns with the creation of a public 
plan that would compete with the current private marketplace. Although 
at present we do not know how this new plan would be structured, we 
have profound reservations with the prospect of a public plan modeled 
after Medicare. Medicare does provide an example of an efficient, 
consistent, and fair claims administrator; there are also examples of 
consistent, fair claims administrators among private health plans. 
Medicare is not, however, a sterling example of what a restructured 
financing system should look like. In fact, Medicare has perpetuated 
some of the cost problems that we have in our current health care 
system by rewarding those who provide more care, regardless of value.
    Our most fundamental concern with a public plan based on Medicare, 
however, is the potential for even greater cost-shifting than exists 
today. Right now ERIC members subsidize the cost of Medicare. This 
includes both administrative and claim costs. One example of the 
administrative subsidy relates to the fact that Medicare does not pay 
anything for transaction fees associated with the electronic movement 
of claims from providers to Medicare intermediaries. These transaction 
costs are not free. They must be absorbed by other paying customers, 
including employer plans.
    Moreover, according to most providers, Medicare's reimbursement 
rates do not cover their costs. Contrary to what many people say, these 
rates are not negotiated, they are mandated. Providers argue that in 
most cases they accept these rates because they want to continue 
treating patients that have been treated all of their lives. Hospitals 
argue that they have no choice. They believe that they survive only 
because they are able to charge higher rates to private plans and other 
customers. In short, the provider shortfall from Medicare is shifted to 
the private sector, a practice that is unacceptable in a reformed 
system.
    At the end of the day, ERIC's position is that if a public plan 
could be fairly fashioned, it must not be structured in such a way that 
employer plans end up bearing the burden of additional cost shifts. 
Health care costs are already rising at an unsustainable rate. 
Increased cost-shifting would trigger the warning light that causes 
employers to rethink whether they can afford to provide high-quality 
health care to their employees. An exodus of employment-based plans 
from the Nation's health care system would diminish the development of 
practices to improve the quality of health care and the pursuit of 
innovative strategies to bring health care costs under control that are 
core strengths of the employment-based system.
Employee Opt-Outs
    We are also concerned about the adverse selection that would be 
experienced if individual participants in employer-sponsored plans were 
permitted to opt out of the employer plan and into a public plan, 
especially if the employer were compelled to pay for the individual's 
participation in the public plan and/or finance any subsidy given low-
income individuals who opted out. If permitted, an opt-out would 
undermine the demographic fairness of a large risk pool that is a 
feature of employer plans. Over time, young, healthy employees would 
seek cheaper coverage outside of the employer's plan, and older, sicker 
employees would remain in the plan. Eventually, employer plans would 
become havens for employees with the worst risk profiles, and this 
would be reflected in ever-higher premium costs. At some point, 
employers would no longer be able to provide affordable coverage to 
their workers.
Employer Mandates
    Employer mandates, especially their manifestation in the ``pay-or-
play'' penalties currently under discussion, have the potential to 
seriously harm employer-sponsored plans. ERIC members generally provide 
high-quality benefits with generous employer contributions; thus, it 
would appear that a ``pay-or-play'' requirement would have little or no 
relevance for us. As we have learned from the experience in 
Massachusetts, however, this is not always the case, and--as is so 
often true in life--the devil is in the details. For instance, if the 
employer mandate only required that employers offer a set minimum 
package of benefits to employees that met a specified, modest actuarial 
value, then many--but not all--major employers would meet that bar. But 
if the mandate were to require that all full-time employees were to be 
covered, and full-time were defined as working 25 hours per week, many 
other employers would drop below the bar. If the mandate were to 
further include no cost-sharing for prevention or wellness and full 
coverage of mental health benefits, others would drop out.
    Employer mandates by definition restrict our ability to devise and 
operate health care plans that best meet the needs of our employees. 
Mandates increase costs and limit flexibility. Coupled with punitive 
regulatory regimes, employer mandates will discourage employers from 
continuing to provide quality, affordable health care to their 
employees. This is not an idle threat; one need look no farther than 
the Nation's moribund defined benefit plan system to see the effects of 
overly complex rules and regulations.
Preemption
    It is absolutely essential that ERISA's preemption doctrine not be 
breached. Without the national uniformity made possible by ERISA's 
preemption doctrine, large multistate employers simply could not offer 
quality health care coverage to their employees. Its importance was 
recognized by the original sponsors of ERISA as critical to ensuring 
that employers provided sound and secure benefits. Any future 
legislation must continue to accord preemption and national uniformity 
of regulation a similar priority.
Conclusion
    ERIC is committed to the goal of reforming the Nation's health care 
system in a responsible manner that will extend health care to those 
without it and that will reverse the current fatal escalation in the 
costs of health care. Equally important is that this reform be 
accomplished without undermining the system that currently offers 
quality health care to 170 million satisfied Americans.
    ERIC intends to continue to play a constructive role in this 
debate.

                                 
                Statement of The Senior Citizens League
    On behalf of the approximately 1 million members of The Senior 
Citizens League (TSCL), a proud affiliate of The Retired Enlisted 
Association (TREA), thank you for the opportunity to submit a statement 
regarding health care reform. TSCL consists of active senior citizens, 
many of whom are low income, concerned about the protection of their 
Social Security, Medicare, and veteran or military retiree benefits.
    Our members are very concerned with the rising cost of health care. 
According to a recent survey that TSCL conducted in early 2009, some 41 
percent of seniors responding said they occasionally cut back on visits 
to the doctor in the past year due to the economy. Another 21% said 
they ``frequently'' did so. With skyrocketing Medicare premiums and 
out-of-pocket expenditures, coupled with predictions of no cost-of-
living adjustment (COLA) for 2010 and 2011, TSCL is highly concerned 
that many seniors, or their caregivers, will be forced to choose 
between life-saving medications or paying for groceries or other bills.
    Making health care affordable and accessible for all Americans--
young and old--is of the utmost importance. However, we realize that 
there is an enormous pricetag associated with this vision. President 
Obama's Administration presented a ``down-payment'' of approximately 
$634 billion over the next 10 years in its proposed budget for fiscal 
year 2010. Of this total, an estimated $316 billion is expected to come 
from changes to Medicare payments and reducing fraud. With this in 
mind, TSCL encourages Members of Congress to support including the 
following items in any health care reform package.
    TSCL and its supporters believe that substantial savings to the 
Medicare program could be gained with a few adjustments to current 
examples of waste, fraud and abuse. Many groups, including the 
Government Accountability Office (GAO) and Inspector General, have 
reported that the Federal Government is overpaying the Medicare 
Advantage (MA) insurers by about 14% or more. First, payments to 
Medicare Advantage plans should be reevaluated by Congress. 
Additionally, the Centers for Medicare and Medicaid Services (CMS) 
should complete drug plan and MA plan audits as required by law. Plans 
should be required to refund overpayments, if any, to affected Medicare 
beneficiaries.
    TSCL also believes that provisions, such as those in Senator Mel 
Martinez's (FL) Seniors and Taxpayers Obligation Protection (STOP) Act, 
would prevent the loss of billions of dollars from Medicare through 
prevention of waste, fraud and abuse. For example, the GAO estimates 
that improper payments for Medicare Fee-for-Service and Medicare 
Advantage totaled $17.2 billion in fiscal year 2008.\1\
---------------------------------------------------------------------------
    \1\ ``Progress Made but Challenges Remain in Estimating and 
Reducing Improper Payments.'' Testimony of Kay L. Daly before the 
Subcommittee on Federal Financial Management, Government Information, 
Federal Services, and International Security, Committee on Homeland 
Security and Governmental Affairs, U.S. Senate, April 22, 2009.
---------------------------------------------------------------------------
    TSCL believes that additional savings could result if consumer 
access to affordable prescription drugs is made possible by Food and 
Drug Administration (FDA) approval of the importation of safe 
prescription medications from selected countries. During the 110th 
Congress, the Congressional Budget Office (CBO) estimated that, if 
enacted, Senator Byron Dorgan's (ND) Pharmaceutical Market Access and 
Drug Safety Act would result in a $5.4 billion reduction in direct 
Federal spending for prescription drugs and a $5.2 billion increase in 
Federal revenues over 2009-2017. The CBO also estimated that this 
legislation would reduce total drug spending in the United States by 
$50 billion over 10 years.\2\
---------------------------------------------------------------------------
    \2\ ``Pharmaceutical Market Access and Drug Safety Act Frequently 
Asked Questions,'' www.dorgan.senate.gov/issues/families/rx/faqs/.
---------------------------------------------------------------------------
    TSCL adamantly opposes means testing and encourages Congress and 
the Administration to not expand it to Medicare Part D premiums. 
Monetary funds from a one-time high-income (e.g., property sale, lump 
sum distribution of a pension account, etc.) or retirement savings 
should not be used to determine higher-income-based Medicare premiums 
for persons who would not normally be required to pay the higher fee. 
Because Part D plan premiums vary tremendously, implementation may be 
extremely difficult. Another challenge that could present itself is 
protecting beneficiaries' sensitive tax information from misuse by 
private health plans.
    In 2009, approximately 2.2 million affected seniors \3\ pay at 
least $38.50 and up to $211.90 per month in addition to the standard 
monthly premium of $96.40.\4\ This is the first year that beneficiaries 
pay fully phased-in higher premiums. Despite a `break' in 2009, the 
standard Medicare Part B premium has increased from $45.50 per month in 
2000 to $96.40--that is 111.8%! This percentage does not take into 
account the increases in premiums due to means testing. TSCL is 
supportive of legislation that would eliminate the means test applied 
to Medicare premiums. During the 110th Congress, Rep. Nita Lowey (NY) 
introduced H.R. 4330, which would have eliminated means testing for 
Medicare Part B premiums.
---------------------------------------------------------------------------
    \3\ ``CMS Announces Medicare Premiums, Deductibles for 2009,'' CMS, 
September 19, 2008.
    \4\ http://www.ssa.gov/pubs/10161.html. March 9, 2009.
---------------------------------------------------------------------------
    TSCL also supports legislative action that would either reduce or 
eliminate the coverage gap, often referred to as the `doughnut hole.' 
For 2009, seniors falling into the gap must pay $3,454 in out-of-pocket 
expenses before Part D coverage begins again. When premiums, 
deductibles, and copays are factored in, in premiums, deductibles, and 
copays, the beneficiary must spend $4,350 out-of-pocket before 
catastrophic coverage. Unfortunately, there are few Part D plans that 
offer gap coverage, and those that do typically cover only generic 
prescriptions.\5\ The beneficiary that takes a brand-name medicine for 
which there is no generic or that takes a costly specialty tier drug is 
often forced to choose between taking their meds and paying for other 
necessities.
---------------------------------------------------------------------------
    \5\ ``Medicare Part D 2009 Data Spotlight: The Coverage Gap,'' 
Kaiser Family Foundation, November 2008.
---------------------------------------------------------------------------
    Senator Bill Nelson (FL) introduced the Medicare Prescription Drug 
Gap Reduction Act of 2009, which, if signed into law, would amend the 
Medicare portion of the Social Security Act to reduce the Part D 
doughnut hole due to savings resulting from negotiated prescription 
medication prices. The Federal Government would be able to do such 
negotiations under the umbrella of Department of Health and Human 
Services (HHS), with its Secretary acting as a liaison/negotiator.
    Included in the American Recovery and Reinvestment Act of 2009 \6\ 
was approximately $1.1 billion for Comparative Effectiveness Research 
(CER). Although language was included that stated CER should not be 
used by Medicare and private insurers to deny care or leave patients 
with uncovered costs, TSCL believes that this should not be overruled 
by health care reform legislation. Beneficiaries rely on Medicare to 
cover all medically necessary costs. Changing the ``medically 
necessary'' policy could prevent seniors from getting certain types of 
care that impose much higher new costs on sick patients.
---------------------------------------------------------------------------
    \6\ Public Law No. 111-5.
---------------------------------------------------------------------------
    Take for example virtual colonoscopies. CMS ruled that virtual 
colonoscopies will not be covered because there was ``insufficient 
evidence'' to conclude that virtual colonoscopy ``improves outcomes in 
Medicare beneficiaries.'' \7\ However, the public may be interested in 
receiving more information about available treatment options. Some 
patients may find it less invasive and thus be more willing to undergo 
the treatment. On the other hand some specialists say virtual 
colonoscopies may expose patients to more dangerous levels of radiation 
than conventional methods. This information, which is of the greatest 
use to patients, was never even mentioned in general media stories on 
this coverage decision.
---------------------------------------------------------------------------
    \7\ ``Cost Effectiveness of Colorectal Cancer Screening With 
Computed Tomography Colonography,'' Medicare and American Cancer 
Society, April 23, 2007. ``Medicare Blow to Virtual Colonoscopies,'' 
Andrew Pollack, The New York Times, February 13, 2009, http://
www.nytimes.com/2009/02/13/health/policy/
13colon.html? _ r=1&scp=1&sq=Medicare%20Blow%20to%20Virtual%20 
Colonoscopies&st=cse.
---------------------------------------------------------------------------
    If taxpayer supported research is made public, it holds the 
potential to save lives and some people may prefer safer forms of 
treatment when possible. However, TSCL fears that without proper 
oversight, CER could be used by Medicare and private insurers, to deny 
treatment on the basis of cost-effectiveness--despite the fact that 
patients may not have the same reaction to the same prescribed 
treatment. As such, TSCL recommends that legislators and the 
Administration ensure that CER is easily accessible by the entire U.S. 
public, and that it is used to help patients and their health care 
providers make informed decisions regarding medical treatment.
    Another concern that many groups, including TSCL, and some 
legislators have is that CER may lead to age-based health care 
rationing. Presently, there is nothing set in stone that mandates 
limiting health care to persons on the basis that he/she is too old to 
receive such a treatment and should accept the condition as something 
that comes with age. There are, though, hospitals that have adopted a 
type of health care rationing on the basis of their legal status or 
whether or not the patient has an outstanding payment balance.\8\ 
Extending this practice to senior citizens is something that could 
happen and some argue should happen to help the Federal Government cut 
costs. TSCL believes that medical treatment should not be denied to 
anyone on the basis of his or her age. Again, CER managed by a Federal 
health care board should be primarily used to help--not deny--care as 
doctors, patients, and their families make informed decisions about the 
available treatment for that individual.
---------------------------------------------------------------------------
    \8\ ``Rationing Health Care Among the Uninsured: Practice Becomes 
More Common at U.S. Hospitals,'' Robert Bazell, Chief Science and 
Health Correspondent, NBC News, February 24, 2004.
---------------------------------------------------------------------------
    TSCL also strongly opposes changes to Medicare that would increase 
costs for beneficiaries. According to a recent TSCL survey, the 
overwhelming majority of respondents said they are highly concerned 
about Medicare reform proposals that would increase out-of-pocket costs 
and at the same time would restrict what Medicare supplements or 
Medigap plans are allowed to cover.
    Currently, most Medigap plans cover almost all of the deductibles 
and cost-sharing. Seniors and the disabled purchase the plans precisely 
because they need protection from the large out-of-pocket costs that 
Medicare does not currently cover.
    Nevertheless, several budget options to control Federal spending on 
Medicare, cited in testimony in February to the Senate Committee on 
Finance by the Congressional Budget Office would:

      Impose a new $500 deductible for an estimated three-
quarters of Medicare beneficiaries.\9\
---------------------------------------------------------------------------
    \9\ ``Options for Expanding Health Insurance Coverage and 
Controlling Costs,'' Statement of Douglas W. Elmendorf, Director, 
Congressional Budget Office, Before the Senate Committee on Finance, 
February 25, 2009.
---------------------------------------------------------------------------
      Mandate coinsurance for certain services such as home 
health care that currently are not subject to cost sharing.
      Prohibit Medigap plans from covering the new deductible 
and restrict plans to covering only 50% of cost-sharing.

    Beneficiaries could potentially face up to $2,888 in out-of-pocket 
expenses (not counting premiums) in 2011 and the maximum out-of-pocket 
would increase every year after that.\10\
---------------------------------------------------------------------------
    \10\ Budget Options Volume I, Health Care, Congressional Budget 
Office, December 2008.
---------------------------------------------------------------------------
    The Senate Finance Committee recently released a document, 
Financing Comprehensive Health Care Reform: Proposed Health System 
Savings and Revenue Options, which addressed these same budget 
proposals to alter Medicare co-insurance coverage. These proposals 
would prevent seniors from receiving the full supplemental coverage for 
their Medicare co-insurance and cost-sharing that they pay for and rely 
on today. Increasing out-of-pocket costs for supplemental coverage will 
only exacerbate the financial problems encountered by seniors who are 
trying to make ends meet and could lead to more hospital admissions if 
seniors avoid necessary visits and screenings. Additionally, the media 
is full of stories about seniors who have been forced to file 
bankruptcy due to uncovered Medicare costs.
    Seniors and the disabled already spend a larger portion of their 
incomes on health care than younger Americans. Thus, TSCL believes it 
would be poor policy to finance an expansion of health care coverage to 
younger Americans by shifting higher costs to the oldest and sickest 
family members.
    TSCL also supports extending ``hold harmless'' protection to 
beneficiaries who receive Medicare Part D. The CBO is predicting no 
Social Security Cost of Living Adjustment for 2010 and 2011.\11\ TSCL 
is concerned about Medicare drug plan premiums increasing (in addition 
to Part B for some beneficiaries) in years when there is no Social 
Security COLA. The ``hold harmless'' provision prevents the vast 
majority of beneficiaries from receiving smaller Social Security checks 
in years when Medicare Part B premiums exceed the COLA. Currently, 
``hold harmless'' protection applies only to Medicare Part B as there 
is no provision protecting the Social Security benefits of those who 
receive their coverage through Part D and have premiums deducted from 
their benefits. Assuming most drug plans will increase premiums, TSCL 
estimates that at least 6.3 million beneficiaries enrolled in Part D 
plans would see a reduction in Social Security benefits because of the 
increases.12,13
---------------------------------------------------------------------------
    \11\ A Preliminary Analysis of the President's Budget and an Update 
of CBO's Budget and Economic Outlook, Congressional Budget Office, 
March 2009.
    \12\ Medicare Trustees Report, May 12, 2009.
---------------------------------------------------------------------------
    \13\ Medicare Premium Withholding, GAO, July 15, 2009.
    TSCL would also support an ``emergency COLA,'' paid out of Social 
Security payroll taxes, to Social Security beneficiaries to offset the 
increase in Medicare premiums. This would help to preserve 
beneficiaries' current and future buying power and potentially lower 
overall beneficiary Part B premium costs. To prevent inequities among 
beneficiaries TSCL supports an ``emergency COLA'' for all Social 
Security recipients.
    The ``emergency COLA'' could be set at a level that would cover the 
cost of Part B premium increases for beneficiaries. This would 
potentially mitigate a very stiff projected jump in Part B premiums. If 
no action is taken, Medicare Trustees estimate that Part B premiums for 
beneficiaries not covered by the ``hold harmless'' provision would 
increase from $96.40 per month in 2009 to $104.20 per month in 2010, 
and $120.20 per month in 2011.\14\ Providing an ``emergency COLA'' 
eliminates the need for the ``hold harmless'' provision for Part B in 
2010 and the beneficiary portion of the cost of premiums could thus be 
spread over 42.4 million rather than just approximately 10 million.
---------------------------------------------------------------------------
    \14\ Medicare Trustees Report, May 12, 2009.
---------------------------------------------------------------------------
    There are countless additional provisions that will be debated, but 
one thing remains certain--beneficiaries should be protected and their 
health should come first. Protecting Medicare for current and future 
retirees is essential, and TSCL respectfully requests that any proposed 
changes impacting America's senior citizens be carefully considered.
                                 
                      Statement of Larry S. Gage,
      National Association of Public Hospitals and Health Systems
    The National Association of Public Hospitals and Health Systems 
(NAPH) greatly appreciates this opportunity to submit a statement for 
the record in connection with your June 24, 2009 hearing on Health 
Reform in the 21st Century. Specifically, we would like to share with 
you our comments on the Tri-Committee bill under consideration at that 
hearing, with particular attention to the role of NAPH members and 
other safety net hospitals and health systems in a reformed health care 
system.
    We would like to begin by extending our support to this Committee, 
as well as to the Congress and the Administration, for their historic 
efforts to reform our Nation's health care system. In particular, we 
support your goal of extending comprehensive health coverage to all 
Americans. For far too long, tens of millions of vulnerable individuals 
have been unable to access affordable health care coverage. These 
people not only fail to benefit from the knowledge and care made 
possible by the advances in American medicine, but do not even have 
ready access to basic preventive and primary medical, dental, and 
behavioral health care.
    We also would like to acknowledge the many sound substantive 
policies lying at the heart of the Tri-Committee bill. The initiatives 
you have proposed address many weaknesses that underlie the existing 
delivery system, including fragmented care, wide disparities in the 
type and quality of services available to different populations, and 
workforce training that does not align with our system's needs. NAPH 
supports Congress' efforts to promote integration and care 
coordination, to address disparities in care, and to invest in primary 
care training.
    We also deeply appreciate that the Tri-Committee bill preserves 
critical support for safety net hospitals--and in particular 
Disproportionate Share Hospital (DSH) payments--thereby protecting the 
vulnerable patients that these hospitals serve currently and will 
continue to serve under a reformed system. Just as there is widespread 
agreement that health reform should include increased investment in 
community health centers--an approach that NAPH supports--a similar 
investment in ensuring a viable safety net beyond primary care is 
equally critical. As coverage expands, many newly-covered patients will 
have gone long periods of time without care. We can anticipate pent-up 
demand not only for primary care services, but also for resulting 
specialty and acute care services for which patients are going to need 
to be referred. Strong community health centers and safety net 
hospitals will both be required to provide newly-insured and other 
vulnerable groups with meaningful access to health care.
    We would like to focus our testimony on the role of safety net 
hospitals under health reform. Simply stated, America will continue to 
depend on safety net hospitals and health systems even if we are able 
to extend health coverage to all. Massachusetts health reform was 
premised on the belief that the need for safety net hospitals would 
decline once health reform took hold. Policymakers had assumed that 
when previously-uninsured individuals enrolled in the new coverage 
options, they would begin using a broader network of providers and that 
the new insurance payments would encourage competition for these 
patients. This assumption proved false, these patients have continued 
seeking care at safety net hospitals, and the State has scrambled to 
find new support for these providers before the unforeseen losses 
arising out of health reform completely undermine the State's health 
care safety net.
    This statement will briefly describe NAPH, and then will address 
the following four topics:

      The role of safety net hospitals and health systems in 
health reform, including the use of coordinated care networks.
      The ongoing need for DSH payments under health reform.
      Graduate medical education.
      Other Medicare payment issues.

NAPH

    NAPH members include over 140 of the Nation's largest metropolitan 
area safety net hospitals and health systems. Located across the 
county, our members include hospitals and systems such as the Alameda 
County Medical Center, Hurley Medical Center, and the New York City 
Health and Hospitals Corporation. These systems have traditionally 
served as the primary source of care for many low-income populations, 
including Medicaid recipients, patients unable to access insurance, and 
individuals who find their health coverage inadequate. On average, 
roughly 60 percent of patients served by NAPH members are enrolled in 
Medicare and Medicaid, and another 20 percent are uninsured. Although 
NAPH members account for only 2 percent of hospitals nationwide, they 
provide 20 percent of the Nation's uncompensated hospital care. The 
amount of uncompensated care provided by NAPH members has increased 
significantly in the last year due to the economy, underscoring the 
need for comprehensive health reform that provides meaningful coverage 
and access to care to all Americans. In the last quarter of 2008, NAPH 
members experienced a 10 percent increase in uncompensated care costs 
compared to the same quarter of 2007, an average per-hospital increase 
of $3 million.
The Role of Safety Net Systems in Health Reform
    Enacting comprehensive health reform legislation will be only the 
first step to achieving universal coverage. The Tri-Committee bill does 
not envision full coverage initiatives commencing until 2013, and the 
health reform initiatives of Massachusetts, Maine, Vermont and others 
confirm that the process of expanding health coverage to all Americans 
will take several years. During this time, the need for safety net 
hospitals likely will expand, rather than contract. In fact, any 
coverage expansion's success will hinge, in part, on using safety net 
hospitals and health systems to engage low-income and other hard-to-
reach populations, ensuring that these individuals take advantage of 
the new, affordable coverage opportunities.
    During the transitional years, safety net hospitals will continue 
providing high-quality services to all those seeking care, regardless 
of insurance status. Many people likely will remain uninsured during 
health reform's initial years, and safety net systems likely will 
continue treating a disproportionate number of these patients.
    Given safety net health systems' uninsured volumes, they also are 
uniquely positioned to facilitate enrolling the uninsured into new 
coverage vehicles. To the extent that health reform expands Medicaid 
eligibility in certain States, those States likely will rely on safety 
net hospitals to identify newly-eligible patients. Safety net hospitals 
also will serve as entry points for individuals not eligible for public 
coverage, but who can enroll in subsidized and unsubsidized private 
coverage. Given our members' deep knowledge of their patients' unique 
needs, safety net health systems will be able to facilitate enrollment 
in the most suitable plans, whether that be Coordinated Care Networks 
(described below) or other plans offered by private or nonprofit 
insurers through the Health Insurance Exchange.
    Coordinated Care Networks (CCNs) have the potential to serve as a 
vehicle for transitioning to a reformed health care system and for 
ensuring that the newly-insured receive ongoing care that addresses 
their unique needs. Attached to this statement is NAPH's proposal to 
develop CCNs. CCNs would be integrated health care delivery systems for 
low-income populations, voluntarily formed by public and private safety 
net providers. CCNs would provide support for integrated delivery 
systems to coordinate the full range of care--primary care to hospital 
and post-acute care--for low-income individuals and families, including 
Medicaid patients, Medicare beneficiaries (including dual eligibles), 
the uninsured and those who may be newly covered under health reform. 
CCNs would focus on improving both quality and efficiency of care for 
these vulnerable patient populations, and would ensure that their 
enrollees continue to have a range of necessary ``wrap-around'' support 
services that may not be needed by the rest of the population. Given 
the high costs associated with treating low-income and other targeted 
populations, safety net systems, through CCNs, also would be prime 
testing grounds for incentives to improve quality and efficiency.
    As proposed, CCNs would be public or private nonprofit legal 
entities representing consortia of safety net providers, such as public 
hospitals, federally qualified health centers, children's hospitals and 
others. They would be eligible to contract directly with various payers 
under health reform to provide integrated care to their respective 
enrollee populations. CCNs could also, at their option, choose to offer 
or develop health plans built around their network and contract with 
Medicare, Medicaid, CHIP, or the newly-formed Exchange.
    In many ways, CCNs would deliver the services already available 
through safety net systems. Our proposal, however, would provide a 
needed national framework to recognize integrated, multi-provider 
networks and systems already developed by safety net providers in many 
parts of the country, and to develop and extend their ``best 
practices'' for care coordination to other communities. They would work 
in concert with many of the other important initiatives included in the 
Tri-Committee bill, such as accountable care organizations and medical 
homes. Quality can be improved and costs reduced by getting patients to 
the right place, at the right time, with the right level of care, with 
the right provider, with the right outcomes, and the right financial 
incentives. Through CCNs, the Federal Government would have a mechanism 
through which to encourage this sort of integration and coordination. 
NAPH developed this proposal from successful models implemented by 
several safety net hospitals, including ones from south Florida to New 
York City, San Francisco 
to Richmond, Virginia. Based on the success of these models, we urge 
you to con- 
sider incorporating the concepts imbedded in this proposal into your 
health reform efforts.
    Finally, safety net systems will continue their leadership in 
addressing disparities in health, access, and quality often faced by 
low-income and minority populations. NAPH members, including the 
University of California Davis Health System and Nassau County Medical 
Center in New York, have devoted significant resources to create 
programs that target disparities in care. Denver Health's experience 
demonstrates that disparities can be eliminated. Seventy percent of 
Denver Health's patients are members of minority groups. Yet a recent 
study in the Journal of Urban Health found that at Denver Health, 
disparities in care did not exist among racial or ethnic groups for the 
likelihood of receiving various cancer screenings and having properly 
managed chronic conditions. NAPH supports the requirement that all 
plans participating in the Exchange would have to provide culturally 
and linguistically appropriate services and communications, a first 
step towards broadly eliminating disparities. We also support your 
proposal to increase Medicaid funding for translation services.
The Ongoing Need for DSH Payments
    NAPH strongly endorses the DSH policy reflected in the Tri-
Committee bill. Both Medicare and Medicaid DSH payments will continue 
at their current levels into the foreseeable future, with HHS reporting 
on both programs by July 1, 2016.
    Federal and State governments have a significant interest in 
ensuring the ongoing viability of safety net hospitals in a reformed 
health care system. Large numbers of low-income and other vulnerable 
patients will continue relying on safety net hospitals, as will the 
general population. Many newly-covered patients, as well as low-income 
patients already with health coverage such as Medicare, will continue 
seeking the specialized care that these hospitals provide. Many NAPH 
members offer wraparound services designed to address vulnerable 
populations' unique needs, such as translation, transportation, and 
social work services. Similarly, even with a goal of coverage for all 
Americans, many are likely to continue falling through the cracks, 
remaining uninsured and underinsured post-health reform. For example, 
the Congressional Budget Office estimated that upwards of 33 million 
Americans would remain uninsured under the Health, Education, Labor and 
Pensions (HELP) Committee's portion of the Senate's health reform 
legislation. Even in Massachusetts, the uninsured rate continues to 
hover around 2.6 percent. Some groups, particularly undocumented 
aliens, simply will not be eligible for coverage under health reform, 
and will continue seeking care at safety net systems. For these 
reasons, safety net hospital uncompensated care costs may remain 
relatively high compared to other hospitals' post-health reform.
    The virtual certainty that many low-income patients will continue 
seeking care at safety net hospitals means that Congress will need to 
maintain existing levels of Medicare DSH support. We appreciate your 
decision to maintain Medicare DSH payments. Congress originally 
established the Medicare DSH program to offset the heightened costs 
associated with treating large numbers of low-income Medicare patients. 
Over the years, Congress acknowledged that Medicare DSH also helps 
ensure access to care for vulnerable patients, including low-income 
Medicare beneficiaries. The Tri-Committee bill acknowledges that 
Medicare DSH has been extended to also support hospitals' uncompensated 
care burden by requiring a report on the distribution of Medicare DSH 
as it relates to hospital uncompensated care. In Massachusetts health 
reform, safety net hospital systems provided more care to low-income 
patients post-reform and were reimbursed significantly below costs for 
that care (60 to 70 percent of costs). Including inpatient and 
outpatient care, NAPH members lose money on treating Medicare patients, 
so we believe that the need for Medicare DSH will continue after reform 
has been implemented.
    NAPH supports your decision to maintain existing Medicaid DSH 
payments, too. Medicaid DSH is critical for safety net hospital's 
financial stability, directly reimbursing uncompensated care expenses 
and any Medicaid shortfalls. Although we support your use of Medicaid 
as a building block to reform, we expect shortfalls associated with 
this program to worsen unless States improve their payment rates. We 
also urge you to extend the 340B program to the inpatient setting, 
which should further reduce costs associated with treating this 
population and provide savings to safety net hospitals and the Medicaid 
program.
    In summary, NAPH strongly supports the approach to both Medicare 
and Medicaid DSH outlined in the Tri-Committee bill--rejecting 
arbitrary predetermined cuts in DSH and establishing a thoughtful 
process by which the DSH programs can be restructured once health 
reform is fully implemented and only after hospital losses on the low-
income and uninsured populations are substantially reduced. NAPH thanks 
the Committee for its ongoing support for DSH and its deep 
understanding of the important role played by safety net hospitals in 
securing access to care for low-income, vulnerable populations.
Graduate Medical Education
    NAPH supports the Tri-Committee bill's multi-pronged approach 
toward strengthening our health professional workforce, and its clear 
recognition of workforce development's prominent role in health reform. 
Our current graduate medical education (GME) infrastructure fails to 
train an adequate number of primary care physicians. We face impending 
shortages in many other health professions, particularly nursing 
(although the nursing crisis has been delayed by the ongoing 
recession). Large areas of the country remain underserved, and only 
through gap-filling programs like the National Health Service Corps are 
we able to ensure that residents in these areas have access to basic 
medical care.
    One pressing need is to train more physicians, particularly primary 
care physicians. Health care reform may aggravate the need for 
physicians in certain areas, as seen in Massachusetts where health 
reform has demonstrated the need for primary care physicians to serve 
the newly insured. Eighty-five percent of NAPH members are teaching 
institutions, and their diverse patient populations ensure that 
physicians training at their facilities learn to deliver culturally 
competent care and to treat the specialized needs of minority and other 
vulnerable populations early in their careers.
    NAPH was pleased to see that the Tri-Committee bill did not propose 
funding a coverage expansion with reductions to Medicare or Medicaid 
GME payments. Rather, your bill strengthens these programs by enabling 
increased training in the outpatient setting and codifying Medicaid's 
role in funding GME. Funding for GME activities comes almost 
exclusively from public payors. Medicare makes direct GME (DGME) 
payments for direct training costs, including salaries for residents 
and supervising physicians, and indirect medical education (IME) 
payments compensate teaching hospitals for the increased cost of 
providing care in teaching hospitals. Many Medicaid programs include 
either DGME or IME payments or both to pay Medicaid's share. Private 
insurance rarely makes specific DGME or IME payments. With little other 
support for their teaching mission, Medicare and Medicaid GME payments 
are essential to safety net teaching hospitals.
    NAPH urges the Committee to consider expanding the overall number 
of physicians trained annually. This country suffers not only from 
shortages of certain types of practitioners, particularly in primary 
care, but, in many areas, from an overall shortage of practicing 
doctors. Your proposal to redistribute unused GME positions to fund new 
primary care positions is a good first step. However, we urge the 
Committee to consider more sweeping proposals, such as the one 
introduced by Representative Schwartz, that would increase the overall 
number of funded GME positions.
Other Medicare Payments
    NAPH is pleased that the Tri-Committee bill includes a permanent 
fix to Medicare physician payments. The current payment system, which 
requires temporary `patches' on an annual basis, does injustice to the 
many physicians who devote their time and energy to treating Medicare 
beneficiaries.
    NAPH urges this Committee to exercise utmost caution prior to 
making other significant changes to Medicare hospital payments. On 
average, 23 percent of the inpatient services provided by NAPH members 
is to Medicare beneficiaries. These patients account for 20 percent of 
our members' revenues, a significant amount, albeit relatively lower 
than many other hospitals'. We are concerned that several of the 
provisions in the Tri-Committee bill may result in significant 
reductions to Medicare payments. In particular, we are concerned that 
the proposed productivity adjustment to the market basket increase may 
result in extremely low payment updates. This adjustment, coupled with 
CMS' proposal to further reduce inpatient payments over the next 3 
fiscal years, may even result in negative payment updates. We also are 
concerned about the scope of the proposed readmissions policy, and urge 
the Committee to work with the industry to refine it. We thank you, 
however, for providing additional support to high-DSH hospitals to 
address patient noncompliance with discharge instructions.
    NAPH thanks you for your monumental reform effort and looks forward 
to continuing to work with you to see meaningful health care reform 
happen this year.
                       Coordinated Care Networks:
           Delivery System Reform for Vulnerable Populations
Proposal of The National Association of Public Hospitals and Health Syst
                                  ems
                              June 3, 2009
I. OVERVIEW OF PROPOSAL

The National Association of Public Hospitals and Health Systems (NAPH) 
asks the Congress to include in national health reform legislation a 
provision extending explicit Federal recognition of Coordinated Care 
Networks (CCNs).

    CCNs would be integrated health care delivery systems voluntarily 
formed by public and private safety net providers. This proposal would 
provide a needed national framework to recognize integrated, multi-
provider networks and systems already developed by safety net providers 
in many parts of the country, and to develop and extend their ``best 
practices'' for care coordination to other communities.
    A number of integrated safety net delivery systems have made 
significant strides toward coordinating care for their vulnerable 
patient populations, including safety net networks in communities from 
south Florida to New York City, San Francisco to Richmond, Virginia.
    The goals of the proposed CCN program would be multi-faceted:

      To provide support for integrated delivery systems to 
coordinate the full range of care--from primary care to hospital and 
post-acute care--to low-income individuals and families, including 
those who may be newly covered under health reform.
      To provide mechanisms for improving both quality and 
efficiency of care for such vulnerable patient populations.
      To provide a range of necessary ``wraparound'' support 
services for these populations that may not be needed by the rest of 
the population.
      To provide networks of safety net services for those 
individuals who may continue to fall through the cracks following 
implementation of health reform, and
      To provide ways under health reform to continue to ensure 
the availability of communitywide safety net services, such as 
emergency and trauma care, needed by everyone.

    This proposal should be a companion provision to current delivery 
system reforms under consideration by Congress, such as Accountable 
Care Organizations.
II. ELEMENTS OF CCN PROPOSAL

While it is important to provide sufficient flexibility to enable CCN's 
to be responsive to the specific needs of their communities, the 
establishment of national guidelines as part of health reform will 
greatly enhance the ability of such systems to meet the goals set out 
above.

    Networks and CCN Health Plans. Federal law would authorize CCNs to 
be established (on a voluntary basis) as public or private nonprofit 
legal entities representing consortia of safety net providers, such as 
public hospitals, federally qualified health centers, children's 
hospitals and other providers. CCNs would be eligible to contract 
directly with various payers under health reform to provide integrated 
care to their respective enrollee populations. CCNs could also, at 
their option, choose to offer or develop health plans built around 
their Network that could contract with Medicare, Medicaid, and the 
Children's Health Insurance Program (CHIP), and participate in the 
Exchange.

    Federal Criteria. The Secretary would be authorized to develop a 
set of criteria that a provider network would have to meet in order to 
be certified as a CCN. NAPH's proposal would link CCN certification to 
additional support funding (described in the discussion of payment 
below), providing a significant incentive for existing and new hospital 
systems to commit to providing a scope of services and incorporating 
innovations that HHS determines are critical to improving the delivery 
system for vulnerable patients. Examples of such criteria may include:

       Comprehensive Range of Services
       Enhanced Support for Primary Care
       Coordination Between Primary and Specialty Care
       Comprehensive Care Management
       Community-Based, Accessible Care
       Assurance of Emergency Care
       Outreach and Enrollment
       Prevention and Wellness Care
       Transitional Care
       HIT Requirements
       Accountability Requirements

    Vulnerable Population Focus. The proposed provision would encourage 
the development of CCNs in communities whose residents include 
significant numbers of low-income individuals and families and other 
vulnerable patient populations that suffer from inadequate access to 
care and disparities in their health status. Potential target 
populations include: low-income newly insured, residual uninsured, 
Medicaid and CHIP enrollees, low-income Medicare beneficiaries and 
individuals who are dually eligible for Medicaid and Medicare.

    Comprehensive Range of Services. To receive a Federal CCN 
designation, CCNs would be required to offer a comprehensive range of 
primary, specialty and acute care services, as well as support services 
(such as nutritional counseling, transportation, language services, and 
other social services), consistent with broad Federal requirements. The 
precise scope of services would be defined by each CCN and approved by 
the Federal Government, allowing for variation by CCN and by community 
to meet local needs. Specialized CCNs might be developed to provide a 
set of services tailored to meet the needs of specific populations, 
such as the chronically ill, Medicare-Medicaid dual eligibles, or 
migrant workers.

    Payments for Services. The proposed provision would authorize a 
range of ways in which payments could be made for services provided by 
CCNs, which could vary by program and by population. Health Exchange 
plans could negotiate market rate reimbursement for CCN services they 
cover, but to the extent that a CCN's federally-approved scope of 
services exceeds the services covered by a plan, the CCN would receive 
Federal wraparound payments to provide these noncovered services to 
Network patients. CCNs would receive case management services payments 
and could develop innovative payment incentive systems, for example to 
share in cost-savings with Exchange plans or public payers. FQHCs 
participating in CCNs would continue to receive FQHC payments from 
public payers. CCNs also would receive Federal payments to provide 
services to those who remain uninsured.

    Added Value. CCNs would be required to demonstrate their value in a 
reformed system by participating in quality reporting, quality-based 
incentive payments and other quality initiatives. Demonstration 
programs could test innovative payment mechanisms and delivery system 
designs, with successful demonstrations rapidly expanded and 
unsuccessful ones terminated.

    Start-Up Funding. Direct grants and contracts would be made 
available for start-up and capital (including HIT) necessary to meet 
the certification requirements to ensure adequate availability of CCNs.

    Creation of a HHS Coordinated Care Network Center. NAPH proposes 
creation of a Center that would certify CCNs, provide ongoing technical 
support, share CCN best practice models, and evaluate the effectiveness 
of the CCN model and related demonstrations.
III. PROJECTED POPULATIONS SERVED

NAPH projects that a range of important populations would be served 
under this proposal whose needs (and communities) may not otherwise be 
adequately addressed under health reform.

    Those populations could include:

      Newly insured. CCNs could ensure continuity of care and 
sufficient support services so that coverage translates into actual 
access by contracting with Exchange plans or creating their own 
Exchange plans. Exchange Plans that receive premium subsidies for low-
income enrollees should be required to contract with CCNs operating in 
their geographic region, unless a CCN declines to participate or places 
unreasonable conditions upon its participation.
      Current Uninsured During Transition. CCNs could serve a 
critical role in assisting their transition into a reformed health care 
system by beginning to implement delivery system reforms, providing 
care management and improving care for these low-income populations.
      Medicaid and CHIP. CCNs could serve Medicaid and CHIP 
populations either as providers or by forming CCN health plans and 
participating as managed care plans. If these populations are moved 
into Exchange plans, Medicaid and CHIP programs could also contract 
with CCNs and CCN health plans for certain wraparound services, such as 
EPSDT services.
      Dual Eligibles. CCNs, in particular those with a 
specialized scope of services (such as for treating people with chronic 
disease or long-term care CCNs) could serve as a basis for innovation 
and experimentation in providing care to the chronically ill in this 
population.
      Medicare. CCNs could continue to serve Medicare patients 
as a unique provider type and CCN health plans could participate in the 
Medicare Advantage program. CCNs could also play a role in bringing the 
uninsured who would qualify for any temporary Medicare buy-in into the 
health care system and providing critical care coordination for this 
population known to suffer from a higher burden of multiple chronic 
diseases.
      Remaining Uninsured. CCNs could be a vehicle to provide 
cost effective, affordable care to the remaining uninsured after 
reforms are fully implemented and to provide continuous care to those 
who cycle on and off coverage due to administrative obstacles or for 
other reasons.

                                 
