[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
BETWEEN YOU AND YOUR DOCTOR: THE BUREAUCRACY OF PRIVATE HEALTH
INSURANCE--DAY 1
=======================================================================
HEARING
before the
SUBCOMMITTEE ON DOMESTIC POLICY
of the
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 16, 2009
__________
Serial No. 111-127
__________
Printed for the use of the Committee on Oversight and Government Reform
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland JOHN M. McHUGH, New York
DENNIS J. KUCINICH, Ohio JOHN L. MICA, Florida
JOHN F. TIERNEY, Massachusetts MARK E. SOUDER, Indiana
WM. LACY CLAY, Missouri JOHN J. DUNCAN, Jr., Tennessee
DIANE E. WATSON, California MICHAEL R. TURNER, Ohio
STEPHEN F. LYNCH, Massachusetts LYNN A. WESTMORELAND, Georgia
JIM COOPER, Tennessee PATRICK T. McHENRY, North Carolina
GERRY E. CONNOLLY, Virginia BRIAN P. BILBRAY, California
MIKE QUIGLEY, Illinois JIM JORDAN, Ohio
MARCY KAPTUR, Ohio JEFF FLAKE, Arizona
ELEANOR HOLMES NORTON, District of JEFF FORTENBERRY, Nebraska
Columbia JASON CHAFFETZ, Utah
PATRICK J. KENNEDY, Rhode Island AARON SCHOCK, Illinois
DANNY K. DAVIS, Illinois BLAINE LUETKEMEYER, Missouri
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
------ ------
Ron Stroman, Staff Director
Michael McCarthy, Deputy Staff Director
Carla Hultberg, Chief Clerk
Larry Brady, Minority Staff Director
Subcommittee on Domestic Policy
DENNIS J. KUCINICH, Ohio, Chairman
ELIJAH E. CUMMINGS, Maryland JIM JORDAN, Ohio
JOHN F. TIERNEY, Massachusetts MARK E. SOUDER, Indiana
DIANE E. WATSON, California DAN BURTON, Indiana
JIM COOPER, Tennessee MICHAEL R. TURNER, Ohio
PATRICK J. KENNEDY, Rhode Island JEFF FORTENBERRY, Nebraska
PETER WELCH, Vermont AARON SCHOCK, Illinois
BILL FOSTER, Illinois
MARCY KAPTUR, Ohio
Jaron R. Bourke, Staff Director
C O N T E N T S
----------
Page
Hearing held on September 16, 2009............................... 1
Statement of:
Gendernalik, Mark, father of Sidney Gendernalik, Los Angeles,
CA; Erinn Ackley, daughter of William Ackley, Red Lodge,
MT; Mel Stern, pediatrician, Highland, MD; Linda Peeno,
former review physician for Humana, Louisville, KY; and
Wendell Potter, former head of corporate communications for
Cigna, Philadelphia, PA.................................... 16
Ackley, Erinn............................................ 30
Gendernalik, Mark........................................ 16
Peeno, Linda............................................. 47
Potter, Wendell.......................................... 79
Stern, Mel............................................... 38
Pollitz, Karen, project director, Health Policy Institute,
Georgetown University, Washington, DC; and Michael Cannon,
director, Health Policy Studies, CATO Institute,
Washington, DC............................................. 113
Cannon, Michael.......................................... 124
Pollitz, Karen........................................... 113
Letters, statements, etc., submitted for the record by:
Ackley, Erinn, daughter of William Ackley, Red Lodge, MT,
prepared statement of...................................... 32
Cannon, Michael, director, Health Policy Studies, CATO
Institute, Washington, DC, prepared statement of........... 125
Gendernalik, Mark, father of Sidney Gendernalik, Los Angeles,
CA, prepared statement of.................................. 19
Jordon, Hon. Jim, a Representative in Congress from the State
of Ohio, prepared statement of............................. 11
Kucinich, Hon. Dennis J., a Representative in Congress from
the State of Ohio, prepared statement of................... 4
Peeno, Linda, former review physician for Humana, Louisville,
KY, prepared statement of.................................. 49
Pollitz, Karen, project director, Health Policy Institute,
Georgetown University, Washington, DC, prepared statement
of......................................................... 116
Potter, Wendell, former head of corporate communications for
Cigna, Philadelphia, PA, prepared statement of............. 82
Stern, Mel, pediatrician, Highland, MD, prepared statement of 40
Watson, Hon. Diane E., a Representative in Congress from the
State of California, prepared statement of................. 144
BETWEEN YOU AND YOUR DOCTOR: THE BUREAUCRACY OF PRIVATE HEALTH
INSURANCE--DAY 1
----------
WEDNESDAY, SEPTEMBER 16, 2009
House of Representatives,
Subcommittee on Domestic Policy,
Committee on Oversight and Government Reform,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:05 a.m., in
room 2154, Rayburn House Office Building, Hon. Dennis J.
Kucinich (chairman of the subcommittee) presiding.
Present: Representatives Kucinich, Cummings, Tierney,
Watson, and Jordan.
Staff present: Jaron R. Bourke, staff director; Yonatan
Zamir, counsel; Jean Gosa, clerk; Charisma Williams, staff
assistant; Leneal Scott, information systems manager, full
committee; Adam Hodge, deputy press secretary, full committee;
Dan Blankenburg, minority director of outreach and senior
adviser; Adam Fromm, minority chief clerk and Member liaison;
Ashley Callen, minority senior counsel; and Molly Boyl,
minority professional staff member.
Mr. Kucinich. Good morning. The Domestic Policy
Subcommittee of the Oversight and Government Reform Committee
will now come to order.
Today's hearing will examine how the bureaucracy of the
private health insurance industry influences the relationship
between physicians and their patients. This hearing is divided
into two parts. Today the subcommittee will hear testimony from
patients and health care providers with personal experiences.
The subcommittee will also hear from a former health insurance
executive who will testify about internal practices of the
industry, and two individuals whose focus is on health policy.
Tomorrow the subcommittee will hear testimony from top
executives of the six largest health insurance companies in the
United States.
Now, without objection, the Chair and ranking minority
member will have 5 minutes to make opening statements followed
by opening statements not to exceed 3 minutes by any other
Member who seeks recognition.
And without objection, Members and witnesses may have 5
legislative days to submit a written statement or extraneous
materials for the record.
An observer of the public debate on reform of the health
insurance industry would draw three conclusions, all of which
are false. The first is that Government does not play a role in
insuring health care today in America. The truth is that tens
of millions of Americans get their health insurance right now
through government-run health insurance: Medicare, Medicaid, VA
and TRICARE.
The second myth is that government-run health care is
inefficient and wasteful compared to private insurance. The
truth is that government-run health care has lower prices and
much lower administrative costs than private insurance.
Government-run insurance negotiates harder bargains with
pharmaceutical companies to get lower prices; it has no
multimillion-dollar executives, no corporate jets, no dividends
to pay, no lobbying expenses, no campaign contributions, no
front groups to pay for, and no television advertising. Private
insurers pay for all of these expensive things out of the
premium dollars they collect, and these things have nothing to
do with improving health care outcomes.
The third myth is that bureaucracy is solely a governmental
problem. The truth is that for millions of Americans, there are
layers of corporate bureaucrats standing between them and their
doctors, often on matters of life and death, and those
bureaucrats work for the private health insurance industry. The
hearing we will hold today and tomorrow will examine the
nature, costs, techniques and consequences of the bureaucracy
of the private health insurance industry.
Wall Street considers paying for your cancer treatment as a
loss, and they want to see health insurers keep those losses to
a minimum. They have a statistic known as the medical loss
ratio [MLR], that keeps track of how effectively private health
insurance bureaucrats achieve that financial objective of
keeping losses at a minimum. To please Wall Street, private
health insurers have to deny medical claims, raise premiums, or
both. Even as the rate of inflation of medical prices has
increased, the share of premium dollars spent on medical care
has come down to around 83 percent, from over 90 percent in the
early 1990's.
The State regulatory record and civil litigation dockets
are replete with recent findings of wrongful denial and delay
of health care by private insurance bureaucrats. For instance,
in 2008, PacifiCare, a subsidiary of United HealthCare, paid a
$3\1/2\ million fine, $25 million in waived premiums and
reimbursements of medical expenses, and restoration of health
care to nearly 1,000 patients to resolve violations of
California law including wrongful denial of 130,000 claims,
incorrect payment of claims, failure to acknowledge receipt of
claims in a timely manner, and for imposing the hassle of
multiple requests for documentation already provided. Similar
regulatory actions exist for nearly every private insurer.
Private health insurance bureaucrats play with the lives of
people, our constituents, when they are at their most
vulnerable, when they have a life-threatening injury, when
their children develop severe diseases, when their parents are
battling cancer. This is when the pressure that insurance
companies can bring is the greatest.
From the insurer's perspective, people who really need
their health insurance to cover life-saving medical treatment
threaten the company with medical losses, and investors want
medical losses to be minimized in order to maximize profits,
pure and simple. The fact is that in America today, you don't
know if your health insurance will take care of your serious
medical bills until you become seriously ill or injured. By
then it is too late to shop around.
You buy health insurance on blind faith that coverage will
be afforded to you when you really need it, but you receive no
guarantees from private health insurers, especially if you get
very sick. And that contradicts the purpose of health insurance
in the first place, to spread the cost of illness, especially
serious illness requiring expensive care.
We will hear today how the private health insurance
bureaucrats have become more sophisticated at denying expensive
treatment and more effective at wearing down doctors and
patients, conditioning them to choose to pay for the treatment
themselves or to go without, rather than insist that their
insurer pay.
In the business of private health insurance, corporate
bureaucrats may put profits before people, thereby becoming as
noxious as disease itself. Such was the conclusion of the Ohio
Supreme Court when it upheld the largest jury award in Ohio's
history against Anthem for denying life-saving treatment to
Esther Dardinger. From the court decision, ``Then came the
bureaucracy. Anthem had worn''--talking about the Dardingers--
``Anthem had worn the Dardingers down as surely as the cancer
had. Like the cancer, Anthem relentlessly followed its own
course, uncaring, oblivious to what it destroyed, seeking only
to have its way,'' from the Ohio Supreme Court in the case
involving Anthem.
[The prepared statement of Hon. Dennis J. Kucinich
follows:]
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Mr. Kucinich. At this time I recognize the ranking member
from Ohio, the Honorable Mr. Jordan. You may proceed.
Mr. Jordan. Thank you, Mr. Chairman. I appreciate you
having this hearing, and I want to thank our witnesses for
participating. I look forward to hearing their unique
perspectives on this important topic. I know many of them have
tragic stories to share with us, and you certainly have our
sympathy.
The ongoing health care debate is extraordinary. Americans
who were not previously engaged in politics are now attending
town halls, rallies, tea parties. During August and September,
I had the opportunity to meet with many of our constituents in
Ohio. Each and every person I talked to expressed grave concern
about a government-run health care system, but no one denied
that our current system needs reform, and that's what I hope we
can gather from the next 2 days, the kind of reforms that are
actually going to make sense and help families, help small
business owners, help Americans.
Health care spending is out of control, and we're not
covering many of the most vulnerable. Medicare alone accounts
for 3\1/2\ percent of the gross domestic product. The
Congressional Budget Office projects that by 2080, without
intervention, it will be as high as 13\1/2\ percent. Total
health care spending in 2007 exceeded $2.2 trillion, which
represents over 16 percent of GDP.
In the debate there are areas of agreement between
Republicans and the President. In fact, last week during the
speech to the joint session of Congress, the President said,
``let me set the record straight. My guiding principle is, and
always has been, that consumers do better when there is choice
and competition. That's how the market works.''
Mr. Chairman, on this point I agree with the President. In
fact, we have cosponsored a piece of legislation, H.R. 3400,
that I believe relies on free-market approaches and tax credits
to incentivize Americans to buy their own plans, instead of
mandates and surtaxes which are part of the current House bill
that passed out of committee.
Our bill allows individuals and businesses to purchase
insurance across State lines, increasing their insurance
choices from perhaps a dozen carriers to over 1,300. In
contrast, the bill being discussed decreases competition by
installing a government-subsidized public option into the
marketplace to crowd out the private sector. Real competition
in the private market helps reduce prices. A government-run
monopoly will cost all of us, especially our children and
grandchildren.
Rather than the Federal Government serving as an
intermediary, my colleagues and Irealize that individuals and
families are best served when there is a strong relationship
between them as a patient and their primary and specialty
health care providers. Our plan strengthens that relationship
by reducing the practice of defensive medicine brought about by
lawsuits. Enacting medical liability reform will help reduce
the price of medical malpractice insurance in defensive
medicine, both of which are passed on to consumers through
increased costs and higher insurance premiums.
By establishing health courts, capping noneconomic, and
creating best practice measures, we will eliminate frivolous
lawsuits that harm physicians, while also ensuring that justice
is done to true victims.
Mr. Chairman, I hope that commonsense solutions are not
ignored. I believe Americans trust their health care
professionals more than they trust politicians and Federal
Government bureaucrats. They want to keep what they like best
about their current plan, while addressing some of the problems
with cost, access and portability.
My trust rests in the ingenuity and compassion of the
American people and with the professionalism and competence of
our health care professionals.
Thank you, Mr. Chairman.
Mr. Kucinich. I thank the gentleman.
[The prepared statement of Hon. Jim Jordan follows:]
[GRAPHIC] [TIFF OMITTED] T4917.006
[GRAPHIC] [TIFF OMITTED] T4917.007
Mr. Kucinich. The Chair recognizes the gentleman from
Maryland Mr. Cummings.
Mr. Cummings. I want to thank the chairman for convening
this hearing. It is a very important hearing.
One of the things that I want us to keep in mind is that
insurance companies are making life-and-death decisions every
single day. Folks talk about government, worrying about
government coming in and making decisions. Insurance companies
are making life-and-death decisions every day.
There's a gentleman in my neighborhood who had a swelling
on his leg, I guess, maybe about 2 years ago. I see him almost
every day. I live in Baltimore, 40 miles away from here. And he
went in and he found out that it was cancerous. He had surgery,
then he had radiation, and then he had chemo. And then the
cancer apparently spread to other parts of his body.
And he had been a hardworking American, working for the
city of Baltimore, and he had moved into a disability status.
And he used to tell me about his problems in that the copay for
the chemo left him in a position where he had to choose between
eating and paying the copay. And I would see him almost every
day, and I just think our society is better than that.
This is a point in time where we must leave politics at the
door and address the problems of all Americans. We need to keep
in mind, as the President said the other night, over the last 2
years, one out of every three Americans have had a gap in their
insurance coverage. And what does that say? What that says is
if you've got a gap in your insurance coverage, that means
you've got to get some more insurance at some point.
Well, this is a bulletin coming over the wire. The older we
get, the more likely it is that we're going to have a
preexisting condition, and if you haven't gotten there yet, you
just keep on living. And the fact is that we've got to deal
with these preexisting conditions. We've got to deal with this
rescission where a person gets sick, they've been doing
everything they're supposed to do, working hard, paying their
premiums, and when it comes time for the insurance company to
help them, they suddenly find they have no insurance.
We've got to deal with the high cost of insurance going up.
The President said it, and we have said it. We want people to
keep what they have, but guess what? If it is too expensive,
you won't be able to afford it anyway. That's a major problem.
And so I am glad that--and I had a town hall meeting, and
it went well, and I have listened to--seen what has happened
across the country with regard to town hall meetings. But I
think we need to hear not only from the people who are opposed,
we need to hear from everyday American citizens who have been
placed in a position where they cannot get the coverage they
need.
And so, Mr. Chairman, I applaud you for these two hearings,
and I look forward to the testimony.
Mr. Kucinich. I thank the gentleman.
Mr. Kucinich. The Chair recognizes the gentleman from
Massachusetts, Mr. Tierney.
Mr. Tierney. Thank you, Mr. Chairman. I thank all the
witnesses for being here today.
You know, this idea of competition is great, and it's
interesting to hear people say they want these corporations to
be able to go across States. I think many of them see that just
as an opportunity to avoid State regulation, and we have to
make sure that if that happens, and companies are allowed to go
across States, that they do not get to avoid State regulation,
just going to the lowest common denominator on this. They're
seeking to avoid competition with any plan that essentially
will do things other than their way. That's one of the reasons
that they're so avidly fighting this public option. They're
happy to compete with any other insurance company that does the
things that they do: pay really excessive and exorbitant
salaries to executives; pay a lot of money for underwriting to
figure out ways not to cover people with health care; and give
dividends that are just not reasonable, but that are extremely
excessive to shareholders, who actually punish them when they
spend too much of the premium dollar on health care delivery.
It's a little shocking to me as we watch what goes on
around the country throughout these town meetings that so many
people who consider themselves out there fighting for the
people wittingly or unwittingly are out there shilling for
insurance and prescription drug companies, that they're really
for the status quo. And that's just a little bit amazing. If
they were really populists, they would be out there saying
there is a point in time where government ought to step between
corporations that go to the excess, between corporations that
use their power and their bureaucracy to deprive us of what we
pay our premiums for, and you step in with a little regulation,
and we're making sure that competition really does work.
That doesn't seem to be the message that's going around out
there at all, and it's sort of surprising.
When you look at this medical loss ratio that the chairman
mentioned earlier, essentially I think Mr. Potter you discussed
this on interviews as well. Companies get punished when they
show their medical loss ratio too high. In the 1990's, it was
common for medical loss ratios to be 95 percent. Out of every
$100 spent, $95 would go to health care, and $5 would go toward
salaries and overhead and profits, and the companies were doing
well; they were doing extremely well. Well, studies now show
that in some instances that medical loss ratio is 57 percent,
57 percent of your premium dollar going for care and the rest
of it going to them.
I'd be on the streets pounding away saying, why isn't my
Government out there doing something to stop that? That's
what's ridiculous. You want to go out and yell and scream and
take a town hall meeting, go where the culprit is. They're the
ones that are taking our premium dollars, and what do they give
us in return? Rescission. You're in the middle of your care,
and they go back and scrub your records to find out, ah,
there's a reason we don't have to pay the claim; making sure
that you have a preexisting condition where you don't get
coverage at all, or putting a cap on it, a cap on it. Sixty
percent of the bankruptcies in this country are directly or
indirectly related to medical expenses families are
experiencing, and 85 percent of those families have health
insurance.
That's what we should be on the streets protesting about,
and that's why this bill should directly look in there and say,
look, we need to put in some regulation. No more rescission, no
more unreasonable caps, no more incredibly high deductibles and
copays, no more telling people preexisting conditions are going
to keep them off, and no more getting away with spending less
than a reasonable amount of our premium dollars on actual
health care services.
You can have a decent profit, you can have a decent salary,
but $80,000 a day, as some executives were getting, and
millions of dollars plus bonuses plus stock options is not a
good way to spend our premium dollar, and that's why this
health care reform package ought to be as much about health
insurance reform as anything else.
We have to move in that direction. Yes, there should be an
option out there where people say, I don't want to go to that
private company that gives us that kind of bad coverage; I'll
take another option, a public option, and that maybe will
inspire these people to do the right thing. Maybe when they see
that there's somebody not playing their game, that we're not
just going to let people into the game who do it the way they
do it, that they will have to behave a little better. And
that's what this is about, and hopefully that's what the
American people are going to understand this is about, and
we'll move in that direction.
Thank you, Mr. Chairman.
Mr. Kucinich. I thank the gentleman.
We're now going to hear testimony from the witnesses, and
the first two witnesses are sharing a personal narrative with
us, which I think that when we in Congress tend to expound on
these weighty matters, we're always much more informed when we
hear what people have to say about their own experience. And so
two of our witnesses will provide us with information about
their personal experience. It is important that we pay careful
attention.
Now, there are no additional opening statements, so we will
receive testimony from our witnesses. I would like to introduce
our first panel. Mr. Mark Gendernalik. Is that right?
Mr. Gendernalik. Gendernalik, hard G.
Mr. Kucinich. OK. Mr. Gendernalik is a teacher from Los
Angeles, CA, where he lives with his wife and three children.
His daughter Sidney suffers from a rare neurological disorder
known as infantile spasms.
Ms. Erinn Ackley is a resident of Montana where she lives
with her husband and their daughter. In 2006, Ms. Ackley
assisted her father William Ackley in his struggle to obtain
approval from his private health insurer for prescribed medical
treatment.
Dr. Melvin Stern, M.D., has been in solo practice as a
private care pediatrician in Highland, MD, for the last 28
years. In addition to direct patient care, Dr. Stern has been
continuously involved in teaching medical students, pediatric
residents and physician extenders, such as physician
assistants. Dr. Stern has served on the medical faculty of the
Maryland chapter of the American Academy of Pediatrics, and has
also previously served as the chairman of the Maryland State
Medical Society's legislative committee.
Dr. Linda Peeno, M.D., is a physician and medical ethicist
who consults and educates on issues related to health system
operations, managed care and ethics. Dr. Peeno has worked in
executive positions in a variety of health care organizations
and as a physician reviewing hospital requests for admission at
the insurance company Humana. Dr. Peeno is now a nationally
recognized expert on various issues related to health system
operations and ethics, particularly managed care and insurance
practices.
And finally, Mr. Wendell Potter. Mr. Potter has served
since May 2009 as the Center for Media and Democracy's senior
fellow on health care. Previously Mr. Potter spent 20 years in
a variety of communications positions for private health
insurance companies. Mr. Potter was the chief corporate
spokesman for CIGNA insurance company.
I want to thank each and every one of the witnesses for
appearing before the subcommittee today.
It's the policy of the Committee on Oversight and
Government Reform to swear in all witnesses before they
testify. I would ask that at this time if you could rise and
raise your right hands.
[Witnesses sworn.]
Mr. Kucinich. Thank you very much. Let the record reflect
that each of the witnesses has answered in the affirmative.
I now want to ask each of the witnesses to give a brief
summary of your testimony. I want you to keep in mind that it's
helpful to have this summary no more than 5 minutes in
duration. Your complete written statement will be included in
the hearing record. So if you're worried about not getting in a
certain word, just know it's going to be in the record of the
hearing, and all Members will have access to that.
We're going to start with Mr. Gendernalik. You're going to
be our first witness, and we'd like you to proceed at this
time. And before you begin, I would like to recognize and
welcome the distinguished gentlelady from California
Congresswoman Watson. Thank you for being here. You may
proceed.
STATEMENTS OF MARK GENDERNALIK, FATHER OF SIDNEY GENDERNALIK,
LOS ANGELES, CA; ERINN ACKLEY, DAUGHTER OF WILLIAM ACKLEY, RED
LODGE, MT; MEL STERN, PEDIATRICIAN, HIGHLAND, MD; LINDA PEENO,
FORMER REVIEW PHYSICIAN FOR HUMANA, LOUISVILLE, KY; AND WENDELL
POTTER, FORMER HEAD OF CORPORATE COMMUNICATIONS FOR CIGNA,
PHILADELPHIA, PA
STATEMENT OF MARK GENDERNALIK
Mr. Gendernalik. Mr. Chairman, members of the committee, I
want to thank you for inviting me here today to share my
daughter's story with you. I hope it will inform you about the
human side of the business of health care in America.
As an American, it is an honor to be a part of this
democratic process at such an important time, and like many
Americans, I'm unashamedly guilty of the swagger that comes
with that heartfelt feeling that I live in the best country on
Earth. Unfortunately, that swagger wears a little thin when we
don't deliver, when we come up short, and health care is one
such area where we are not the best in the world. Most will
agree we are paying far too much for health care and getting
far less than we are entitled to, far less than the American
people deserve, far less than my daughter Sidney deserves, and
that less has consequences, real consequences, for people,
especially my infant daughter Sidney.
Early one afternoon when Sidney was just 3 months old, as I
walked down the steps of the living room in my home, Sidney's
arm suddenly struck out at an awkward angle, her head cocked
over to the side. Her eyes looked odd and distant. She was 3
months old. I was concerned and alarmed at that point. I
thought, well, that's odd, and then we had a few more and a few
more and went and saw a pediatrician, and we started what was
going to be the beginning of what may be Sidney's lifelong
struggle.
We're here today not only to help my little girl, but the
families who have to fight beyond exhaustion just to receive
the care that their hard-earned dollars were supposed to have
provided them when they bought their insurance.
Since Sidney was sent to a pediatrician--or from the
pediatrician to a neurologist, that neurologist ordered an MRI
with contrast dye and an EEG. He conducted his own EEG in his
office, sent out for the MRI to be done at UCLA Medical Center.
The insurance company denied the medical center he wished to
send her to, which was UCLA Children's Hospital.
She was then sent to an imaging center, which was pretty
much a storefront operation that just does X-rays, MRIs,
images. Their staff were incapable of injecting my small
daughter with the dye necessary to create the contrast to give
my neurologist the images he needed. The end result was my
neurologist didn't get the images he needed to accurately
diagnose my daughter, but the medical group got to save a
little money.
In all of the struggle through, we made the best we could
out of it. We reached a point where he was coming to the point
we understood her diagnosis to be infantile spasms. It's a
syndrome. It's diagnosed by an index of symptoms. We sent out
for a second opinion just to be prudent. We ordered a second
opinion. The insurance company authorized Children's Hospital
L.A. to conduct a second opinion, and then refused to authorize
the neurologist there to do any of the diagnostics to inform
and form the second opinion.
My wife took the day off work. She went to the neurologist
at Children's Hospital, waited, was seen. That neurologist went
to order the standard panel of diagnostics, was denied. We were
then sent to UCLA, where they didn't even have a room for us.
We were sent there by the insurance company's telephone agent
saying, hey, go there, they're ready for you, your
authorization has been faxed. They weren't ready for us. My
wife and my daughter spent the day, without food other than the
hospital snacks, in the emergency room.
When I finally got off work, they were able to tell us--I
joined them at the hospital. They were able to tell us that
they weren't able to service my daughter that day; they had no
beds; they didn't know we were coming. When they finally were
able to admit us 2 days later, they immediately did their panel
of diagnostics. Those diagnostics confirmed the diagnosis of
infantile spasms. They set out the first course of treatment.
The universally recommended course of treatment is a drug
called ACTH.
The medical group would not return a phone call to the
whole pediatric neurology department at UCLA, a prestigious
medical center. They would give them answers like, we'll call
back today by 5, it's under review. After 6 days of being
inpatient at UCLA, my wife and I were living with my daughter
in the hospital room, the doctors came in and said, we're going
to have to discharge you; we can't get any response from your
insurance company--from your medical group.
After crying, I got angry. I tried calling the insurance
company myself. I was hung up on twice for only asking for a
supervisor in the tone of voice like I'm speaking to you today.
Finally, I called the State regulatory agency. They looked
into it on my behalf, and we were able to mysteriously get an
authorization over the telephone to UCLA and to my wife. No
explanation, no written documentation, no anything. Clearly
their plan was to exhaust us, to wear us out.
My time is coming to an end here. I have to just conclude
with a final statement, if you will indulge me. Sidney's mom
and I have spent so much time fighting to ensure her proper
care that all too often I feel like her medical manager instead
of her daddy. I need you people to let me be a daddy.
I understand there's a lot of talk and a lot of ideas. The
Consumers Union is here today with their own ideas on ways we
can put consumers back into this competition scheme I hear
about because we're disenfranchised right now. All I want to do
is go home and be a dad.
Thank you.
[The prepared statement of Mr. Gendernalik follows:]
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Mr. Kucinich. The Chair recognizes Ms. Ackley.
Thank you, Mr. Gendernalik.
STATEMENT OF ERINN ACKLEY
Ms. Ackley. Mr. Chairman, members of the committee, thank
you for inviting me to participate in today's hearing on health
reform. I am honored to have the opportunity to convey my
family's struggle with the administrative measures and
protocols used by my father's private health insurer and the
lengths we went through to obtain his doctor-prescribed
treatment in the form of a bone marrow transplant.
This is an abbreviated version of our emotional journey as
my dad fought for his life when his insurance company set up
one bureaucratic roadblock after another.
My father Bill Ackley dedicated 31 years of his life to the
children of Montana as a public schoolteacher and
administrator. In 2003, he retired to Florida, trusting his
group health insurance, Blue Cross Blue Shield of Montana,
would continue to pay, as they had for 16 years, for the
medically necessary treatment of his chronic lymphocytic
leukemia.
In 2005, my dad's doctor determined that he needed a bone
marrow transplant because his chemotherapy regimen was no
longer effectively managing his cancer. My father was accepted
into a transplant program, and on December 11, 2005, an
unrelated donor match was found.
In January 2006, my dad began two rounds of intensive chemo
to suppress the disease in preparation for his transplant; 4\1/
2\ months after finding a donor, we were euphoric on April 14th
when my dad's transplant doctor gave him the news that his
disease had responded well to the treatments, and he was ready
to proceed with a mini transplant. However, we marked this as
day 1 of our unexpected and emotional struggle with Blue Cross
Blue Shield of Montana.
Because his insurance had paid for all of the treatments
leading up to the transplant, including the donor search and
testing, you can imagine how shocked and heartbroken we were a
week later when his insurance notified the hospital, not my
parents, that it was denying the mini transplant, claiming the
procedure as investigational.
For the next 60 days, we continued to run around in circles
with the insurance company, never actually speaking to a human
who could discuss my dad's case, to obtain approval for my
father's prescribed treatments while his body was still
receptive to a transplant. On the surface this might not seem
like a long time, but when a loved one is going through a life-
or-death struggle, you can hear the clock ticking every minute.
My dad's doctor submitted a different request for a full
transplant, which had been performed for nearly 20 years, but
that, too, was denied on grounds that it was investigational.
It is important to note that both transplant protocols were
approved treatments under Medicare.
Neither of the two time-consuming approval processes my dad
went through in an effort to overturn the denials were
completed in the promised timeframe, and during this agonizing
time we reached out to the Montana Insurance Commissioner's
Office, who persisted in keeping the insurance company in
compliance. We enlisted the help of countless friends and
families to hold the insurance company accountable on my
father's behalf, and we then consulted an attorney who had
experience litigating transplant denial cases.
On day 48, my Dad was readmitted for another round of
intensive chemo as his cancer was growing rapidly again because
we were waiting for transplant approval. We were emotionally
exhausted, frustrated and devastated that we had to continue
focusing our time and energy on holding this insurance company
accountable instead of spending quality time with my father and
concentrating our efforts on his care.
Due to his persistence and refusal to accept that
unreasonable insurance company denials would be the deciding
factor in his life-and-death struggle with the disease he had
lived with for 20 years, my dad was finally transplanted with
the stem cells of a selfless anonymous donor on August 17th,
126 days after the first transplant request.
What would have happened if the first transplant request
had been approved? We will never know. We do know that he never
returned home. We spent Christmas with him in his hospital
room, and he did make it to the new year. My dad passed away on
January 3, 2007, at the age of 59, leaving behind a grieving
widow and daughter and missing the chance to share his joy of
life with his only grandchild Eliza, born 17 months later.
My written testimony includes a very detailed timeline of
our struggle with my father's insurance company, and I
sincerely hope that you will read it and consider the
implications of how an agonizing and bureaucratic denial and
appeal process changed the course of my father's treatment and
affected his chance for a successful life-saving transplant.
Thank you.
Mr. Kucinich. Thank you for your testimony.
[The prepared statement of Ms. Ackley follows:]
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Mr. Kucinich. The Chair recognizes Dr. Stern.
STATEMENT OF MELVIN S. STERN
Dr. Stern. Thank you, Chairman Kucinich, members of the
committee, for this opportunity to appear before you today. I
am here on behalf of the patients and families that I take care
of, the American Academy of Pediatrics, the Maryland chapter,
and the National Physician Alliance.
As has already been noted, I've been in practice in primary
care pediatrics for approximately 30 years in Maryland and have
spent a fair amount of that time advocating for my patients and
my families in the public policy arena. And one of the
templates that I utilize for reviewing public policy is if it
makes sense for children, it makes sense for the community. If
it doesn't make sense for children, we better go back and
reexamine it, and based on that, go forward with the remainder
of my evaluation here.
We've discussed the bureaucracy, the bureaucracy of both
the private insurer, the for-profit, as well as the not-for-
profit.
In 2003, Steffie Woolhandler observed that 30 percent of
our health care budget, 30 percent of the dollars that we sent
in, is now spent on administration, and that's in the private
sector.
As an example of what goes on and how that impacts and has
resulted in what happens in the private office, when I started
private practice over 30 years ago, there were two full-time
equivalents that were supporting me. One was a nurse who was
fully involved in patient care, did nothing in terms of
administration, and the other was a secretary-receptionist who
basically handled the scheduling and the billing.
Today I'm still the solo practitioner. I have four full-
time equivalents in the office. I am the only one who is
exclusively involved in patient care. The other individuals are
involved in chasing after insurance companies; doing things
like referrals, prior authorizations; and arguing for benefits
for my families, certainly a dramatic increase in bureaucratic
meddling, as it were, in the office procedures.
For the bureaucracy that we see in the private sector, the
impact, as you've already heard--and I'll give you a scenario
in my office of a newborn with a tumor. This baby was born with
a tumor at a world-class hospital in Baltimore and was insured
by a for-profit insurer. From the time the baby was born, this
insurer required referrals.
Now, recognize, I had never seen this baby. I was not
medically in charge of this baby. For me to begin to refer this
baby for additional services at an institution that had world
authorities in regards to what should be done and how this
tumor should be handled was just sheer nonsense and an
obstruction for the care. It obstructed it to the point where
there were therapies and evaluations that were remiss, were not
obtained in a timely manner. But in the end, those therapies
went forward initially.
The administrative burden was very real. The institution
itself had people working in conjunction with my office to get
the referrals, to do the paperwork; not to do the medical care,
but to do the paperwork to get this child the care that she
needed.
Following the inpatient treatment, which required surgery,
the child underwent--began outpatient chemotherapy. It was at
that point that the insurance company became obstructionist
and, utilizing the Milliman and Robertson criteria for
evaluation of whether this service should be paid for, denied
inpatient chemotherapy services for this infant.
Now, you need to understand, there are no Milliman and
Robertson criteria for infants with tumors, but they refused to
recognize that and proceeded to say, no, they were not going to
permit this baby to have inpatient services.
The only reason that we're able to move forward with that
is I bluntly told them, look, either provide this infant with
what are clearly standard treatments in the hospital, or we
will have to go public. This is a beautiful baby, it will
attract a great deal of attention; you can either deal with
this in the media or deal with this appropriately. And they
chose at that point to say, OK, we'll get things organized.
That's not the way we need to run the health care system.
That's not the way I need to be spending my time. This invasion
and obstruction is not very productive.
And finally, I'd like to leave you with a notion or the
issue of two things. One, this is not really an issue of
insurance coverage. Please understand, this is an issue of
access to quality health care, and Mr. Cummings is painfully
aware of a youngster in our community, Deamonte Driver, who had
coverage but did not have care and died in this very city as a
result of lack of care because providers weren't available.
The last thing is at the current way--we know the
liabilities that we're generating in the health care area are
being left at the feet of our children. Let us make sure as we
move forward that the assets are in their hands.
Thank you very much.
Mr. Kucinich. Thank you very much, Doctor.
[The prepared statement of Dr. Stern follows:]
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Mr. Kucinich. I want to acknowledge what you said about
mentioning Deamonte Driver. Mr. Cummings and I have had an
ongoing conversation about that young man's death, and I think
that before the end of the day, we'll have a chance to recount
what happened with him and this system.
Dr. Peeno, you may proceed.
STATEMENT OF LINDA PEENO
Dr. Peeno. Mr. Chairman, members of the committee and
staff, I appreciate the opportunity to be here.
I am a former company doctor who made those kinds of life-
and-death decisions Mr. Cummings referred to. In fact, one of
my prior appearances here was in 1996 to talk about how company
doctors cause harm and death to patients, and the fact that
little has happened is evidenced by the fact that a quote of
that hearing has resurfaced and is very timely still.
After 1996, I continued to work on health care issues, and
I've worked on more than 150 legal cases on behalf of patients
and assisted patients in appeals. So I have a wealth of
acquired information about the inner workings of the health
insurance companies.
The one thing that I think, in summary of my experience
which I've detailed in my written comments, is that this has
never been a more deadly time for patients in terms of
insurance practices. They've become more sophisticated and more
expert in achieving the cost cutting and saving goals.
The four areas that I would like to talk about
specifically, at least to address and make you aware of, the
first has to do with claims. And I see a lot of insurance
rhetoric that says that they're kinder and gentler, and they
deny fewer claims, but a recent study in California showed that
at least in that study, as much as--as many as 40 percent were
denied.
But the more interesting thing is what we don't know,
because the evolution of managed care has been to shift the
process of limitation, denial and substitution more
prospectively. So if you can co-opt the treating physician in
the office or the bedside, we can create conditions like we
have already heard today where you will obstruct and delay and
wear people down. Then those are things that are never
recorded. There's no data or statistics we can go to to show
the amount of care that has been altered through those
processes.
The second thing is that the shift in health care has been
to move everything more technical. So the goal over the past
decade has been to eliminate the independent medical judgment
of physicians and of the health care professionals, to
normalize through criteria and other scientific-based ways, and
to eliminate the patient particulars.
Coinciding with that is the attempt to make other agents
the denial factors by, one, co-opting physicians and altering
their medical ethics to achieve the goal of the company, but
more disturbing is making patients themselves the agents of
their own denials through economic changes.
The fourth one, I think, has kind of been touched on
already by several remarks here, and that is the expert use of
terms like ``medical necessity,'' ``investigational,'' and
``experimental.'' I actually testified in a case that you
mentioned, Mr. Kucinich, on the Dardinger case, which was a
very interesting case because the definition of
``experimental'' changed as it went through layers of review in
order to constantly shift--justify the denial. And, in fact,
part of the e-mail communication that came out in that case is
that the health plan employees were deliberately delaying
because they knew Mrs. Dardinger was going to die soon, so they
were avoiding making a decision to avoid even dealing with the
issue of paying for it in hopes that she would die before they
would have to address it.
The recent attention on medical criteria and evidence-based
medicine, it sounds wonderful to talk about best practices. We
should be focused on that, but there is a layer of rhetoric
there that hides what goes on underneath. Companies--you know,
for example, the criteria for the appropriateness of a
hysterectomy should be the same whether it's in, you know,
Boston or Los Angeles. It should be the same whether it's
Humana or CIGNA, and yet these tools are used and wielded.
They're proprietary. A company would never purchase criteria
that would cause it to be more generous and to spend more
money. So these criteria are used deliberately to justify
denials and to limit care and--and these tools are being
developed using public research and should be transparent and
should be publicly available.
There are so many things that I could go into that I have
seen in all the cases. As I said, I went into detail in the
written remarks, but I think the last two things I would like
to sum up is that patients are not mere anecdotes, and that's
the way the insurance company would like to dismiss any claims
of adverse affects on patients' well-being or health.
And the last thing is that they operate in a medical--in an
ethical and legal void. There's no medical ethics when you're
working on behalf of stockholders, and the legal situation is
that most Americans have no legal recourse because of ERISA and
other complications holding these companies accountable.
So I personally believe we will have no health reform
unless we reform the health insurance industry to a system that
is ethical and patient-centered.
Thank you very much.
Mr. Kucinich. Thank you, Doctor.
[The prepared statement of Dr. Peeno follows:]
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Mr. Kucinich. Mr. Potter, you may proceed. Thank you.
STATEMENT OF WENDELL POTTER
Mr. Potter. Thank you, Chairman Kucinich, Ranking Member
Jordan and members of the committee for this opportunity.
The title of today's hearing serves as an important
antidote to some of the rhetoric about who or what stands
between a patient and his or her doctor. I know there are many
who fear the idea of a government bureaucrat in that space, but
the alternative has proved much more fearsome. The status quo
for most Americans is that health insurance bureaucrats stand
between them and their doctors right now, and maximizing profit
is the mandate that has simply overtaken this industry.
As Members discuss the various compromises that undoubtedly
will be floated in the coming weeks, I encourage you to look
very closely at the role of for-profit insurance companies in
particular and the role that they play in making our health
care system both the most expensive and one of the most
dysfunctional in the world.
I know this hearing and others you are holding will help
Members of Congress look beyond the misleading and destructive
rhetoric making the rounds and the headlines and help provide a
real sense of what life would be like for most of us if the
kind of so-called reform the insurers are lobbying for is
enacted.
An estimated 25 million Americans are now underinsured for
two principal reasons. This is in addition to 45 million people
who are uninsured. First, the high deductible plans that many
of us have been forced to accept require us to pay more out of
our own pockets for medical care, whether or not we can afford
it. Second, the number of underinsured people has increased,
and far more have fallen victim to deceptive marketing
practices and bought what essentially is fake insurance.
The industry is insistent on being able to retain the so-
called benefit design flexibility so insurers can continue to
market these kinds of often worthless policies. The big
insurers have spent millions of dollars acquiring companies
that specialize in what they call limited benefit plans. An
example of such a plan that is marketed by one of the big
insurance companies is under the name of Starbridge Select. Not
only are the benefits extremely limited, but the underwriting
criteria established by this insurer essentially guarantees big
profits. Preexisting conditions are not covered under the first
6 months. The employer must have an annual turnover rate of at
least 70 percent. So most workers don't even stay on the
payroll long enough to use their benefits, and the average age
of employees must not be higher than 40, and no more than 65
percent of the work force can be female.
I'm sure you've all heard insurance executives say over the
past few months that they are bringing solutions to the table
this time to help you address the problems of the uninsured and
the underinsured. If they were to be completely honest,
however, they would tell you that the solutions they really
have in mind are moving millions more of us into high-
deductible and limited-benefit plans. If Congress goes along
with these solutions, the bill it sends to the President might
as well be called the Insurance Industry Profit Protection and
Enhancement Act.
That said, the executives you will hear from tomorrow
rarely use the term ``insurance'' to describe their businesses
these days. They refer to their companies now as health benefit
companies or health solutions companies, and for a very good
reason. They have been moving rapidly away from the risk that
insurers used to assume for their customers and toward a
business model that enables them to administer benefits for
large self-insured companies, and also to shift the financial
burden of health care to individual workers if their employers
are not big enough to self-insure.
If I were a member of this subcommittee, I would ask the
executives tomorrow about this trend. I would ask them what has
been happening to their fully insured books of business in
recent years. If they're honest, they will tell you that it has
been shrinking, and that they have been taking deliberate
actions to make it shrink.
According to a recent story in The Wall Street Journal, the
seven largest for-profit health insurance companies have seen a
decline of 5 million members in their fully insured books of
business just since 2007. I would ask the executives why this
has happened, and if they expect this trend to continue, and I
would ask them what kind of businesses are fully insured these
days. Again, if they're honest, they will tell you that they
are primarily small to midsize customers that are not large
enough to self-insure. And that does not bode well for the
future of this country or our economy as most of the job growth
in the United States is occurring in small to midsize
businesses.
I would ask the executives what kind of health benefits--
health benefit plans they're marketing now to small businesses
and to businesses with a high rate of turnover among employees.
If they're honest, they will tell you they're marketing
limited-benefits or high-deductible plans to these businesses.
I would ask Aetna and CIGNA in particular why they are
sponsoring the first annual voluntary benefits and limited
medical conference in Los Angeles next month. And I would ask
them what ``voluntary'' really means. If they're honest, they
will tell you that workers enrolled in voluntary benefit plans
pay the full premium as well as high out-of-pocket expenses.
Their employees do not have to pay a dime--their employers
don't have to pay a dime toward their employees' health care
benefits. Many of these plans actually prohibit employers from
subsidizing the premiums.
As the organizer of the Los Angeles conference notes on its
Web site, voluntary benefits and limited medical plans are a
multibillion-dollar industry and one of the fastest-growing
segments in the health insurance industry.
Another question you might consider asking is how much
money insurance companies make from investments by delaying
payments to health care providers. As you know, doctors now
have staff members dedicated solely to trying to get insurance
companies to pay claims that have been denied. The longer an
insurance company can avoid paying a claim, the more interest
it can earn from the float.
Mr. Chairman and members of the subcommittee, this is the
current state of the inadequately regulated free-market system
the health care companies want to preserve. We already have 25
million Americans who are underinsured. If the insurance
industry gets what it wants out of this forum, that number will
grow very, very fast in the years ahead. People you know, your
constituents, maybe even your sons and daughters and your
grandchildren, will be joining the ranks of the underinsured,
and they will be forced by law to pay private insurance
companies for their lousy coverage, and you and I and other
taxpayers will have to subsidize the premiums for those who
cannot afford them. I implore you not to let that happen.
Thank you for considering my views.
Mr. Kucinich. Thank you very much, Mr. Potter, for your
testimony and also your expression of civic consciousness.
[The prepared statement of Mr. Potter follows:]
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Mr. Kucinich. I want just--before I begin my questions, I
just want to say how deeply moved I was to hear the testimony
of Mr. Gendernalik and Ms. Ackley.
How's your daughter?
Mr. Gendernalik. She's improving gradually. Her condition
is--it is hard to treat seizures. It's hard to treat seizure
disorders. We've been through many pharmaceuticals, and
currently she's now on what is called a ketogenic diet. It's a
diet designed to alleviate seizures. We're having some success,
but she's way off her benchmarks. If we don't arrest the
seizures, her cognitive development will leave her severely
mentally retarded.
Mr. Kucinich. Well, your family shall remain with our
thoughts.
I just also want to say to Ms. Ackley, I had the chance to
read the exhibits, but in particular the obituary of your dad,
who was obviously a wonderful person, and I can imagine what
it's like for you to testify.
I have to tell you when I was listening to both your
testimony, I'm sure this is true of other Members, I wasn't
just hearing the words, I could feel it in my heart. And this
is the kind of testimony I think that can move the country,
and, you know, I just--you can feel this. Thank you for being
here, and our condolences to your family. From your experience,
perhaps Congress will become better informed about the actions
that we need to take.
I want to thank Dr. Stern for sharing with us his
testimony, as well as Dr. Peeno for her understanding of the
inner workings of the industry.
Now, I want to begin questioning with Mr. Potter, who, as I
said earlier, is the former head of corporate communications
for CIGNA in Philadelphia. First, I want to ask Mr. Potter
about the business profit model of the private insurance
industry. What is the business model of the insurance
companies? How do they make money?
Mr. Potter. They make money by avoiding as much risk as
possible, and often by dumping people who are sick, and they do
this through a variety of means. One is delaying or denying
care. Another is to rescind policies that we've read about in
the news and has been the subject of some subcommittee hearings
in which people who have been paying their premiums for many
years, when they get sick and have high medical bills, the
insurance company will review their original applications, and
if they find any reason to cancel it, they will; and also
purging small businesses.
Mr. Kucinich. Doing what?
Mr. Potter. Purging small businesses. They deliberately
look to see if there are small businesses and midsize
businesses that are customers whose medical claims are higher
than was otherwise expected, and they will jack those rates up,
the premium rates, when those books--when those customers'
accounts come up for renewal, and they will jack them up so
high that these businesses have no alternative but to drop
their insurance coverage. They can't afford--that's why we've
had such a drop in the number of small businesses over the
years. It's declined from 67 percent in the 1990's to just
about 38 percent now.
Mr. Kucinich. And you've talked about the denial reduction
of coverage. Would you explain to this subcommittee what is
policy rescission, and how widespread was that practiced while
you were in the industry?
Mr. Potter. Policy rescission happens. This is in the
individual market, not so much in the market in which people
get their coverage from, through their employer. Many people
don't have the option of getting their coverage through the
employer. And you have to fill out an application if you want
to get coverage, of course. And you have to include in that
application whether or not you have been sick in the past, why
you've gone to the doctor if you have been hospitalized; in
other words, what preexisting conditions do you have that we
should know about? And if you are--and in many cases, a
preexisting condition will mean you can't get coverage at any
cost. And also, children who are born with birth defects
ultimately will not be able to get coverage in this system we
have now.
So it is a means of being able to again cull the sick, to
avoid paying claims. And if you fail to disclose something and
you get sick and there are high medical bills that are sent for
payment to your insurance company, they'll look at your
application, and they'll look to see if maybe you have
inadvertently or even purposefully not disclosed something.
Mr. Kucinich. One of the things that we have been hearing
in the past few weeks is how the private insurance industry
uses special interest groups to craft market and send a message
that the industry wants to send. Could you explain how this
happens, and can you comment on how the industry wants us to
believe that they are there to help us to get healthier? What
do they think they are doing? And, you know, who are they
talking to?
Mr. Potter. The industry, and I know this from having
worked in a lot of trade association committees over the years
and serving on strategic communications committees; they plan
and carry out duplicitous PR campaigns. One is, I call the
charm offensive, in which they will come here and they will
tell you that they are in favor of reform and will be working
with you as good-faith partners and with the President. And
they will say the same thing they said in 1993 and 1994, that
they are in favor of getting rid of the preexisting condition
clauses and in favor of avoiding or making--or of the cherry
picking that goes on.
Mr. Kucinich. So they will say one thing and do another.
Mr. Potter. Exactly.
Mr. Kucinich. Do they do that consistently?
Mr. Potter. They do it consistently. They say what they
want you to hear, and that is the charm offensive that they
carry out. And they will talk about how much they are in favor
of bipartisan reform, for example. Behind the scenes, they will
be conducting these covert PR campaigns, and they work through
big Washington-based PR firms or New York-based PR firms that
set up front groups for them. Like in the 1990's, a group
called the Health Benefits Coalition was set up, and it was
presumably a business coalition but the funding came largely
from health insurance companies, and the soul purpose was to
kill the Patients Bill of Rights.
Mr. Kucinich. When you say front groups, you mean they are
groups that are then mobilized to try to present themselves as
representative of public opinion?
Mr. Potter. That is right. And they employ a lot of PR
tactics, and they work also with the media and with Members on
Capitol Hill. But with the media, the PR people who have
connections with producers and reporters will feed messages to
them, talking points, and there are a lot of reporters and
producers and pundits who are very sympathetic to them.
Mr. Kucinich. I am looking forward to having a chance to
ask Mr. Potter some more questions, but my time has expired,
and I want to, before I recognize Mr. Jordan, I want to
acknowledge the presence of the gentlelady from Ohio, Ms.
Kaptur, who has joined us.
And, Mr. Jordan, you may proceed for 5 minutes.
Mr. Jordan. Thank you, Mr. Chairman.
And I apologize to the committee and to our witnesses. I
have to jump out. I am in another committee next door.
Mr. Kucinich. Mr. Jordan, we are always in awe of how you
can be in two committees at one time. But we are glad you are
here.
Mr. Jordan. Thank you for this important hearing and for
the witnesses' testimony.
And to Mr. Gendernalik and Ms. Ackley, your stories--I
think every single American would agree what you went through
is wrong. You pay your premiums. You're honest when you sign up
for your contract. You should not have to go through the
harassment and the things. I mean, this is coming from a
conservative Republican who says what happened there is wrong.
Americans, it seems this whole health care debate as it has
unfolded over the last several months, Americans hate being
told what to do. And this idea that somebody is going to get
between them and their family and their doctor, whether it is
the insurance company or, frankly, whether it is the
Government, it is just something that just doesn't sit well
with them. So I think there are things that we have to focus on
that empowers the family and doesn't have what you described
take place.
I liked what I think Dr. Stearns said earlier, and I am old
enough to remember as well when I was a kid going into the
family doc, and there was typically one person out front, and
in those days, it was typically a lady, taking care of things
and the reception work, and maybe she was--that individual was
a nurse as well. Today, there are more people out front
complying with all the bureaucracy, whether it is government or
insurance; there are more people out front than there are in
the back trying to get you well. And that's a problem, and that
is what is so frustrating to so many Americans.
Let me just walk through some of the things I outlined in
my opening statement and just see. And I'll go to Dr. Stern, if
I could. Do you think we need some liability reform in our
current health care system? Do you think that is appropriate?
Dr. Stern. The short answer is, very definitely, yes.
Mr. Jordan. Do you think there is the need for more
empowerment, say, health savings accounts, association health
plans? I can remember, just 2 weeks ago I was giving a speech.
Before I even talked to the group, had a husband and wife walk
up to me, small business owners. They own the business, and
they have two employees.
And they said, ``Congressman, we would love the ability to
pool together with other similarly situated--other small
business owners and use the economies of scale.'' Do you think
that makes sense in our health savings accounts, association
health plans, as part of a way to empower people and help with
our costs and help with our system?
Dr. Stern. There is a conflict there. The issue of pooling
together and generating much larger insurance pools makes an
infinite amount of sense, and in fact, in Maryland, we do have
a small business pool.
The issue of the health savings account and the notion that
the consumer can be empowered to spend that dollar more wisely
just flies in the face of what the actual market is. Medicine
is not a free market.
Mr. Jordan. I agree with that.
Dr. Stern. No way. A free market demands the free flow of
information both ways.
Mr. Jordan. And I was going to go there. So how do we get
that? How do we get that transparency? How do we get to where--
there's a great piece, at least I read on the plane flying in
this week, in The Atlantic about a businessman who talks about
the experience his father went through getting an infection in
the hospital. And he outlines what he thinks needs to happen in
health care, and he talks about the fact that it is not a free
market, and it is always somebody else paying the bill, and
that is a fundamental problem. So tell me what you think needs
to happen so we do get the transparency we need to get the
right market out there.
Dr. Stern. The transparency has to be within the health
care system itself, to have the broker. The insurance companies
are not in the health care business; they are a broker. I am in
the health care business; I deal directly with the patient. The
University of Maryland is in the health care business; they
deal with the patient. Johns Hopkins is in the health care
business; they deal with the patient.
To have the broker intercede in that interaction is simply
not productive. And you have in my written testimony some very
specific actions that we have had to take. One of those is a
bill that I worked on in the Maryland General Assembly and
moved, fortunately, moved forward on the national scene, was
the issue of the mandated benefit for maternity care. There is
no way to have the private insurer intercede and make that
determination that a child and a mother should be going home at
such and such a time. That is a medical decision. It should be
left to the medical authorities.
Mr. Jordan. I agree.
Dr. Stern. If there is malfeasance in that, it is the
medical profession that should be taking care of it. And we do.
Mr. Jordan. OK.
Dr. Stern. But to assume that this is a marketplace issue I
think simply isn't going to fix the problem. That is how we
have been dealing with it. It is not a free market. And we
don't have--the consumer doesn't have the information that they
need to make that analysis. Even if they had the information,
they don't have the understanding. I mean, I went to medical
school. I did additional training just to be able to make
that----
Mr. Jordan. Well, I don't know that's always the case. I'll
use my--our--we have a health savings account in our family, a
high deductible health savings account. I did what so many of
my colleagues do, every couple of years go for the physical
that they offer here with the doc on Capitol Hill. Did the
blood work, did everything. He says, ``You know what? We can
have you--we can schedule you for a colonoscopy as well.'' I
said, ``I'll think about it,'' and decided I would rather do it
at home.
Found out our insurance doesn't cover it. But I also know
I'm 45, and 50 is kind of the recommended time you do this. So
I could have depleted our account, or I can just wait, and we
decided to wait. So there was a situation where we made the
decision as a family, or I made the decision, that we would
just wait. So I do think it can work and has a place.
But what I am interested in getting at is a more--what we
need to do so that we empower the patient, the consumer, the
family as much as we can and eliminate this bureaucracy,
whether it is the government or the insurance companies that
gets between the patient and the caregiver.
And my time went way too fast, Mr. Chairman. So I will I
yield back.
Mr. Kucinich. I thank my colleague from Ohio.
Before I introduce Mr. Cummings for questions, I want to
acknowledge the presence in the audience of some visitors who
have come to Capitol Hill to indicate their concern about the
reimbursement policies with respect to prosthetics.
So I want to acknowledge your presence. I see the young man
in the front row. We are glad that you are here. Maybe some day
you will be on the other side of this dais here. So thank you
so much for being here.
At this time, we'd like to recognize Mr. Cummings of
Maryland for 5 minutes of questioning.
Mr. Cummings. Dr. Potter, first of all, thank all of you
for your testimony. It's been very eye opening and very
helpful.
Dr. Potter, one of the things that really bothers me is
that when you talk about insurance companies, the media--health
insurance companies, the media--and you complain about them,
the media it seems to bend in the direction of saying that you
are beating up on them. And that really bothers me, because
when I listen to your testimony--and I can tell you as a
lawyer, the things that you talked about to me are, if not
fraudulent, are very, very close and are criminal.
In other words, when you say that you are going to--when a
person or an insurance company has people paying, say, for 16
years, and when it comes time--they are loyal in paying their
payments. But when it comes time for them to get what they are
due--and that is a simple concept of contract law: You bargain
for something, and you get back something. But when they come
to get it, what they are saying, I mean, listening to the
testimony here, when you hear Dr. Stern, basically what he said
is that he has to fight to get what he needs for his patients.
And not everybody is a Dr. Stern. I know there are 99 million
great doctors. But he has to fight, and he has to double and--
to double the number of employees in the fight.
So I am trying to figure out, do you think it is an unfair
statement when--do you think it's a fair statement when you say
you are beating up on the insurance companies?
Mr. Potter. Absolutely not. It is part of the PR campaign
of the industry to protest that they are being demonized. And
as someone who was in PR for the industry for 20 years as part
of what I did when I was there, they want you to see them as,
again, good-faith partners and working with Congress and with
the President, and behind the scenes doing all they can through
a lot of ways of essentially laundering money through big PR
firms and setting up groups that they don't want anyone to know
that they have any association with but which they are funding
to try to gut reform or to shape it in ways that will benefit
them more than Americans.
One thing that's happened over the years, and I saw this
from my role initially as a journalist but then later as a PR
guy, our media has changed a lot. The newsrooms are shrinking.
There is very little investigative reporting. And reporters are
so stretched for time that they'd often just take a statement
that I would write and go with it and say, ``Well, I've got the
insurance company's point of view here.'' The insurance
companies and other industries of the special interests have
really benefited from the change in the way that the media
operates and the growth in power of corporate public relations.
Mr. Cummings. Dr. Peeno, I am wondering, when I listen to
testimony here and then I watch some of the town hall meetings
where people were loudly protesting--and that is all well and
good. But I sat there and I wondered how many people, if they
really read the legislation, would understand that this
probably would help them. And I get the impression--I know
there are many reasons that have been given for these protests,
but I get the impression that part of it must be what I call,
``It won't happen to me'' syndrome; in other words, that people
assume that, oh, that happened over there in Indiana. That
happened over there in Baltimore, but it won't happen to my
family. It won't happen to my friends. I won't have a similar
experience as Ms. Ackley.
And so, I mean, so how--so I take it that this, the things
that you are talking about are pretty widespread.
Dr. Peeno. Absolutely. And I think you are right. I mean,
people assume that this isn't going to happen to me until
something tragic does. But I can tell you, as one of those
doctors that sat there and put the nod on pieces of paper, that
it did not make any difference what somebody's income level
was, whether they were Democrat or Republican, rich, poor,
black, white, yellow, green, or whatever. The only thing that
made a difference was what they were costing and how quickly we
could avoid any cost or claim that was going to hurt profits. I
mean, I was told when I was first hired that I was to use my MD
degree to give economic justification to the company's
decisions.
Mr. Cummings. And were you rewarded for that? In other
words, was that part of your evaluation?
Dr. Peeno. I was significantly rewarded. I mean, I quit one
company before I got my bonus because we were put on a bonus
system. But when I went to another company, we--my job
evaluation depended upon the number of denials and how much
cost savings I generated. And, you know, the 150 cases that I
worked on as an expert witness, you know, I have read
depositions and seen documents, internal documents, that will
never see the light of day because they are sealed that show
the reward system and the compensation system for the medical
doctors that work for the insurance company.
Mr. Cummings. Just one last question. Is there anything
that you have seen to make you, over--since you left the
system--I think--when did you leave the system, the last
insurance company?
Dr. Peeno. 1990, 1991.
Mr. Cummings. Is there anything that you have seen in your
present work that would indicate that things are better in that
regard that you just talked about?
Dr. Peeno. Absolutely not. It is far worse. Everything is
more evolved, more sophisticated, more technical. The methods--
the difference between the methods I used to deny care and the
methods that are used now is the difference between surgery
with a kitchen knife and a laser gamma knife now. It is just
that much more expert.
Mr. Cummings. Thank you very much.
Thank you, Mr. Chairman.
Mr. Kucinich. The Chair recognizes Mr. Tierney.
You may proceed.
Mr. Tierney. Thank you very much.
Mr. Gendernalik and Ms. Ackley, I can't think of any
question for either of you that would do a better job than what
your testimony did in laying out what some of the issues are. I
do want to thank you for being with us here today. I know how
difficult it must be on that.
Mr. Potter, I want to go back to you again, because I--
someone is going to get between the patient and their medical
provider one way or the other the way our system is set up. Not
everybody in my district, certainly not even a majority of the
people in my district, can afford to put money into an account
of some sort. And, if they do, they are still going to have an
insurance company somewhere involved in that. So clearly that
is not the answer that we are talking about here.
We can regulate, or we can try to regulate prohibiting
rescission, prohibiting a cap on the insurance, and perhaps
prohibiting exclusion for preexisting conditions, but we would
have to be pretty good at policing to make sure the companies
don't just do it anyway, or that they don't try to pay fewer
claims in some other way.
It would seem to me that one way to do it is to just say
that a certain percentage of a premium dollar has to be spent
on medical services, so the medical loss ratio--maybe go back
to where it was in the 1990's, to 95 percent. That would be one
way of going at it. Do you agree?
Mr. Potter. I do agree.
Mr. Tierney. And the second is competition with somebody or
something that doesn't play by the rules that they play. Right
now, they are happy with competition. Let's have competition as
long as we are all in on this game of trying to make sure our
medical loss ratio is low, our salaries are high, our profits
are high, and we have these different ways of excluding
coverage. And I think--would you agree that's where the public
option comes in? That if you don't have something like that, we
are never really going to get at the crux of this?
Mr. Potter. Absolutely. There is some competition, but it
is far less now than there was back in the 1990's. That's one
reason why the medical loss ratio has been able to drop so
much. There is such power concentrated in the hands of now
seven very large for-profit insurance companies that one out of
every three of us is enrolled in some kind of a benefit plan
managed by one of those seven big companies.
They are accountable to Wall Street; they are not
accountable, really, to you and me. And we can become victims
of their striving to meet Wall Street's relentless profit
expectations. There is no counter to that right now. They are
all playing by the rules that they establish in a marketplace.
There is no government benchmark. They set the rules. They
determine what kinds of policies we'll be able to have, what
kinds of policies your employer will offer to you. They run the
show. They have an enormously tight grip on our health care
system, far, far more now than they did in 1993, 1994. And they
are richer and stronger and more powerful and more influential
than ever before. A public option is absolutely, absolutely
vital.
Mr. Tierney. I would think that people on the streets
ranting and raving would be ranting and raving about that kind
of practices that we're talking about engaged in by the
insurance companies. I mean, that would really get your blood
boiling. Now, that would be a populous motion. People would be
out in the streets saying, ``Why is our government letting them
get away with that? Why aren't they stepping in and protecting
us?''
So on the Oversight Committee here, we're used to following
the money. So we know where the money is going: It is going to
Wall Street. It is going to the people who invest in these
companies. What role do you think those companies are playing
in inciting people to go in and, instead of railing against bad
insurance bureaucracy practices, trying to tell how bad their
government is?
Mr. Potter. I was speaking at a town hall meeting a few
days ago, and a woman--and I was describing how this works, how
the PR firms work for the industry and feed pundits talking
points.
And she came up, and she said, ``No one paid me to come
here.'' And I said--I was thinking, well, no one had to. You
don't get the money. That is not where the money goes. The
money goes into the big PR firms who have the influence to
manipulate public opinion. That's how it happens.
And I did ask her, to Congressman Cummings' point, are you
absolutely certain that tomorrow your insurance is going to be
there, that your son or daughter is going to be enrolled in a
benefit plan that provides protection? And she didn't have a
good answer to that, because there is no guarantee. You do not
know if you are going to have your insurance coverage tomorrow.
You do not know if you are going to be losing it because you
lose your job, or if you are going to be forced into a plan
that makes you pay so much out of your own pocket that you
might as well--you will be forced, in some scenarios, to buy
insurance from private insurance companies, but your benefits
may be so limited that you will be sending in money every month
for almost nothing.
Mr. Tierney. Which has been going on.
Just, I'll tell you one little anecdote from an individual
that came into my office, just ranting and raving about the
public option. And I tried to explain what that would do.
He said, ``Look, I like my company now.''
I said, ``Fine, then stay with your company.''
And then he said, ``Well, except if I get really sick or
someone in my family gets really sick, I don't use the company;
I go to the VA, because if I use the company, they will jack up
my premiums.''
Case in point.
Thank you, Mr. Chairman.
Mr. Kucinich. I thank the gentleman.
The Chair recognizes the gentlelady from Ohio, Ms. Kaptur.
Ms. Kaptur. I thank the chairman very much, and compliment
him for his steadfast efforts to try to bring health insurance
at affordable prices and quality care to all the American
people. I'm very, very proud to serve with you.
I wanted to say to the panel that I view my job as
defending our citizenry against those who might harm or exploit
them or our Republic. And these are very important hearings
today.
As I have listened to your testimony, I keep thinking about
pharmaceutical companies being the third most profitable sector
in our economy. In the district that I represent, you can't
turn the TV on without being besieged by all these ads from the
pharmaceutical companies. I don't know if that is true in every
district in the country, but they are sure spending a lot of
money on advertising. I keep asking myself, if you have a
doctor, what do you need all those ads for on the television?
It is very curious what has happened. That wasn't true 20
years ago. It is true today. And I can see, with the kind of
profits they are making, where they are putting some of those
dollars.
Yet, I have people in my district, I border Canada up in
northern Ohio, and I can't tell you how many people from my
district have to go to Canada because they cannot afford
medicine in the United States of America. Yet, I see these ads
on television, and I am thinking, what doesn't fit here? How
are these dollars being used versus what the need is?
The insurance companies are the ninth most profitable
industry in this country, and, Mr. Potter, I think you talked
about seven companies now having a third of the market?
Mr. Potter. Yes. That's right.
Ms. Kaptur. And we heard that yesterday at a hearing by the
former head of CIGNA Corp., who I believe will be before this
committee this week.
I remember, back to our beloved Uncle Skip from our family,
and he used to confide in me as he became older and had
infirmities. He said, ``Marcy, here's all my insurance.'' Now,
this is a man that was on Medicare. And he emptied out his
billfold, and he pulled out all these policies, Art Linkletter
policy and this policy and that.
And I said, ``Uncle Skip, why do you have these policies?
You don't need these policies. You have a supplemental, and you
have your Medicare.''
He says, ``Well, just in case.''
And I keep thinking to myself, I thought, ``Uncle Skip, why
didn't you tell me about this before? You don't need to spend
your money on these.'' I said, and, ``frankly, with some of the
exclusions, this wouldn't give you anything.''
But he really didn't know. He was not an uninformed person,
but he was afraid. He did not have a college degree. And I
asked myself, how many Uncle Skips are out there in our country
who are buying unnecessary policies that are duplicative? And
even with our offices on aging and so forth, we can't reach
every citizen to help them make wise insurance choices.
So my questions to you really are, the bill that the
President has proposed has language that only encourages for
the pharmaceutical companies price negotiation for the cost of
prescription drugs. Within the VA, within the Department of
Defense, we actually negotiate. It is mandatory.
I want to ask you to comment on the language that is in the
base bill that merely encourages negotiation, and what that
might mean down the road. And, No. 2, on the insurance
companies and the fact that seven control so much, can you give
us a sense of what you see happening in the insurance market in
our country? Is it consolidating like we see happening in other
segments of our industry, the banking industry, mega banks that
just caused this huge implosion in our economy, these very big
private companies that seem to be terribly irresponsible? Could
you give us a sense of what is happening in the insurance
market?
Anyone that wants to respond on the pharmaceutical question
or on that would be much appreciated.
Mr. Potter. I think that encouraging is not strong enough.
You are exactly right. Another gentleman I heard was talking
about he got his care through the VA, and he needed medication
that cost him a modest amount of money. But he needed it. And
in private insurance, he would have to pay about $300 for this
medication. He was able to pay through the VA a small fraction
of that. So it makes a big difference.
And in the lives of people who are--the median household in
this country is just $50,000. The average price of a premium
that you get through the workplace for a family is $12,500. So
you are shifting more of the financial burden for either drugs
or care for the doctor, whatever, there's not much money left
over to pay the rent or buy the groceries.
To your point about the seven large companies that control
the industry. They have become so big through mergers and
acquisitions over the years, and I think a part or a lot of
that--or managing communications around them. There are far
fewer companies than there used to be. There is not nearly as
much competition as the industry would like you to believe.
They say on their Web site and they will say in testimony that
there are 1,300 insurance companies that compete. There's
nothing like that. If you look closer on their Web site, you
might see, if you can count up, 287. And then that includes
vendors to these companies. So it's a fabrication.
There's been so much consolidation in the industry that
last year alone $250 billion flowed through the seven--just
these seven companies in revenues. So you have enormous
concentration of power. It is really a cartel of large
companies. And they are so big that small companies--and
there's been talk about maybe establishing co-ops--there's not
a chance that a co-op, a fledgling co-op could ever get the
resources or have the clout in the marketplace to compete
against these big companies.
Ms. Kaptur. You are talking about the insurance companies.
Mr. Potter. I am.
Ms. Kaptur. Do you see the same concentration in the
pharmaceutical industry?
Mr. Potter. Absolutely. The power of the pharmaceutical
companies is--absolutely is great, and they are gigantic
companies that are very, very profitable.
Ms. Kaptur. Could I ask, sir, if there are any of the
witnesses that have any articles that you could reference that
we could incorporate in the hearing record on the nature of
that concentration, I personally would appreciate it very much.
Mr. Potter. Certainly. We'll do that.
Ms. Kaptur. Anyone else want to comment on pharmaceutical
profits and insurance company consolidation?
Mr. Gendernalik. Very briefly.
My daughter's delay in treatment at UCLA, the first
significant delay we received was because the pharmaceutical
she required is a drug called ACTH. There was one manufacturer
who produced it, Questcorps. They have been the subject of
Senate hearings due to what they did with their pricing scheme.
In doing my parental due diligence, I went online to look
up what this drug was that they were going to put in my child,
stumbled across investment journals, online investment
journals, where one of the corporate officers from Questcorps
was speaking freely to investors. So he wasn't speaking--I
wasn't the intended audience.
His remarks were that the drug was an underutilized asset;
and because they were the sole manufacturer, they could change
their pricing strategy and significantly increase the company's
portfolio, which they would then be able to put into--he tried
to cast a noble light on--other FDA approvals and such.
The drug went in July 2007 from roughly $1,000 a vial to
over $23,000 a vial based on published reports. My insurance
company doesn't let me see what the actual costs are. So,
published reports, multiple published reports had it at that
point, when my daughter needed it in December 2007, $23,000 a
vial. And just to get to how ludicrous this is, we had to order
it from out of State; we had to inject it ourselves. Two
untrained people had to inject our daughter nightly with this.
We had a syringe explode. We thought, how many thousands of
dollars just exploded over dad's face? They had a delivery man
in a beat-up Nissan probably making $8 an hour deliver four
vials of this stuff to my house. And I thought, wow, does he
know what he has? He can quit this job, drive across to Mexico
and sell this stuff.
Clearly we've had our brush with the pharmaceutical
industry. My solid opinion is that they delayed service to my
daughter because of the hit they were going to take. Now, that
is the HMO medical group.
The pharmaceutical company on the other hand knew by the
open drug status they had the leverage. There was no
competition in the marketplace for this drug that serves a
minority of people. Very few children are afflicted with my
daughter's disorder. Their primary market for that drug are MS
patients, and, therefore, they leveraged it, as the man was
candidly speaking in investment journals, up to 23,000.
Other published reporters after my daughter's required time
period on the drug, we were on it for 4 months, I don't know,
estimated cost was $80,000 to $100,000. The drug went up to
over $40,000 a vial. Absolutely exacerbating and unwarranted
and immoral. Thank you.
Ms. Kaptur. Thank you.
Mr. Chairman, may I just say, if there are any witnesses
that have any kind of a study on the advertisements paid for by
pharmaceutical companies across this country in order of the
most, the biggest buys, for which drugs, and then in rank
order, I would love to have that for the record.
Mr. Kucinich. I want to say in response to the gentlelady's
question, I think that as we begin preparing for the continued
work of this committee, that would be a proper subject for a
separate hearing. And I want to thank the gentlelady for making
that suggestion.
Ms. Kaptur. Thank you.
Mr. Kucinich. We are going to go to a second round of
questions of the witnesses before we go to our second panel.
And given the fact that we are going to be holding a hearing
tomorrow with top insurance executives in this same
subcommittee and the fact that we have two distinguished
individuals here who have had direct experience working inside
the industry, we are going to hopefully be able to engage a
little bit more in this second round.
I want to start with Dr. Linda Peeno, who is the former
review physician for Humana, Inc., out of Louisville, KY.
Dr. Peeno, the evidence on which evidence-based medicine is
supposed to rely is by its nature public, peer-review journals,
for example. But the detailed standards of care used by private
health insurance companies are proprietary, meaning that it is
their business and not ours. If the coverage decisions are
based on publicly available evidence, why doesn't it follow
that the standards these companies use to determine care should
also be public? Why aren't they? And what is the reason?
Dr. Peeno. Well, the main reason is that their basic
purpose is to be able to deny or limit care. So what happens--
and this has been a part of the evolution of managed care.
Twenty years ago, one of the real difficulties for an insurance
company back when I was functioning as a medical director was
having some sort of objective grounds to deny something. So,
for example, if we wanted to deny a hysterectomy, we needed
criteria to do that. And that was very labor-intensive for a
company to develop. So these companies emerged that would
actually develop criteria, like we've heard Milliman &
Robertson, Dr. Stern referred to them, which is now Milliman
USA, and other companies that have gotten into the business of
developing criteria specifically for health care companies to
have--it is like a filter, you know, and the tighter the
threads of the filter, the more you can limit or deny care.
Mr. Kucinich. So you're saying the criteria is set up on
denying care.
Dr. Peeno. Right. I mean, it's like I said in my testimony
here, you don't purchase criteria in order to provide more care
or more generous care. You know, the reason these companies
spend millions and millions of dollars to buy the criteria, to
set up the computer system, is to enable, as requests are made
for the more costly or the more frequent and costly services,
is for nurses up front, or not even nurses sometimes, to be
able to say, well, this doesn't meet our criteria, and we can't
authorize it.
Mr. Kucinich. So the standards are proprietary. But are
these standards based on evidence? Or are they just basically
accounting devices to try to whittle away the claims?
Dr. Peeno. Well, they are loosely based on evidence. I
mean, there is material that is available and research that
comes out of academic centers that say you take this
information, that is public and has been developed using public
funds, and then you tweak it as an accounting denial tool.
Mr. Kucinich. Now, Dr. Stern, you wanted to get in on this?
Dr. Stern. The criteria in one case has a focus that is the
standard criteria, the standard practice, that are publicly
available has a sole criteria of cost-effective quality care.
That is the criteria.
Milliman & Robertson is focused on cost reduction. That is
the criteria. And everything that is generated in that criteria
is to support the cost reduction. It is a highly different
mission.
Mr. Kucinich. So let me ask Dr. Peeno and Dr. Stern, if you
want to join in on this. I understand, Dr. Peeno, that insurers
pay subcontractors to do utilization review as well as handle
specific appeals of denials of coverage. Do insurance companies
carve out any specific disease for internal special reviews or
for outside contractors to review?
Dr. Peeno. Oh, yes. And----
Mr. Kucinich. Why?
Dr. Peeno. They kind of carve out--or, outsourcing is
increasing.
Mr. Kucinich. Why? I mean, under what circumstances?
Dr. Peeno. It began, one of the earliest carve-outs were
mental health management, you know, where you could carve out
the amount of premium that was used for mental health and you
subcontract it out to a for-profit mental health management
company. You capitate them, so you fix your costs. I mean, they
have to take care of all the medical conditions within that.
And then that has slowly emerged and grown into now we have
disease management companies that will manage a single disease
like congestive heart failure or asthma or diabetes or other
conditions.
Mr. Kucinich. Say a whole industry that is set up around
trying to figure out how to lessen the amount of claims.
Dr. Peeno. Exactly.
Mr. Kucinich. I have a limited time here to just ask one
final question. A person signs up with an insurance company.
They receive a policyholder's book that describes all the
procedures and costs that are supposed to be covered. Does this
mean an insured person will then be covered for all the things
listed in the book? Yes or no?
Dr. Peeno. No.
Mr. Kucinich. And is it one standard of medical necessity
across the industry?
Dr. Peeno. No. It can even differ within the same company
and the same plan.
Mr. Kucinich. Is there any one standard of medical
necessity within each company?
Dr. Peeno. No.
Mr. Kucinich. OK.
My time has expired. I am going to now go to Mr. Jordan.
Mr. Jordan. Thank you, Mr. Chairman.
Let me ask Mr. Gendernalik and then Ms. Ackley. The
harassment that you went through dealing with the insurance
companies, are you in favor of a single-payer system,
government-run system, public option that has received so much
discussion of late? Or do you think that just replaces one--
instead of having the insurance companies give you harassment,
you now have the government? We know from many countries that
have this, at least from what I have read, there are waiting
lists. There are difficulties. There is rationing of care
eventually when you go there.
So do you want us to fix what happened in your situation,
make the insurance companies do what they said they were going
to do when you bought your policy, paid your premiums, did
everything right? Or are you in favor of like throwing it all
out and going to a single-payer, government-run system?
And, I mean, you obviously know where I am coming from. I
look at this, the most recent example of government starting a
big program. I just talked with a car dealer the other day.
He's still waiting on 75 percent of the dollars that the Cash
For Clunker program was supposed to get to him. And I think
there's lots of examples where you have bureaucracy that don't
meet the customers' needs and demands at least in a timely
fashion. So fill me in.
Ms. Ackley. Well, I am in support of a public system. But
from our experience, things that would have been beneficial
with the private industry would include Federal oversight of
that.
You know, the appeals process that we went through,
supposedly once my dad's appeals went to the reviewing
foundation, we were supposed to get a decision within 48 hours.
The first appeals process----
Mr. Jordan. Was that a State review? Was that through the
State insurance commissioner?
Ms. Ackley. That was coming from the insurance company
itself.
Mr. Jordan. Internal. OK.
Ms. Ackley. That we would get a response.
The first appeal process, the hospital received the
decision 6 days later, and then my dad received the decision 9
days later.
On the second appeal process, the insurance commissioner's
office received a decision 10 days later, and then my parents
received it 13 days later. So there was nothing to hold them
accountable for that.
Some other things we encountered was the foundation who was
reviewing my dad's case is getting paid directly by the
insurance company. So, I don't know, that seems a little odd.
Mr. Jordan. But Ms. Ackley, your short answer is you think
a single-payer, government-run system--you would be for moving
completely to that type of system?
Ms. Ackley. I think there are benefits with a public-run
system. But I don't see the private industry being eliminated.
Mr. Jordan. OK. I guess my question, you don't think we
substitute one set of hassles for another if we go in that
direction?
I'll go to you, Mr. Gendernalik.
Mr. Gendernalik. Thank you for the chance to address the
question.
I think to revert to what you were speaking about earlier,
health savings accounts as a sole measure for health care, are
woefully inadequate.
Mr. Jordan. I am not saying they----
Mr. Gendernalik. I don't believe putting things totally in
the hands of government is the solution. I believe that a
public option is a necessity to provide a baseline. I think--as
a Member of the Republican Party myself, I think we talk out of
both corners of our mouth when we express concerns about
government inefficiencies on one hand not being able to get it
done, and on the other hand, we say that if the government
provided a public option, we would undercut, low-ball the price
in health care and run the private sector out. Which is it?
It's one way or the other. It isn't both, unless we are not
dealing direct.
I think there's a desperate need for regulations so that
the consumer, the end consumer, the end user, has recourse. We
have none now. The way it is set up now, our employers largely
negotiate with a limited pool of providers to figure out what
choices we have. Then the employee gets to select from that
menu. And then we get to subselect a doctor who is covered
under that.
Now, I did it backward. I found good doctors and then went
up the chain of command. I am fortunate. I work at a huge
bureaucracy with 80,000 employees, and the employees pick our
contracts. If I worked at a small mom-and-pop who is nice
enough to give us coverage, I wouldn't have had that luxury, or
we would have been audited repeatedly. And we have some of the
most effective policies in this country, thanks to the employee
unions who negotiated it.
That all said, my doctor is handcuffed because they do--
they determine through their best judgment what the proper care
is, and it is constantly meddled and interfered with by people
who are looking at one thing: How can they do this less
expensively?
I don't believe that for the United States a single-payer
government system is what would be best in this point in
history.
I do believe that it is incumbent upon all of you to survey
the world, just like a business would, if you want to continue
on the business model. If I want to know how my competition is
beating me, I am going to go find out what they're doing; I'm
going to take their best ideas and make it work within my----
Mr. Jordan. Let me ask you this question, because I think
your statements sort of beg this question; if in fact the
government's running it, what is our recourse then if we don't
like what they decide? You get hassled. What is our recourse
then?
Mr. Gendernalik. I can tell you that the services I do get
through the Government for my daughter, we have had almost no
problem with. And when we do, there is a clearly identified
appeal process with a clearly identified timetable with a
clearly identified resolution. Nobody is going to be happy all
the time. That is just not realistic.
As the proud son of a Dutch mother, I can tell you that the
waiting lists that you speak about are not a reality in the
Netherlands. And it hurts me as a father and an American, and
my relatives have offered to take my daughter and I in because
we wouldn't be facing the delays and denials that we are here.
As the proud husband of a Belizean American, when we travel
to Belize, a third-world Central American country, my daughter
got sick on the flight over. We were hospitalized for 4 days.
The bill was $7; $7 in a country where children don't have
shoes to go to school. A proud country, a beautiful country. I
certainly don't want anyone to take out of context and malign
any country, but clearly a poverty-stricken nation, 4 days of
hospital care with medication, $7.
Mr. Tierney. Mr. Chairman, let me just--15 seconds by
unanimous consent. I think the answer to the gentleman's
question clearly is, what happens if you don't like the
government doing it? It's government. You have a vote, and you
change it. That's where the people get to have a part in it. We
don't get that vote with the insurance companies, and that's
the problem. We can rant and we can rave and we can do it, but
all we get to do is go to another company with the same bad
practices if we don't like the first one.
Mr. Jordan. I appreciate the gentleman. But we can also
change the law and make it--we do have a say in this as well.
We can make the system work better and do one that doesn't turn
it all over to the government as well. That's Congress. I mean,
I agree with you. We can act.
Mr. Tierney. If the gentleman's for strict regulation, we
can all get there pretty soon.
Mr. Kucinich. I want to thank both of my colleagues for
that exchange. A great thing about this committee is that we
like to hear what each other has to say.
Mr. Cummings, you are recognized.
Mr. Cummings. Mr. Gendernalik, I think you are saying what
I am feeling. I just want us to have an effective and efficient
system that also has an element of empathy.
The President used to talk about, and I guess he still
does, a society where we have an empathy deficit, because we
can put all of the rules and regulations in place, but if we
don't have people in those places that see people as more than
a number or more than a statistic or not worrying about a bonus
over the life of a person, it won't make a lot of difference.
So I agree with you.
Mr. Potter, what is the--I mean, let's put you in the place
in your old position. And somebody walked in to your office and
said, ``Potter, we've got a problem. Those folks over there on
Capitol Hill, they have come up with this thing called a public
option. What do we do about that?''
I mean, in other words, I am trying to figure out, what I
hear the insurance companies on the one hand say that they are
worried about being--not being able to compete, but on the
other hand saying that there are certain things that they have
to have in order--well, the first thing they don't want is a
public option. And I am trying to figure out, what would be the
concern? What are those concerns?
And then I would like to hear from you, Ms. Peeno, also. Go
ahead.
And are they legitimate?
Mr. Potter. The insurance industry actually has had this
concern and has been preparing for opposition to the public
plan since before Barack Obama was elected President. And I was
there during a lot of the meetings in which we reviewed every
Presidential candidate's platform for health care reform. And
as you probably know, President Obama, Senator Clinton, and
Senator Edwards all had the public option as a central
component of their campaign platform. So the industry had a
long time to develop a strategy to try to oppose that, and what
we are seeing now is it being carried out.
And they have been saying the things that we've been
hearing that make no sense: that it will put them out of
business because it will be run too efficiently, on the one
hand; or, that we should oppose it because it is a government-
run system.
They want to try to make--they want to defame it and make
it seen as if this is a government takeover of a health care
system. Those are the terms that they use. That's part of the
strategy that was developed a long time ago. It has been an
ever-green phrase that works for them every time there is an
attempt to reform the health care system.
What are they afraid of? They are afraid of having
something that might take a little bit of revenue from them. If
there's no public option and if you have an individual mandate,
look what happens, everybody has to buy their product. And if
the person can't afford that product, then you and I and other
taxpayers will have to pay the subsidies. And those subsidies,
the premium dollars that the people will pay and the tax
dollars that subsidize them, will flow right into those for-
profit companies--or all those companies for that matter--and
then a lot of that will be taken away and go into shareholders'
pockets.
That is what they--they don't want to have another
competitor. They have been consolidating for many, many years,
taking the small players out, gaining control of markets and
market share. So of course they are going to try to oppose
anything that would compete with them, but certainly anything
that could operate more efficiently.
Mr. Cummings. What I see and what I see and I hear the
insurance companies say, we are ready to come to the table, we
will get rid of the preexisting conditions; we will get rid of
the rescissions. And they go through all of that. It makes it
sound as if they are basically admitting that this stuff is
wrong.
Mr. Potter. Absolutely. And they said exactly the same
thing in testimony before Congress in 1993, and I can point you
to it. They know it is wrong. But after the plan failed, the
Clinton plan failed, did you see them coming here to Congress
and asking them to change the laws? No. Of course, they didn't.
They have thrived. They've made tons and tons--they made
billions of dollars with the system that we have now. They are
not sincere. It's just rhetoric.
They would agree to it if--they could thrive in a system in
which these things are made illegal, but they know how to make
money. It is kind of like squeezing a balloon. You could make
them do certain things, you can regulate them, but what you
would have is pressure from Wall Street to figure out ways,
unique ways for them to deny care or to shift more of the
financial burden to consumers.
Mr. Cummings. Without a public option, do you see any way
where we can control costs? In other words, costs of premiums?
Mr. Potter. In a word, no. In two words, absolutely no.
Mr. Cummings. Can I just hear from Dr. Peeno, just real
quick?
Mr. Kucinich. The gentlelady may respond briefly.
Please go ahead, Dr. Peeno.
Dr. Peeno. Well, a general question about why they would
oppose the public option is because I think, you know, Mr.
Potter referred to them as a cartel and that it's a cartel that
works with very secret hidden practices that suddenly would
possibly be disclosed if they had to compete with a real
competitor. So, all of these methods, these secret hidden
methods for profit maximization would become more public.
And they could come to the table, and they could say, oh,
well, we will give up preexisting conditions; we'll give up
rescission. But that is only because they have so refined all
of the other methods behind the scenes. And I see this in case
after case after case where I've worked as an expert witness,
where after all of the labor of finally getting documents that
have to be compelled by a judge, and we see the inner
practices. You know, these systems are so refined. And they
could give up these other things and still have the methods to
maximize profits. That's why they no longer worry about
possibly having all of these other persons who are uninsured,
because they now can control the cost of the people who are
going to be costly. You know, it's a process that's been
refined over the past decade in ways that are just unimaginable
and would take days to explain how all these devious methods
work.
Mr. Cummings. Thank you very much.
Mr. Kucinich. I would say that it would probably be to the
great benefit of Congress to have still another hearing of this
subcommittee where we actually would go into great detail about
how all these meetings and ways are used to deny coverage.
The Chair recognizes Ms. Kaptur for 5 minutes.
Ms. Kaptur. Thank you, Mr. Chairman.
Mr. Potter, do you have the ability to put on the record
the profit margins of the largest insurance companies that you
have been referencing?
Mr. Potter. Sure. I can get that data.
Ms. Kaptur. How would it compare to the profits that are
made, let's say, by the supermarket industry, the food
industry, or the clothing industry? I mean, how would you
compare, from your knowledge of the industry?
Mr. Potter. The profit margin is higher than grocery
stores. And I haven't compared all the other sectors of the
economy. In fact, I just heard this week that the insurance
industry was putting out propaganda saying that only 3 percent
of the premium dollar goes to profits or something like that.
It varies widely from company to company and product to
product. Some of these products are extraordinarily profitable,
and the ones that they want to move us all in to, these high
deductible plans and similar plans, profit margins will expand
greatly. They can make tons and tons of money on this. So
that's what they want to do in the future. That's why the trend
is the way it is.
But think of it this way. Let's assume that it is 3
percent, and let's assume--and that's not an assumption, that's
the truth, that $250 billion of the money that we spend on
health care flowed through those seven companies last year
alone in revenue, 3 percent of that is a ton of money. That is
a lot of money in profit. So they will use sometimes small
numbers to make you think that it is inconsequential, but it is
a huge, huge amount of money.
Ms. Kaptur. Let me go back to my example of Uncle Skip. How
much duplication--how do we get a handle on how much money is
wasted in the system because consumers are innocently or
fearfully buying numerous plans to cover themselves when
they're unneeded? How do we get at that? What's the mechanism
to get at that? I know the standard benefit plan; that's one of
the goals of the reform legislation, to have a benefit plan
that people know they can depend upon. But how does one get at
that waste inside the system?
Mr. Potter. There's a lot of waste. McKenzie & Co., which
does a lot of consulting work for big insurance companies and
other large corporations, did a study of health care systems
and compared our system with those abroad, and I think the
doctor noted that 30 percent of the money we spend here is on
administration that is not spent in other countries. And that
is not just because you have that much inside the insurance
industry, but it's caused by the industry. The multipayer
system we have now, there's an enormous amount of
administration that goes on within these companies, but it
requires doctors and hospitals to hire big staffs just to deal
with them. So that is 30 percent.
Ms. Kaptur. I understand the administrative point or about
a third of the money. But I am talking about citizens who--
millions of them out there in our country who are buying
policies they don't need because they are victims in the
marketplace, in essence. They are fearful of the future. They
don't believe that what they have is secure. How much money is
being wasted on that?
Mr. Potter. I think that would be a good research project.
I haven't seen the data myself on that because it is not so
easily found. But you would need to look at the kinds of
policies that the companies are selling, what benefits they
have, and whether or not they are really worth a dime.
And then you can also look at the policies that are being
spent on fake insurance or--that I have talked about. These big
companies are now getting into that. It's not just fly by-
nights that are doing that. And these are plans that people--
it's not just supplemental. It's what is being sold as the
choice that they have available to them that's affordable.
Keep this in mind: Don't be blinded by just this talk about
affordable premiums, because they will sell you--they'll market
something that has the premiums being affordable, but the
benefits will be so lousy you might as well not be insured.
Ms. Kaptur. If there are senior citizens listening today,
if they have a Medicare policy with a supplemental plan that is
recognized by the Department of Health and Human Services, do
they need extra catastrophic coverage?
Mr. Potter. I don't think they would. I mean, the basic
Medicare benefits are pretty good. If you've got a reasonably
good supplemental plan, then I can't imagine why you would need
to shell out a lot more of your scarce resources.
Ms. Kaptur. And where the fault line is, is the public--
large numbers in the public don't understand that.
Mr. Potter. Exactly, they don't.
Ms. Kaptur. So there are people that play that portion of
the market. There are firms that play that portion of the
market, and they force product on people that is really
unnecessary. And I can't think of a place--I know we have a
State Insurance Commissioner in the State of Ohio; you can call
that number. But this issue of consumer protection and
insurance plan buying is very important, and money is being
wasted all over this country by people who are so scared that
they are buying what is unnecessary. We really need to look at
that arena. It's huge.
Mr. Potter. It is. And it brings up a point that I would
like to make in the inadequacy of State regulation. They do
review marketing materials, but they don't have the resources
to do an appropriate job. That's why you have stuff like this
going on. The regulators are well intentioned, but they just
don't have the resources. States are not wealthy enough to
provide all the resources that are needed to regulate this
industry that is so bent on taking advantage of consumers.
Ms. Kaptur. I thank you very much.
I know, Mr. Chair, my time has expired.
Mr. Kucinich. I want to thank the gentlelady. And as she
has pursued twice in her line of questioning, the issue of
people, particularly seniors, buying policies beyond their
basic Medicare extra policies that they may not need and which
in fact may represent kind of a consumer fraud that people are
trying to sell to seniors, I just want the gentlelady to know
that I have just talked to staff, and that is something that we
are interested in pursuing to the level of a hearing to work
with the gentlelady.
And perhaps we could get Uncle Skip here to testify.
Ms. Kaptur. Thank you very much.
Mr. Kucinich. You are welcome. And I just want to say, this
is the Ohio committee now. We have Mr. Jordan from Ohio, myself
from Ohio, and also Ms. Kaptur. So Ohio is very concerned on
this. Some of our colleagues may be rejoining us momentarily.
I want to thank this panel. Each one of you has made a
contribution through your testimony here today, some of it
heart-wrenching, and other of the testimony infuriating. We
will continue with our investigation tomorrow. But I will say
that the testimony that came today was very helpful in
preparing us for tomorrow as well as to remind the American
people that I think it's good to communicate with each other
about our experience. It's not theoretical.
You know, Mr. Gendernalik has real experience with the
system.
Ms. Ackley, your family has some real experience with the
system.
We need to hear those stories, not anecdotes; what really
happens. And, as Dr. Stern told his experience as well. So this
is very important. I think, frankly, whatever kind of system we
end up with, the transformation is going to be driven by the
power of the narratives which we hear from across the country.
So, with that, I want to thank each and every one of you
and also to salute Mr. Potter and Dr. Peeno for your courage in
coming forward and giving an insider's point of view that we
rarely get a chance to hear. And so I just want to thank you
personally and on behalf of the committee for being here, and
we look forward to your continued work and cooperation. This
panel is now dismissed.
Mr. Kucinich. We're going to ask our second panel to come
forward.
As the staff is getting the table ready, I just want to
remind everyone that this is the Domestic Policy Subcommittee
of Oversight and Government Reform. The topic of today's
hearing: Between You and Your Doctor: The Private Health
Insurance Bureaucracy. I'm joined by the ranking member, Mr.
Jordan of Ohio. We have Ms. Kaptur from Ohio and other Members
who have been here throughout the hearing.
We want to thank the first panel. We're now going to go to
the second panel. We're fortunate to have an outstanding second
panel of witnesses. I would like to first introduce Ms. Karen
Pollitz; is that correct? Welcome.
Ms. Pollitz is the project director of the Health Policy
Institute at Georgetown University here in Washington. She's
also an adjunct professor of Georgetown's graduate public
policy school. Professor Pollitz directs research on health
insurance reform issues as they affect consumers and patients,
focusing on the regulation of private health insurance plans
and markets, managed care consumer protections and access to
affordable health insurance.
Ms. Pollitz is a member of the National Academy of Social
Insurance. She's also a member of the advisory board of the
California Health Benefits Review Program and has served on the
board of directors of the Maryland Health Insurance Plan, as
well as the National Committee on Quality Assurance.
Previously, Professor Pollitz served as Deputy Assistant
Director for Health Education at the U.S. Department of Health
and Human Services from 1993 through 1997, acting as the
Secretary's legislative liaison on all Federal health care
issues, including national health care reform, Medicare and
Medicaid, and U.S. Public Health Service agencies and programs.
Mr. Michael Cannon. Welcome, Mr. Cannon. Mr. Cannon is the
CATO Institute's director of health policy studies. Previously
he served as a domestic policy analyst for the U.S. Senate
Republican Policy Committee under Chairman Larry Craig, where
he advised the Senate leadership on health, education, labor,
welfare and the Second Amendment. He coauthored a book on
competition in health care. Mr. Cannon has had his work
published in numerous national media publications and has also
appeared as a commentator on television and radio.
I want to thank you, Mr. Cannon and Ms. Pollitz, for
appearing before the subcommittee today. It is the policy of
the Committee on Oversight and Government Reform to swear in
witnesses before they testify. I would ask that you rise and
raise your right hands.
[Witnesses sworn.]
Mr. Kucinich. Thank you very much.
Let the record reflect that the witnesses have answered in
the affirmative.
I'm going to, as we did with the first panel, ask each
witness to a give summary of his or her testimony and to keep
the summary under 5 minutes in duration. Keep in mind your
complete written statement will be included in the hearing
record.
Professor Pollitz, you will be our first witness for this
panel. You may proceed. We'll get your testimony in, and maybe
we'll be able to hear from both of you before we run to votes.
Go ahead.
STATEMENTS OF KAREN POLLITZ, PROJECT DIRECTOR, HEALTH POLICY
INSTITUTE, GEORGETOWN UNIVERSITY, WASHINGTON, DC; AND MICHAEL
CANNON, DIRECTOR, HEALTH POLICY STUDIES, CATO INSTITUTE,
WASHINGTON, DC
STATEMENT OF KAREN POLLITZ
Ms. Pollitz. Thank you, Mr. Chairman, members of the
subcommittee. I just want to open by saying I'm also from Ohio.
I grew up in the Cleveland area when you were mayor, Mr.
Chairman, so it's very nice to be here today.
Mr. Kucinich. Thank you.
Ms. Pollitz. I want to thank you for holding this very
important hearing.
I hope and expect that health care reform when it is
enacted will create rules to prohibit or at least limit a lot
of the practices that you heard about this morning on the first
panel, but rules will not be enough. There will always be a
strong incentive in a competitive insurance market for
insurance companies to try to avoid risks, avoid enrolling,
keeping them enrolled, or avoid paying their claims. And so
transparency and accountability in insurance is essential, and
it's very important that health reform try to accomplish that
as well.
Transparency in insurance will involve a number of key
changes, and the most important of these will be data
reporting. When I was invited to testify at this hearing, I was
asked could I provide data on how often practices like these
happen, and the answer was I could not, and neither can the
regulators or other policymakers, but the information is
knowable.
Regulators need to have ongoing, detailed information about
marketing and enrollment practices and about how coverage is
administered so that it will be possible to see when insurers
are avoiding risk that they are supposed to cover. We don't do
that today. The Federal Government collects no data on health
insurance consumer protections, even though Federal law
requires certain important protections already, including
guaranteed renewability of coverage.
For the most part, States don't collect a lot of data on
consumer protection and health insurance either. Instead, most
data collected on an ongoing basis by State insurance
departments relates to financial solvency, and regulators rely
largely on consumer complaints as an indicator of problems.
However, a body of research shows that rarely do consumers
lodge formal complaints with regulators, even about serious
health insurance problems that cost them a lot of money or that
delay their access to care.
A series of hearings about health insurance rescissions
that were initiated in this committee provides a sobering case
study of how little we know about how well health insurance
works for consumers and how vulnerable they are to
discrimination.
This committee asked all 50 State regulators what data they
collect on health insurance rescissions, and in response only 4
States could provide any data on the number of rescissions that
had occurred. Only 10 could provide the number of individual
insurance policies that were enforced in their States, and more
than a third of States could not supply a complete list of
companies that sell individual health insurance within their
borders.
The NAIC pulled all 50 State insurance departments and
provided summary complaints data about health insurance
rescissions. They found a total of 181 complaints about health
insurance rescissions had been lodged over a 5-year period. By
contrast, when this committee asked just 3 insurance companies
how many policies they had rescinded over the same period, the
answer was almost 20,000.
A new approach to health insurance regulation must require
ongoing and detailed reporting by insurers of data that will
enable regulators to evaluate how the market works, especially
for the sickest consumers. That would include data on
enrollment, retention, disenrollment, on rating practices at
issue, and at renewal.
Regulators must also track measures of coverage
effectiveness to see what medical bills are paid and how many
are left for consumers to pay on their own. That means insurers
also need to report data on provider participation fees,
insurer reimbursement levels, health insurance policy
lossratios, and data regarding claims payments and utilization
review practices. If regulators have access to this kind of
information, patterns of problems that affect the sickest
consumers won't be as easy to hide.
Finally, Mr. Chairman, health insurance must also be held
accountable for compliance with market rules and consumer
protections. As Ms. Kaptur talked about her uncle buying
additional policies, that is illegal. So it's not enough to
have rules. We have to enforce the rules, and that requires
resources for oversight and enforcement.
In addition, it's time for the Federal Government to take a
more proactive role in health insurance regulation. Current
Federal capacity for private health insurance oversight and
regulation is practically nonexistent. Last year a witness from
CMS testified that agency dedicated only four part-time staff
to HIPAA private health insurance matters for the entire
Nation.
Further, despite press reports alleging abuse of rescission
practices in violation of Federal law, the agency did not
investigate or even make inquiries as to whether Federal
guaranteed renewability protections were being adequately
enforced. This outcome is not surprising.
When you enacted HIPAA in 1996, Congress created important
Federal rights for consumers, but limited Federal enforcement
authority. Instead, Congress opted to rely primarily on State
enforcement by adopting a so-called Federal fallback
enforcement structure. Federal enforcement is triggered only as
a last resort once a finding is made that States have not
adopted and substantially enforced Federal minimum standards.
Under the structure it's not surprising that the Federal
Government lacks oversight and enforcement capacity. It doesn't
make sense to build and maintain capacity that you don't expect
to use. So you rely on the States instead, but unfortunately,
limited regulatory capacity is a problem at the State level as
well. Insurance department staff have been cut, and States are
overworked.
It's time for the Federal Government to assume an active
and effective role in enforcement of Federal health insurance
standards and to require transparency so that we can see how
coverage works.
Mr. Kucinich. I thank the gentlelady.
[The prepared statement of Ms. Pollitz follows:]
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Mr. Kucinich. Mr. Cannon, you may proceed for 5 minutes.
STATEMENT OF MICHAEL CANNON
Mr. Cannon. Thank you, Mr. Chairman, for this opportunity
to present my perspective on providing secure health insurance
to American consumers.
How do we ensure that insurance plans honor their
commitments to care for the sick? It's a problem whether we're
talking about private insurance plans or government plans.
Private plans, whether through indifference or incompetence, do
sometimes shirk on those commitments. So does government.
In 2007, a 12-year-old Maryland boy named Deamante Driver
died because his mother could not access the care that Deamante
was supposedly guaranteed under a government health plan. As
former Senate Majority Leader Tom Daschle acknowledges, even if
we achieve universal coverage, some percentage of patients will
fall through the cracks. Health care is a human endeavor. That
means perfection is not an option. Our task is to find a set of
rules that least often leaves Americans in the position of
Deamante Driver and his family.
In my written testimony, I cite a growing body of economic
literature that finds that rightly regulated insurance markets
perform actually much better than critics suggest, providing
secure coverage to millions of Americans with high-cost
illnesses. And I also express my concerns with the four
measures that Congress is considering. For example, legislation
before the House would compel tens of millions of Americans to
purchase private health insurance and would shower private
insurance companies with billions of dollars in taxpayer
subsidies, and not, I would add, because insurance companies
are doing a fantastic job.
Another provision of the legislation would impose price
controls on private health insurance premiums. As President
Obama's economic adviser Larry Summers has said, ``price
controls inevitably create harmful economic distortions. An
example of one of those distortions, if you think insurers try
to avoid the sick now, wait until the government price controls
force insurers to sell a $50,000 policy for just $10,000.''
It is worth noting that the insurance lobby supports both
the proposal to make health insurance compulsory and the
proposed price controls because they would subsidize and
protect private insurance companies from competition. Whether
we support a new government health program or oppose it, I
think we should all be able to agree that we don't need to
further subsidize and protect private insurance companies from
competition.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Cannon follows:]
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Mr. Kucinich. I want to thank Mr. Cannon and Ms. Pollitz
for their testimony.
We have votes that are on right now, and I just would like
to invite you to do one of two things, and this is up to you.
You can either respond to written questions from members of
this subcommittee, and they will be included in the record, or
you can come back probably in about 45 minutes at the
conclusion of the votes, and then we can go through a second
round of questioning of the panel here. So what would you
prefer?
Mr. Cannon. I would be happy to come back in 45 minutes.
Mr. Kucinich. Can you do that? OK. OK. My colleague
suggests it might be, let's say, a half hour. So let's say--
let's come back in a half hour then, and we'll go to questions.
I thank you for your patience. We're going to go vote right
now.
The committee is in recess for the vote. We'll be back in a
half hour.
[Recess.]
Mr. Kucinich. The committee will come to order. I'd like to
thank the witnesses for remaining, and I'd like to begin by
asking Mr. Cannon, under what circumstances do you see that
making private health insurance compulsory represents a bailout
to the insurance industry? How would you explain that view?
Hold the mic a little bit closer.
Mr. Cannon. Mr. Chairman, in order to help Americans comply
with what they call the individual mandate in the legislation
before the House and in the legislation before the Senate as
well, Congress has decided it would--or the legislation would
offer subsidies to Americans to help them purchase health
insurance. Simply mandating that people purchase health
insurance doesn't mean that they will be able to. A lot of
people won't be able to afford it, and so Congress would be, in
its legislation, offering subsidies to a lot of people who
cannot afford health insurance on their own and to a lot of
people who can afford health insurance on their own, because
the subsidies, as I understand them, would go up to 300 or 400
percent of the Federal poverty level, which for a family of
four is somewhere around $60,000 to $80,000 per year.
Those subsidies offered to people who can afford health
insurance already and to people who cannot would--would
essentially help people purchase more health insurance and give
the insurance industry really a guaranteed customer base and a
guaranteed source of revenue.
So I think that essentially what that legislation would do
is akin to a bailout of the health insurance industry. I don't
think that what we should be doing is giving more to this--to
this sector or to this industry. I think we should be demanding
more from it, and I think the way to do that is to preserve the
freedom to choose whether or not to purchase health insurance
as well as the freedom to choose what goes into your health
insurance policy. And the way to do that, in my view, is to let
consumers control the money that government and employers now
control to purchase health insurance on their behalf, and they
will--they will economize on health insurance. They will--they
will most likely purchase less health insurance than they do
right now, and they will hold health insurers accountable in a
way that they cannot when their employers are making those
decisions for them.
Mr. Kucinich. So let's go 4 years down the road. Let's say
that a health care plan is enacted which requires that people
have private insurance. Let's say there's no public option--
that's kind of the way it looks like right now--and people--
there will be tens of millions of Americans who will be faced
with a decision to either purchase private insurance or pay a
fine. Would you like to comment on that?
Mr. Cannon. I think that what that really highlights is
that this proposal for--to mandate people purchase health
insurance, this proposal to make health insurance compulsory in
the United States, amounts to a tax on a lot of middle-class
families. If they purchase the health insurance, as President
Obama's economic adviser Larry Summers acknowledges, then the
government forces people to purchase something that they don't
value or pay more than the market would demand, values in
itself are taxed, and if they don't purchase the mandatory
level of coverage and they have to pay what we euphemistically
call a fine or a penalty, that's a tax as well.
In the House legislation, there would be a tax on the
individual equal to 2\1/2\ percent of income--of adjusted gross
income, and if the individual's employer does not offer them
coverage, there would be a tax equal to 8 percent of payroll.
Now, Mr. Summers and the Congressional Budget Office and
economists broadly acknowledge that 8 percent payroll tax would
be paid for by the worker because it reduces their earnings. So
what you're talking there is a 10\1/2\ percent tax----
Mr. Kucinich. Is that axiomatic?
Mr. Cannon. It is.
Mr. Kucinich. So you're saying that if workers have a
health care benefit, they're in effect paying for it?
Mr. Cannon. Absolutely, and I think, in fact, that is why--
I think that's the great--the biggest drawback or the biggest
problem with the tax preference for employer-sponsored
insurance.
The, ``employer contribution'' to the average family plan
in this country amounts to $10,000. That's $10,000 of the
worker's earnings that the worker doesn't get to control. The
government, by creating this tax preference for employer-
sponsored insurance, essentially takes that $10,000 out of the
worker's hands, gives it to the employer, and lets the employer
make the worker's health insurance decisions for the worker.
So, yes, I think that economists--in fact, there was a
survey of health economists recently, and the broadest area of
agreement was on the question of whether health benefits
actually come out of wages or profits or something else. Ninety
percent of economists--health economists acknowledge or agreed
with the proposition that, yes, workers pay for those health
benefits through reduced wages, and the same is true of any tax
penalties that Congress might impose.
Mr. Kucinich. Thank you, Mr. Cannon.
Professor Pollitz, I want to speak to you about how
government can help the public make better choices about health
insurance. In your testimony, you pointed out something that
many people may not realize, ``The primary purpose of health
insurance data collected by State regulators today is to
monitor the solvency of private health insurers, and that,
quote, enforcement of consumer protections in health insurance
today is largely triggered by complaints.''
I think the average person is or would be surprised to hear
this. So who does monitor things like accessibility,
affordability, or security of private health insurers or how
accurately do they pay out on claims?
Ms. Pollitz. It is not well monitored or consistently
monitored today. I think State insurance regulators strive
mightily to protect consumers as best they can. Their resources
are limited.
Mr. Kucinich. Would you describe the State regulators as
reactive to consumer complaints rather than proactive?
Ms. Pollitz. A lot of it is reactive. A lot of times in
response to a complaint, as little as one complaint, a State
regulator may initiate a broader investigation of a company or
of a pattern of practices. So I don't mean to suggest that
State regulators aren't out there giving it their best effort,
but they are very strapped in terms of resources. They are very
broad in terms of the jurisdiction that they need to keep an
eye on, and with limited resources--I mean, if I were one, and
I had the limited resources, I would probably start with
solvency myself, because if a company goes under, then no
claims will be paid for anybody. So that's not an illogical
place to start, but there are not enough resources to monitor
closely what needs to be monitored. And with health insurance,
that's a very transaction-heavy task to accomplish.
Mr. Kucinich. Do private health insurers themselves keep
data on complaints made against them that can be reviewed?
Ms. Pollitz. That can be reviewed?
Mr. Kucinich. Yeah.
Ms. Pollitz. I don't actually know what data they would
keep. All insurance companies have a compliance office with a
lot of attorneys, and I'm sure they at least have a pretty good
idea of what complaints are being filed, and they have to keep
records. I mean, this is why you get urged to put everything in
writing when you're communicating with your insurance company
so that there will be a record somewhere.
Mr. Kucinich. My time is expired. I'm going to go to my
colleague for 5 minutes, and then we'll go to one more--one
final round of questioning.
Mr. Jordan. Thank you. Thank you, Mr. Chairman.
Mr. Cannon and Ms. Pollitz, thank you for being here.
Mr. Cannon, let me ask you about this idea of interstate
insurance broadening the field, increasing the market,
increasing competition. In the first panel, I believe Dr. Peeno
and Mr. Potter talked about the cartel that exists in the
insurance market right now. Their solution was to have the
Government compete; you know, to increase competition by having
this so-called public option. The approach I prefer is this
interstate market.
Mr. Jordan. Tell me your thoughts on that, what the
research shows us getting. This is now being debated a lot and
talked about as a possible improvement. Let me hear your
thoughts there.
Mr. Cannon. Well, I think the insurance markets in most
States are not unlike a cartel, and I think the reason is
that--is because each State sets up barriers to competition to
protect their domestic insurers.
What those are are essentially State licensing laws. Now,
there's nothing wrong with a State licensing law per se, but
what these laws do is they say unless your insurance policy is
licensed by this State, say the Commonwealth of Virginia, then
you may not sell it to residents of this State. And so what
that means is that residents of Virginia cannot purchase a
health insurance policy that's available in Maryland or North
Carolina.
That's particularly cruel, I think, to residents of New
Jersey, who face some of the highest health insurance premiums
in the country. They cannot purchase health insurance from
across the Delaware River in Pennsylvania where it's often less
expensive.
So what happens--so I do think there is insufficient
competition in insurance markets. The President and other
supporters of a new government program have said that they--
that a new competitor can keep insurance companies honest. If
that's the case, then I think that dozens of new competitors
would do an even better job, so that if Congress, using its
power under the interstate commerce clause of the Constitution,
were to say, look, you know, States can license health
insurance, but they cannot prohibit their residents from
purchasing health insurance licensed by another State, what
that would do is it would bring new entrants into the markets
in each State, give individuals and employers a lot more
choices of health insurance plans and increased competition.
What it would also do is it would give individuals and
employers the power to avoid unwanted costly State regulations.
A lot of State regulations are, in fact, consumer protections.
Solvency standards that Ms. Pollitz was talking about, I think,
are a prime example. But when you start looking at how the
States require consumers to purchase 30 different types of
mandated benefits that they may not want or need, or try to
impose hidden taxes on the healthy in order to subsidize the
sick, those are increase--those are regulations that increase
the cost of insurance and make it unaffordable for some people.
So you can't really call them consumer protections if
they're keeping people from purchasing health insurance, and I
think that letting people purchase insurance across State lines
would allow people to----
Mr. Jordan. Thank you. Thank you.
Ms. Pollitz.
Ms. Pollitz. The proposals to allow sale across State lines
that have been in the Congress to date are really a
prescription for insurance fraud. There would be little
practical ability of the licensing State to regulate insurance
sold across the 50 States. Imagine if the Ohio commissioner had
to keep track of policies that were sold in California and
Texas and New York. They're not set up for that.
The notion of escaping mandated benefits is a total red
herring. The reason that health insurance costs more in New
Jersey compared to Maryland, where I live, which has been cited
as the champion of mandated benefits--supposedly we have more
in Maryland than anywhere--is that in New Jersey everybody has
to be offered health insurance. You can't be turned down
because you have cancer, and in Maryland you can. So it's
cheaper and insurance----
Mr. Jordan. I think the chairman talked about that in his
previous question.
Ms. Pollitz. I think we have to come back to what is the
basis of competition in health insurance right now, and it is
competition to avoid sick people and their costs. And the more
you dilute oversight and regulation, the more easy that will be
and the more----
Mr. Jordan. Let me get a response from Mr. Cannon.
Mr. Cannon. Karen raises a couple of important issues. One
of them is how do you enforce these rules that are written by
an out-of-State legislature or insurance commissioner, and I
think there's a fairly straightforward way of doing that. You
have those regulations, whatever they may be, incorporated in
the insurance contract, which could then be enforced in the
purchaser's home State and in their courts, and then the
domestic--the purchaser's insurance commissioner could even
play a role there.
What's important is that the individual consumer or the
employer be able to choose the rules, and they could be
enforced at home without having to rely on an out-of-State
insurance commissioner.
As for the cost of mandated benefits, the cost estimates
vary, but the Commonwealth of Massachusetts recently estimated
that the benefits that are mandated in that State add 12
percent to the cost of premiums. So that's a substantial chunk
of money.
Mr. Jordan. Sure.
Mr. Chairman, looks like just you and me. I yield back to
you.
Mr. Kucinich. Just you and me. This town is big enough for
both of us.
I'd like to go back to Ms. Pollitz. I'd like to talk to you
about standards of care and a possible scenario. Are you aware
of any data on the inconsistent application of standards of
care by private insurers? Is it possible that within two--
taking two different people with the same illness, who are
insured by the same private health insurer, that they will be
treated differently by the insurance company; is that possible?
Ms. Pollitz. I believe it's possible, yes.
Mr. Kucinich. And so is there any guarantee that if a
person buys coverage, it will guarantee coverage?
Ms. Pollitz. Not an ironclad guarantee, no.
Mr. Kucinich. Pardon?
Ms. Pollitz. Not an ironclad guarantee, no. There is a
contract, but it----
Mr. Kucinich. But there are no guarantees.
Ms. Pollitz. That's correct.
Mr. Kucinich. I'd like to ask about lack of transparency in
private health insurance as compared to Medicare.
Congress and the general public are able to examine and
debate the reasoning behind how Medicare pays for medical care,
but the private health insurers keep their decisionmaking
process and guidelines hidden behind books of confusing
terminology. In other words, Medicare's actions are
transparent, but private insurers are not, but they provide the
same service ostensibly to cover medical expenses. Now, is
there any justification to keeping insurance company
definitions of medical necessity proprietary?
Ms. Pollitz. I don't think so, no.
Mr. Kucinich. And why would the insurance company want to
keep that information proprietary?
Ms. Pollitz. I believe they will argue so that doctors and
other providers don't try to game the system and sort of code
their billing so that it matches up what the--you know, what
the guidelines would be. But I think you heard testimony on the
earlier panel that there is also an effort to just, you know,
kind of try to hide the ball and try to, you know, create
options for the insurance company to deny claims if they feel
like they want to do that.
Mr. Kucinich. Are there any data nationally about either
the frequency of wrongful denials of claims or of unjustified
reviews or appeals?
Ms. Pollitz. There are not good, consistent data. I tried a
couple of years ago to study the results of even external
appeals programs, and the data was very sparse.
What you can find is--suggests that we need to be doing a
better job and looking much more carefully and not relying on
the sort of end result of a patient having to go through all of
the steps and appeals before they can get to a system where
records will be kept.
Mr. Kucinich. Anything else you want to add about that you
haven't told this committee about the data collection?
Ms. Pollitz. I really do think, Mr. Chairman, that we need
to think carefully about the ways that insurance companies
compete now to avoid paying claims. Certainly there are reasons
why we don't want to pay for care that's not medically
necessary. We don't want to pay for fraud. I mean, there are
reasons for vigilance for sure, but I think we need to think
from the patient's perspective about what we need to track so
that we can make sure that decisions are justified, that
they're backed up, that they're consistent, and that they're in
the patient's best interests, and then build our data-reporting
requirements from that exercise.
I think we need a much more proactive and propatient
approach to data gathering from health insurance companies, and
I hope that will be a central part of any health reform
legislation that gets enacted.
Mr. Kucinich. I'd like to ask a question of Mr. Cannon.
You're here representing the CATO Institute, and I've always
found very handy this Constitution of the United States which
comes from the CATO Institute, including its introduction.
Under our Constitution, you know, the general welfare
clause, which there's been a lot of discussion about, there are
some of us who believe that both the Preamble to the
Constitution and Article I, section 8, in describing the
general welfare, that as we evolve as a Nation and have
specified health care, retirement security as part of the
general welfare, that a logical extension of that would be to
have health care for all, guided by the principle enunciated in
the Constitution, both in Article I, section 8 and the
Preamble. You know, tell me what--how you see that.
Mr. Cannon. The question is about the general welfare
clause of the Constitution? There is a difference of opinion
among legal scholars about what that means. I'm not a
constitutional scholar, but let me give you my best take on
what that disagreement is.
There's some that believe that is an expansive grant of
power that would, say, give Congress the power, the
constitutional authority to enact, say, a single-payer system
or make health insurance compulsory for all Americans. I think
that the perspective of CATO's constitutional scholars is that
if that were true, if the--if the Framers of the Constitution
meant for the general welfare clause to be such a sweeping,
broad, comprehensive grant of power from the States to the
Federal Government, then the rest of the Constitution would be
superfluous. They wouldn't have had to enumerate all the other
powers in the Constitution, because the general welfare clause
would have taken care of everything. So the very structure of
the Constitution itself, I think, argues against a broad or the
sort of expansive interpretation of the general welfare clause
that you suggest.
Mr. Kucinich. One of the things that I've always been
impressed with is the Preamble which CATO provides to the
declaration and the Constitution. And one of the things they
say in there, my colleague, is that it's not--it's not
political will, but moral reasoning which is the foundation of
the political system.
And some of the issues that are being brought to us about
conditions relating to health care in America are laden with
moral consequences and moral overtones, and it's like an
underlying reality of whether health care--if health care's a
privilege based on ability to pay, or is health care a
fundamental right in a democratic society.
There's like this arc where you go from--from economics,
which can be amoral, to the imperatives of a democracy that
relate directly to morality. And I just--you know, that's--in a
way, that's part of the backdrop of this national discussion
we're having right now, is it a right or is it a privilege, you
know, and this is part of our unfolding democracy here, trying
to decipher what the meaning of this document is, and also
doing it within the context of what our present-day needs are
and what--the various human conditions we find ourselves in and
the underlying morality--you know, is it immoral for somebody
to be denied care when they're paying for it?
These are questions that we are to deal with here. I
appreciate having the chance to share that with you.
Mr. Jordan, you can conclude this hearing.
Mr. Jordan. All right. Thank you, Mr. Chairman.
Let me just go to the premise. Many of the witnesses in the
first panel, the premise was that the government can do it
better. We know that there's been problems with the way
insurance companies deal with patients and sometimes some of
the things that take place, but to say that government can do
it better, I'd like your thoughts on that in light of the
Congressional Research Service said of over the 1 billion
claims submitted each year to Medicare, 10 percent of those
claims are denied.
Attorney General Holder said, ``by all accounts every year
we lose tens of billions of dollars in Medicare and Medicaid
funds to fraud.''
So, your thoughts on--you know, we met with health care
professionals. We did health care roundtables in our district
over the recess, and, you know, we had so many people tell us
that government's already 50 percent of the health care market
right now, and that providers don't get compensated fully for
the care they provide when they treat folks under the Medicare
and Medicaid system, and therefore the folks who are in the
private insurance have to pay more because that's just the way
the system is set up right now.
So I'd like both your thoughts. I'd start with Mr. Cannon
on this premise that has been so--kind of underlies the entire
hearing today on how somehow the government can do it better,
because, as you can gather, I have real reservations about
that.
Mr. Cannon. Well, I think, Congressman, that the state of
America's health care sector right now is pretty good evidence
that the government does not do a very good job of managing
health care. And I'll give you a couple of examples.
You brought up the Medicare program. That program, it has
been estimated that one-third of Medicare spending does
absolutely nothing to improve the health or--improve the health
of patients or improve patient satisfaction, provides no value
to them whatsoever. It's often cited that we have--so that's an
enormous amount of waste, much--even larger than the estimates
of fraud in the Medicare program.
It has been estimated that as many as 100,000 Americans die
every year due to medical errors in hospitals. I submit that
probably Medicare is the biggest reason for that because
Medicare's payment system actually penalizes doctors and
hospitals when they succeed in reducing medical errors. It
makes it a losing business proposition. Rather than have
competition between different payment systems that bring out
different dimensions that would improve all dimensions of
quality, Medicare gives us good marks on some dimensions of
quality, but absolutely horrible marks on other dimensions.
One of the biggest problems that the President talks about
is the problem of preexisting conditions, people with high-cost
illnesses who lose their coverage and then cannot afford the
premiums that they're charged on the individual market. That is
a problem that has been fueled by government for 60 years, and
the reason is that 60 years ago the government created a tax
preference for employer-sponsored insurance coverage that has
given us the employer-based system that we have right now that
is so cruel and, to use the chairman's words, immoral that it
takes insurance away from people the moment they need it most.
And they lose their jobs, they lose their incomes, and if those
people are sick, then they've got a preexisting condition. They
are not going to be able to get coverage.
And if I may finish, one of the studies that I cite in my
written testimony finds--looks at the empirical--looks at the
data and finds that people who purchase insurance directly from
an insurance company, people with high-cost illnesses who do
so, are half as likely to end up uninsured as people who
purchase--high-cost patients who purchase health insurance from
a small employer.
Mr. Jordan. One of the things we should deal with in the
legislation I have cosponsored is for the families who have to
go out and buy it on their own in the market, they should get
the same tax advantages that we give to employers to provide to
employees.
Mr. Cannon. That problem has been in place for 60 years
now----
Mr. Jordan. That is one of the key things we have to--Ms.
Pollitz, I'm sorry, go ahead.
Ms. Pollitz. No problem. I think the real--two real
differences. One is about accountability, and there is a
different level of accountability for government than there is
for the private sector. There just is. I think we should try to
enhance and strengthen accountability in the private sector
with much stronger oversight and regulation and enforcement.
Regardless of how you end up structuring health reform, I think
that's essential.
But government programs will always be accountable in a
different way to--directly to the voters. They will always be
open in a different way compared to commercial plans. That's
the way we've set up our government----
Mr. Jordan [continuing]. These and others and Mr. Cannon
and many of us that a real marketplace, you're accountable
directly to the consumer.
Ms. Pollitz. Well, but that's my second point.
Mr. Jordan. That's where we needed to be headed is to a
true marketplace.
Ms. Pollitz. That's my second point. A marketplace of
competing insurance companies will always, always in health
insurance compete to avoid sick people. That is the
overpowering incentive. It beats everything, and it always
will. Even in a more regulated marketplace, even in a more
transparent place, you're always going to be trying to catch up
with that.
Introducing a public component to that, it's kind of a
funny notion. It's not like the government is going to compete
to make more profits than Blue Cross or WellPoint. It's that
the government will be there offering a choice that is the----
Mr. Jordan. If there is a public option, eventually the
public option will dominate. Even Congressman Frank has said
that a public option will lead to a single-payer system. This
idea that somehow it's not going to do that, I just--I don't
think flies. I think most Americans have already figured that
out, and that's why they're concerned about this plan.
Ms. Pollitz. Mr. Jordan, I was on the board for several
years of a public program in my State where I ran our State
high-risk pool, and it was administered by a private insurance
company, and so, you know, they know how to administer claims,
and that is definitely its own art and its own skill.
And as the consumer rep on the board, I would ask
questions: Why do we have so many denials of preauthorization,
for example, for mental health services? That turned out to be
one of the biggest services that any of our patients used. Even
though that wasn't the major diagnosis, it's very stressful to
be sick; people need help. And one of our leading sources of
complaints had to do with denials for mental health service.
And so I said, why is that? Why are we denying all this
care? Well, it turned out it was paperwork. People were
supposed to jump through all these hoops and get
preauthorization. They had to do it within a certain number of
days, and it was just a load of hoops that they had to jump
through.
And I said, well, OK, once they go through all these hoops,
how many of them are actually denied--and there were thousands
of denials--and they said, seven. And I said really? Then why
are you doing this? Why are you making them jump through all
these hoops? Oh, they said, this is saving you a lot of money.
I said, I don't want you to save us a lot of money. We're here
to pay for care. We're a high-risk pool. They're sick. No one
else will take care of them. This is our job. This is what the
taxpayers have given us tax dollars to do. Let's stop doing
that. We did that.
I can't imagine that would happen in the company that Ms.
Peeno--Dr. Peeno used to work for. It's just a different
incentive. It competes in a different way, and I think we need
to create a different standard for covering health care. And if
private insurance companies can't compete against that and
survive, well, so what? I mean, we took care of the patients
who were sick, and isn't that what this has to be about
primarily? It seems to me that has to be where we start the
discussion.
Mr. Kucinich. We thank the gentlelady.
I want to thank Mr. Jordan for his participation in this
hearing, and thank both the witnesses from the second panel for
their participation.
As my friend is leaving the room, I just wanted to
comment--and staff can relate this to him--that some--there are
some cases, I suppose, where a public option may lead to a
single-payer system at some point. I mean, I actually am the
coauthor of a bill to create a single-payer system, and I'd
like to see a single-payer system. We have 85 Members of the
House who have signed on to a bill, H.R. 676, the bill I
drafted with Mr. Conyers. That bill, in its fullness, is not
likely to have hearings, and whether there might be a vote on
it, it needs a movement behind it. That needs a little more
strength.
So while some public options may lead to single payer, I
would just like to offer the opinion that it's unlikely that
the current status of the public option that is suggested in
H.R. 3200 would lead to single payer.
The CBO has said in one of its studies that 9 million
people at most would be covered by--by any kind of a public
option; that the first iteration of that plan was to have 129
million people covered by it. So you have 9 million people,
that particular plan may not pose much of a risk or, frankly, a
competitive position vis-a-vis the private insurers. I just
wanted to mention that since we were talking about public
options.
You're much appreciated for the time that you have spent,
for your patience, and this committee stands adjourned. I want
to remind people that tomorrow we will hear from executives
from six of the major health insurance companies so that we can
followup and ask them some of the questions that were raised in
today's hearing. We're all very appreciative of your presence.
The committee stands adjourned.
[Whereupon, at 1:30 p.m., the subcommittee was adjourned.]
[The prepared statement of Hon. Diane E. Watson and
additional information submitted for the hearing record
follow:]
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