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


 
    MAKING HEALTH CARE WORK FOR AMERICAN FAMILIES: DESIGNING A HIGH 
                       PERFORMANCE HEALTH SYSTEM

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 10, 2009

                               __________

                           Serial No. 111-11


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



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                    COMMITTEE ON ENERGY AND COMMERCE

                 HENRY A. WAXMAN, California, Chairman

JOHN D. DINGELL, Michigan            JOE BARTON, Texas
  Chairman Emeritus                    Ranking Member
EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
RICK BOUCHER, Virginia               FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
BART GORDON, Tennessee               NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
GENE GREEN, Texas                    STEVE BUYER, Indiana
DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
  Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California               MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
JANE HARMAN, California              LEE TERRY, Nebraska
TOM ALLEN, Maine                     MIKE ROGERS, Michigan
JAN SCHAKOWSKY, Illinois             SUE WILKINS MYRICK, North Carolina
HILDA L. SOLIS, California           JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas           TIM MURPHY, Pennsylvania
JAY INSLEE, Washington               MICHAEL C. BURGESS, Texas
TAMMY BALDWIN, Wisconsin             MARSHA BLACKBURN, Tennessee
MIKE ROSS, Arkansas                  PHIL GINGREY, Georgia
ANTHONY D. WEINER, New York          STEVE SCALISE, Louisiana
JIM MATHESON, Utah                   PARKER GRIFFITH, Alabama
G.K. BUTTERFIELD, North Carolina     ROBERT E. LATTA, Ohio
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA M. CHRISTENSEN, Virgin 
Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE L. BRALEY, Iowa
PETER WELCH, Vermont

                                  (ii)
                         Subcommittee on Health

                FRANK PALLONE, Jr., New Jersey, Chairman
JOHN D. DINGELL, Michigan            NATHAN DEAL, Georgia,
BART GORDON, Tennessee                   Ranking Member
ANNA G. ESHOO, California            RALPH M. HALL, Texas
ELIOT L. ENGEL, New York             BARBARA CUBIN, Wyoming
GENE GREEN, Texas                    HEATHER WILSON, New Mexico
DIANA DeGETTE, Colorado              JOHN B. SHADEGG, Arizona
LOIS CAPPS, California               STEVE BUYER, Indiana
JANICE D. SCHAKOWSKY, Illinois       JOSEPH R. PITTS, Pennsylvania
TAMMY BALDWIN, Wisconsin             MARY BONO MACK, California
MIKE ROSS, Arkansas                  MIKE FERGUSON, New Jersey
ANTHONY D. WEINER, New York          MIKE ROGERS, Michigan
JIM MATHESON, Utah                   SUE WILKINS MYRICK, North Carolina
JANE HARMAN, California              JOHN SULLIVAN, Oklahoma
CHARLES A. GONZALEZ, Texas           TIM MURPHY, Pennsylvania
JOHN BARROW, Georgia                 MICHAEL C. BURGESS, Texas
DONNA M. CHRISTENSEN, Virgin 
    Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
BETTY SUTTON, Ohio
BRUCE L. BRALEY, Iowa
  

                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     1
Hon. Nathan Deal, a Representative in Congress from the State of 
  Georgia, opening statement.....................................     6
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     7
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................    11
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................    12
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................    14
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................    14
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................    15
Hon. Lois Capps, a Representative in Congress from the State of 
  California, opening statement..................................    20
Hon. Phil Gingrey, a Representative in Congress from the State of 
  Georgia, opening statement.....................................    20
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................    29
Hon. Donna M. Christensen, a Representative in Congress from the 
  Virgin Islands, opening statement..............................    30
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................    31
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, opening statement...............................    32
Hon. John B. Shadegg, a Representative in Congress from the State 
  of Arizona, opening statement..................................    33
Hon. John P. Sarbanes, a Representative in Congress from the 
  State of Maryland, opening statement...........................    34
Hon. Bruce L. Braley, a Representative in Congress from the State 
  of Iowa, opening statement.....................................    35
Hon. Mike Rogers, a Representative in Congress from the State of 
  Michigan, prepared statement...................................    43
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................    44
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................    44
Hon. Zachary T. Space, a Representative in Congress from the 
  State of Ohio, opening statement...............................    45
Hon. Tammy Baldwin, a Representative in Congress from the State 
  of Wisconsin, opening statement................................    46
Hon. Mike Ross, a Representative in Congress from the State of 
  Arkansas, opening statement....................................    47
Hon. Kathy Castor, a Representative in Congress from the State of 
  Florida, opening statement.....................................    48
Hon. Betty Sutton, a Representative in Congress from the State of 
  Ohio, opening statement........................................    49
Hon. Eliot L. Engel, a Representative in Congress from the State 
  of New York, opening statement.................................    49
Hon. Jane Harman, a Representative in Congress from the State of 
  California, opening statement..................................    50

                               Witnesses

Glenn Hackbarth, Chairman, Medicare Payment Advisory Commission 
  (Medpac).......................................................    51
    Prepared statement...........................................    54
Douglas Elmendorf, Director, Congressional Budget Office.........    76
    Prepared statement...........................................    78
Jack Ebeler, Vice Chair, Committee on Health Insurance Status and 
  its Consequences, Institution of Medicine......................   120
    Prepared statement...........................................   122
Alan Levine, Secretary, Louisiana Department of Health and 
  Hospitals......................................................   132
    Prepared statement...........................................   134
M. Todd Williamson, M.D., President, Medical Association of 
  Georgia........................................................   139
    Prepared statement...........................................   141
Atul Gawande, M.D., Associate Professor of Surgery, Harvard 
  Medical School, Associate Professor, Department of Health 
  Policy and Management, Harvard School of Public Health.........   146
    Prepared statement...........................................   149

                           Submitted Material

Report brief entitled, ``America's Uninsured Crisis: Consequences 
  for Health and Health Care,'' February 2009, submitted by Ms. 
  Schakowsky.....................................................   178
Article entitled, ``Getting There From Here,'' by Atul Gawande, 
  January 26, 2009, submitted by Mr. Pallone.....................   184


    MAKING HEALTH CARE WORK FOR AMERICAN FAMILIES: DESIGNING A HIGH 
                       PERFORMANCE HEALTH SYSTEM

                              ----------                              


                        TUESDAY, MARCH 10, 2009

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:07 a.m., in 
Room 2123 of the Rayburn House Office Building, Hon. Frank 
Pallone, Jr. (chairman) presiding.
    Members present: Representatives Pallone, Dingell, Eshoo, 
Engel, Green, DeGette, Capps, Schakowsky, Baldwin, Ross, 
Matheson, Harman, Gonzalez, Barrow, Christensen, Castor, 
Sarbanes, Murphy of Connecticut, Space, Sutton, Braley, Waxman 
(ex officio), Deal, Whitfield, Shimkus, Shadegg, Blunt, Pitts, 
Rogers, Murphy of Pennsylvania, Burgess, Blackburn, Gingrey, 
Scalise and Barton (ex officio).
    Staff present: Phil Barnett, Staff Director; Karen Nelson, 
Deputy Staff Director for Health; Karen Lightfoot, 
Communications Director, David Rapallo, General Counsel; Steve 
Cha, Professional Staff Member; Amy Hall, Counsel; Purvee 
Kempf, Counsel; Tim Gronniger, Professional Staff Member; Jon 
Donenberg, Health Fellow; Bobby Clark, Senior Policy Advisor; 
Virgil Miller, Legislative Assistant; Jennifer Berenholz, 
Deputy Clerk; Caren Auchman, Communications Associate; Alli 
Corr, Special Assistant; Alvin Banks, Special Assistant; 
Caitlin Sanders, Staff Assistant; Brandon Clark, Minority 
Professional Staff; Marie Fishpaw, Minority Professional Staff; 
Clay Alspach, Counsel; and Chad Grant, Legislative Analyst.

          OPENING STATEMENT OF HON. FRANK PALLONE, JR.

    Mr. Pallone. The meeting is called to order.
    I want to first thank every one for being here, 
particularly our panelists. The subcommittee today is holding 
the first in a series of hearings entitled ``Making Health Care 
Work for American Families.'' These hearings will help us 
better understand issues important to the health care reform 
debate such as quality, cost, coverage and prevention, and 
today we are focusing on how to design a high-performing health 
care system, which implies that our current system is 
underperforming. Indeed, as it is presently structured, the 
U.S. health care system is incapable of consistently providing 
access to quality and affordable care to every American, and a 
large part of this failure can be attributed to our Nation's 
growing uninsured population. According to a new report on the 
uninsured by the Institute of Medicine, who we will hear from 
later today, 47.5 million Americans, or an estimated 17.2 
percent, of the non-elderly population went without health 
insurance in 2007. As we move forward with health care reform, 
we must understand that our failure to insure 47 million 
Americans has significant consequences for the health system as 
a whole. Our Nation's growing uninsured crisis impacts us all 
regardless of our own insurance status. If we are to design a 
high-performing health care system, the foundation of such a 
system has to ensure access to quality and affordable coverage 
for every American.
    But the problems we face with our health care system go 
beyond coverage issues. Our health care system is woefully 
disorganized, so much so it is hard to characterize it as a 
system at all. There is virtually no coordination of care among 
providers. Patients are often handed off from provider to 
another. In the process, information is lost, inappropriate 
treatments or tests are ordered and medical errors occur. This 
is particularly a problem when it comes to patients who suffer 
from chronic conditions and are under the care of multiple 
providers at any given time.
    Researchers have suggested that part of the problem stems 
from the fragmented way in which we finance the delivery of 
health care services. We pay providers based on volume 
regardless of the quality of the care or service provided and 
regardless of the outcomes. Furthermore, there is little 
incentive for providers to follow up with a patient after they 
have provided treatment or to coordinate care among multiple 
providers or between different health care settings.
    What has this disorganization created? Well, the United 
States spends more on health care per person than any other 
industrialized nation and yet we do not enjoy better health 
outcomes by almost any measure, and within the United States 
there are vast disparities in how health care is delivered 
among the different communities. Clearly we are not getting the 
most value out of our health care dollars. The erratic and 
chaotic manner in which our health care system is organized 
can't continue.
    We need to find a way to reorganize the health care 
delivery system in a way that improves quality and efficiency, 
thereby driving down costs, and there are a number of options 
on the table. For example, the President's budget contains 
specific proposals that would change the way Medicare pays for 
and delivers health care including, one, reducing readmission 
rates at hospitals, two, providing performance-based payments 
for physicians that coordinate care for Medicare beneficiaries, 
and three, promoting coordinated care between acute and post-
acute care settings through bundled payments.
    Now, I know we have MedPAC here today and I am happy that 
they are here because they have done work in many of these 
areas as well as other areas like the medical home model. As 
Chairman Hackbarth notes in his testimony, Medicare can be a 
leader in reforming the health care delivery system but changes 
to the way Medicare delivers and pays for health care will only 
take us so far. We need fundamental change to the entire health 
care system in order to achieve our goals.
    Now, one of the best examples of change, I think, was in 
the economic recovery bill. As you know, there is a pot of 
money for health care information technology, and that is 
certainly an example of the systematic change we need. As more 
physicians are able to adopt and use HIT, we can facilitate 
greater communications among providers and thereby increase the 
coordination of care. By passing the Economic Recovery Act, we 
started the process of modernizing our health care system by 
investing $19 billion in HIT. But not everything has to be as 
complicated as moving our health care system into the 
electronic era. There are simple changes that will produce 
dramatic effects. For instance, I believe that by focusing more 
on primary care, coordinated care models and prevention we can 
achieve greater savings and efficiency within our health care 
system, and again, there are prevention and wellness measures 
and pots of money in the Economic Recovery Act as well.
    If we are successful in redesigning our health care system 
so that it performs better, there will be great rewards. Aside 
from the potential to improve health outcomes, a more efficient 
health care system that pays for quality services will help 
drive down costs for American families, businesses and the 
federal government, all of which are struggling with the 
escalating cost of health care. Indeed, health care reform is 
fiscal reform. Those of us who have been paying attention to 
the President over the last month or so, he constantly talks 
about health care reform being fiscal reform and the need to 
bring down costs if we are going to effectuate an economic 
recovery and expand coverage for all Americans. We can't 
restore the financial health of the Nation and American 
families without tackling our broken health care system first, 
so let us get started.
    I just wanted to say that many of us on this committee 
attended the President's health care summit last Thursday. I 
was tremendously impressed with the fact that almost everyone 
said that we needed health care reform now. They did not want 
to wait, and almost everyone said that the cost and bringing 
down cost was an important part of any change that we are going 
to effectuate. I used to be very proud of the fact that I could 
go around saying I was involved in health care policy and that 
we had the best health care system in the world. I don't 
believe that anymore, and I think the time to act is now and so 
we are going to begin today.
    [The prepared statement of Mr. Pallone follows:]

    [GRAPHIC] [TIFF OMITTED] T7099A.001
    
    [GRAPHIC] [TIFF OMITTED] T7099A.002
    
    Mr. Pallone. I now recognize our ranking member, Mr. Deal, 
for an opening statement.

             OPENING STATEMENT OF HON. NATHAN DEAL

    Mr. Deal. Thank you, Mr. Chairman. I want to thank you for 
holding the hearing today. I want to thank both panels of 
witnesses who are going to testify. In particular, I would like 
to go ahead and welcome in advance of his official introduction 
Dr. Todd Williamson, who is a neurologist from Georgia and is 
president of the Georgia Medical Association. He will be on 
panel II, and thank you for allowing him to testify.
    You know, when you talk about health care, you are talking 
about how to wrestle a porcupine, and the problem I think we 
have encountered is that we have known different ways to deal 
with this issue in small pieces over a long number of years and 
we have failed to come to grips with dealing with those pieces 
and now we are trying to deal with the system as a whole and 
talk about how bad the system is even though we have not taken 
advantage of the opportunities to make it better incrementally. 
I am always concerned about major reforms, especially of a 
segment of our economy and of societal service as large as 
health care. But we are now apparently on the brink for 
whatever reason, dereliction of duty in the past or whatever, 
of having to deal with major reform.
    Now, let me mention a couple of things that I hope in the 
context of this hearing, perhaps even more specifically in 
future hearings, I think are important to deal with. First of 
all, I have had a passion for the issue of price transparency. 
In the health care arena, it is one of the few areas that you 
just cannot know in advance of a service being rendered what 
the charge is going to be, and the reason is, and it indicates 
part of the problem we are wrestling with, is the reason you 
don't know is because the question is always followed with a 
question. When you ask how much is it going to cost, the 
question becomes well, who is going to pay, and who pays 
depends on how much the cost really is, and that is something 
that you do not find in most other areas of service in our 
Nation. So price transparency is an issue and I am pleased that 
the chairman and the chairman of the subcommittee have both 
indicated a willingness to explore that issue in the future.
    Let me talk about a couple of other things. I think you are 
going to find that throughout all of this, the issue of medical 
malpractice reform has got to be one of those issues that we 
just simply cannot ignore. Now, it manifests itself not only in 
private physician and hospital practices but also the one that 
is probably the most acute that we tried to deal with several 
years ago and that is the emergency rooms with EMTALA that 
requires to treat everyone with no ability to divert without 
running the risk of being held accountable on a liability 
basis, you are just simply going to continue to see as in my 
local emergency room the primary reason for presentation is ear 
infections and you probably could duplicate that all across the 
country, non-emergencies being presented in the most costly 
environment, that is, an emergency room. But until we deal with 
the ability either to alter EMTALA, which I have no confidence 
that that will be done, or to provide some protections as we 
attempted to do several years ago for diversions to non-
emergency settings in an environment close to the emergency 
room so as to take that pressure off and the financial as 
otherwise the pressure off. I think we still have a problem 
there.
    Now, there are other issues and I am just going to deal 
with them in very broad, general terms. First of all, I think 
we have to remember that as we are dealing with an expansion of 
government power we never can forget about the fact that the 
only thing that keeps our country working in almost every facet 
of life is the issue of personal responsibility. When we have 
government assuming all of the responsibility, then it is very 
difficult to get people to do what they need to do for 
themselves, not only financially contributing to the cost of 
their health care but to doing the things that they need to do 
that the chairman has alluded to such as prevention, such as 
wellness programs, et cetera. A few other things that I would 
like to mention. I think that as we deal with the broader 
context of how to reform the delivery system, hopefully we will 
not forget the private sector. The private sector has been the 
primary mechanism for providing health insurance through the 
employer-based system. Obviously it has some problems. I would 
like to see us be able to take advantage of the one that has 
the most personal responsibility and that is a medical savings 
account where a person has the right to decide how they want to 
spend their money and they are directly involved but they can't 
be the ones that are paying the highest price. If that is the 
case, then you can't make that kind of system work.
    Thank you, Mr. Chairman. This is certainly the beginning, I 
hope, of a wide-ranging look at the issue of health care 
reform, and thank you for hosting this hearing today. I yield 
back.
    Mr. Pallone. Thank you, Mr. Deal.
    I will recognize our chairman, Mr. Waxman, but let me just 
digress a minute here, if you will bear with me. There are a 
lot of people on this committee who have played major roles 
over the years in the health care debate, and if we do actually 
accomplish health care reform in a significant way this year, I 
think that we owe a lot to them, and Mr. Waxman, Mr. Dingell, 
others are amongst them, and I just wanted to say, you know, I 
remember 20 years ago, because this is my 20th year, I came to 
this room and I watched Mr. Waxman and Mr. Dingell and others 
talk about health care issues and I was so impressed, that is 
why I wanted to be on this committee, and I know that is why a 
lot of the new members have started. We have a number of new 
members on our Health Subcommittee this year and they have 
expressed the same thing to me, that the main reason they came 
to this committee was because they wanted to deal with health 
care reform. But if and when we accomplish this goal this year, 
a lot of the credit is going to go to some of these people who 
have labored for years on this issue and brought out a lot of 
the problems and solutions that are necessary for health care 
reform and certainly our chairman is one of the leaders among 
them. So I just wanted you to know that, Henry.

           OPENING STATEMENT OF HON. HENRY A. WAXMAN

    Mr. Waxman. Thank you very much, Mr. Chairman, and when we 
accomplish the goal of enacting affordable health insurance for 
all Americans, you will be there ranking among all the members 
who have played a significant role. This isn't one or two, it 
is all of us working together, and I thank you for holding this 
hearing on the health reform issue.
    I think we have a unique opportunity. President Obama has 
called on Congress to work with him to enact comprehensive 
health reform this year, and to underscore this commitment, the 
President has proposed over $630 million in new revenues and 
program savings to help pay for reform. This marks a sea change 
from the last 8 years, and as we will hear from our witnesses 
today, it comes none too soon. The status quo is simply no 
longer an option. The health of our people, the health of our 
economy depends on achieving affordable, high-quality, 
sustainable coverage for all Americans. The President has laid 
out the broad outlines of his preferred way to achieve this 
goal, and I think his approach is sensible. It builds on and 
protects the employer-based coverage that is now in place for 
most Americans. It lets those people who have coverage that 
works for them keep that coverage. It strengthens the safety 
net of our vital public programs, Medicare, Medicaid, CHIP. It 
gives people a place to go to get accessible, affordable, high-
quality coverage through private plans or if they prefer 
through a public alternative. The choice is theirs. And it 
recognizes the critical importance of prevention and wellness 
services and the management of chronic diseases. I am 
determined to work to find the approach that will be broadly 
acceptable to the American people, to the providers that are 
critical to making it work, and to the Members of Congress who 
in the end have to pass it.
    This hearing begins the work of this committee in 
responding to the President's request. As the testimony will 
make clear, the health care challenges we face are daunting and 
finding workable and enactable solutions will be extremely 
difficult. Mr. Chairman, you as chairman of the subcommittee 
will build on the work that I and Mr. Dingell and others have 
done over the years and you and the newer members of the 
committee will bring vitality to this effort that I think will 
finally get us to the goal that has been so elusive, and I look 
forward to working with you in this regard.
    [The prepared statement of Mr. Waxman follows:]

    [GRAPHIC] [TIFF OMITTED] T7099A.003
    
    [GRAPHIC] [TIFF OMITTED] T7099A.004
    
    Mr. Pallone. Thank you, Mr. Chairman.
    Next is our ranking member of the full committee, the 
gentleman from Texas, Mr. Barton.

              OPENING STATEMENT OF HON. JOE BARTON

    Mr. Barton. Thank you, Mr. Chairman, and I want to commend 
you and full committee Chairman Waxman for the bipartisanship 
in arranging these series of hearings. This it not like the 
hearing upstairs on climate change where there is a clear 
ideological difference, and we have even gotten to the point of 
arguing over how many witnesses and which witness and this type 
of thing. In this subcommittee under your leadership and Mr. 
Waxman's leadership, it has been a very cordial operating 
relationship, and I do sincerely want to commend you and Mr. 
Waxman for that.
    Health care is very important to everybody in America and I 
do slightly disagree with your opening statement, Mr. Chairman, 
when you said that you used to think the United States had the 
best health care system in the world but you don't think we do 
anymore. I think we still do. I think our health care system is 
the best in the world. I think it is the best in terms of 
quality. I think it is the best in terms of inclusiveness. I 
think it is the best in terms of its research capability. I do 
think there are problems with it. I think that obviously 
Americans that don't have health insurance are not able to take 
advantage of some of the wellness programs and the preventive 
medicine practices that are becoming more and more prevalent, 
but if somebody in America is sick today and needs to see a 
doctor or a health care practitioner, they are going to see 
them. Whether it is in an emergency room or a clinic or a 
private doctor's office, they are going to see them, and the 
more serious the condition, the more fortunate that person is 
that they are in the United States of America.
    My sister-in-law has just undergone 6 weeks of chemotherapy 
treatment at M.D Anderson in Houston, Texas. She went home 
Sunday to recuperate. Her CAT scan and the tests that they ran 
show that the cancer that is ravaging her body is beginning to 
recede because of the treatment that she is receiving and 
hopefully will continue to receive after her body recuperates. 
I am darned glad that she lives in the United States of America 
and I am very glad that she lives close enough to M.D. Anderson 
in Houston, Texas, that she could take advantage of the 
treatment that is available there. People come from all over 
the world to that facility for that type of treatment.
    So what we are engaged here today, Mr. Chairman, is to 
begin a discussion of how we can improve our health care 
system, and I think we can do it. I do think our health care 
system is too expensive. I do think that there are lots of ways 
that we can improve it. I agree with you that the President's 
health care meeting at the White House last week was very 
productive. I said there and I will say here, I agree with 
President Obama's eight principles but the devil is in the 
details and that is what these hearings are going to 
accomplish. I think there is a difference between Republicans 
and Democrats. In general I think the Democrats, the majority 
party right now, want more government involvement in health 
care. I think Republicans in general would rather have the 
private sector and the marketplace system with openness and 
transparency where doctors and patients make the decisions 
themselves and don't have to depend on some sort of a 
government official or a government program but I do think the 
government needs to be involved and I think that somewhere in 
these hearings perhaps we can have a meeting of the minds.
    So Mr. Chairman, I am involved in the health care debate in 
this committee in a different way than I am the climate change 
issue. I think on health care we can improve the system and we 
can find a consensus and we can do something hopefully this 
year to make health care for Americans more affordable and more 
accessible and even higher quality than it is. I must say on 
climate change that I am hopeful we can convince enough people 
that is not something that we need to do, given the state of 
our economy. In any event, this is a very good hearing, you 
have got good witnesses, and I look forward to a serious 
discussion.
    Mr. Pallone. Thank you. I want to thank our ranking member.
    Next is our chairman emeritus, and I cannot have enough 
accolades about his involvement over the years in health care 
reform and Medicare, and again, I look to him as one of the 
giants on this issue, Mr. Dingell.

           OPENING STATEMENT OF HON. JOHN D. DINGELL

    Mr. Dingell. Mr. Chairman, I thank you for those kind words 
and I thank you for holding this hearing, which is a very 
important one, about designing a high-performance health care 
system. We have a splendid health care system in this country 
which doesn't work. It doesn't work because we have 47 million 
Americans who lack care and we have a lot who have substantial 
deficiencies in the amount of care available to them. We have a 
worse situation in that the problem is fixable but it has not 
been able to be addressed for years because of intense lobbying 
by the health insurance lobby and others. I remember we lost it 
the last time by one vote here and we lost it in good part 
because of dawdling by the Administration, which made a fine 
speech on the subject on the floor of the House in February and 
didn't present the bill to the House until sometime in November 
by which time we had lost in this committee and a business 
roundtable by one vote.
    The health care system in this country is wonderful but it 
doesn't work, and one of the problems about it is, that we are 
seeing large numbers of Americans die prematurely or suffer 
from serious health problems back of the lack of availability 
of care from this extraordinarily advanced system which we are 
blessed with. Health care costs are far higher in the United 
States than in any other advanced nation. These costs have been 
rising significantly faster than the overall economy or 
personal incomes for more than 40 years, and if left unchecked 
will shortly create irreparable harm to the Nation's health and 
economic system. The two curves which are important to us in 
this country, the GDP and the cost of health care or the 
percentage of health care, will cross about 2070. That should 
give us a warning. We have heard the data. Health costs are 
consuming a growing share of federal and State government 
budgets. The United States spends $2.2 trillion and more on 
health care each year, about $8,000 per person. This represents 
16 percent of the total economy and is expected to reach almost 
20 percent, more than $4 trillion, by the year 2017.
    Health insurance premiums have doubled over the past 8 
years, rising 3.7 times faster than wages in the last 8 years, 
and American businesses are losing business share in world 
competition because of the increasing cost of health care for 
their employees. For example, a General Motors car today 
contains about $1,600 in health care costs per car. General 
Motors is in fact not an automobile producer but a health care 
provider that makes automobiles to pay for the cost of it, and 
the same is true for many other U.S. corporations. American 
automakers spend more now on health care than steel. They only 
spend $750 on steel. And Starbucks spends more on health care 
than they do on coffee beans. No one can dispute the fact that 
we spend a great deal of money on health care. America enjoys 
the most outstanding cadre of health care professionals on the 
planet, the most advanced technologies, the most innovative 
health care institutions and the finest medical research, which 
is a model for the whole world. However, in spite of this great 
investment and the amazing talent of our health workforce, our 
health system continues to operate at low performance and more 
spending has not and does not mean better quality service and 
care available to the American people.
    Studies have shown the United States underperforms relative 
to other countries on most dimensions of health care 
performance. It has lower life expectancy and higher infant 
mortality, amongst other things, but there is plenty other 
things wrong if you read the statistics. A number of other 
studies have shown that many surgeries are performed without 
being clinically appropriate. Patients typically receive about 
half the recommended treatment and services. About 100,000 
Americans die from medical errors at hospitals every year. Half 
of these cases are avoidable. One-quarter of medical spending 
goes to administrative and overhead costs, something which we 
must address if we are to save ourselves from a crazy system 
that is failing.
    Across the Nation, health care costs vary substantially, 
however, and higher cost areas surprisingly do not generate 
better health outcomes. Our goal of providing health care 
security for those struggling to keep the coverage they 
currently have while expanding coverage to the 47 million 
Americans currently without coverage is clearly necessary. 
However, we must all do what we can to first make our current 
system of health care more efficient and effective including 
care provided by public programs like Medicare and Medicaid, 
the costs of which without reform will become unsustainable in 
the near future. The current payment structure of these systems 
does not encourage coordinated care and encourage unnecessary 
treatment which in turn leads to higher costs and significant 
inefficiencies.
    I look forward to the testimony of our witnesses today and 
of continuing our discussion and action as we seek to reform 
our health care system. Mr. Chairman, this has long been a 
passion of mine, as you have noted, and also of my great 
father, who introduced the first legislation on this in 1943. I 
look forward to working with you and with Chairman Waxman and 
the others of my colleagues on both sides of the aisle to solve 
this terrifying problem.
    Thank you, Mr. Chairman.
    Mr. Pallone. Thank you, Chairman Dingell.
    Next we have the gentleman from Kentucky, Mr. Whitfield.

             OPENING STATEMENT OF HON. ED WHITFIELD

    Mr. Whitfield. Chairman Pallone, thank you very much for 
this hearing on making health care work for American families.
    We all hear a lot about health care reform and we know that 
there are basically two reasons that we are moving down this 
avenue. One, health care costs continue to escalate, health 
insurance premiums go up and then access for all of the 
American people, and I noticed that President Obama in his 
budget has set aside $634 billion for health care reform, and 
although his plan is quite sketchy, the one thing that he has 
talked about specifically is a federal board to set provider 
rates, design coverage and ultimately control prices in the 
health care market.
    I think from the philosophical point of view, health care 
reform gets down to a debate on both sides of the aisle. When 
we talk about these federal health boards, most of us, I think, 
think of Canada and Great Britain. They both have federal 
boards, and the key issue, as least from my understanding, is 
that in both of those countries while the primary health care 
delivery system is very good, they basically ration health 
care, and that is something that we really have never done in 
America so that if you do not need a certain criteria then you 
are not going to be eligible for a particular kind of health 
care procedure. That is something I think we have to move very 
carefully with as we discuss health care reform.
    A second thing, it looks like to me that--I philosophically 
believe that a federal board is not the way to go because when 
you talk about an effective health care system, I like to look 
at Part D of the prescription drug benefit under Medicare 
because today we know that the premium for that plan is less 
than what was originally anticipated. The cost of that plan is 
less than what was originally anticipated. And the reason for 
that in my view is that in every jurisdiction you had private 
companies coming together competing with each other offering 
plans and more important than the cost is that the senior 
citizens seem to be satisfied with their Part D prescription 
drug benefit. I know that not all of them are but generally 
speaking they are satisfied, and I think that is a model that 
as we talk about health care reform that we definitely need to 
explore giving patients more of an opportunity to decide for 
themselves rather than a federal board making all these 
decisions.
    I yield back the balance of my time.
    Mr. Pallone. Thank you.
    Next for an opening statement is the gentlewoman from 
Colorado, and thank you again for your work on stem cells.

            OPENING STATEMENT OF HON. DIANA DEGETTE

    Ms. DeGette. Thank you very much, Mr. Chairman. It was a 
banner day yesterday.
    I want to--I was just telling Congresswoman Capps about my 
sister and I think I am going to talk about that because it is 
why we have to do something about health care in this country. 
My sister is married to a fellow who has worked for one of the 
local school districts for many, many years and she is a stay-
at-home mom. She home schools her kids. And they are middle-
class Americans. Their insurance premiums working for the 
school district are $1,100 per month with copays and exclusions 
and everything else you can imagine. And about a year ago my 
nephew, as teenage boys will, was skateboarding and broke his 
arm at the skateboard park and his friend's parents couldn't 
find my sister to ask what to do. It was a compound fracture 
with the bone sticking out. So they took him over to the local 
emergency room and then her insurance company refused to pay 
the bill because they said they didn't get pre-approval, and 
that is what kind of health care system we are living with in 
this country and that is why we need to have comprehensive 
national health care policy and that is why, Mr. Chairman, I am 
so grateful to you and also Mr. Dingell and also the President 
for pushing this through. We have got to do something about a 
system where we are spending over $2 trillion a year but our 
health outcomes are abysmal.
    I just want to reference really quickly two studies that we 
have seen recently. In 2007, the Commonwealth Fund did an 
international health care survey where they compared the 
American health care payment and service delivery system to six 
other countries and found huge disparities. For example, the 
United States spends $6,697 per capita on health care services, 
which is more than double the per capital expenditures of all 
the other countries. Canada was the next highest, spending only 
$3,326 per capita. Well, you could say we have the best health 
outcomes in the world, which is what many people assume. 
However, this is simply not true if you look at the rest of the 
data. For example, the most recent data from the Centers for 
Disease Control ranks the United States 29th worldwide in terms 
of infant mortality and it also ranks us 31st worldwide in 
terms of life expectancy and 24th in terms of women's health. 
The United States ranks 37th overall in the world for health 
outcomes, just below the Dominican Republic and Costa Rica and 
just above Slovenia. So if anybody thinks that we don't need 
health care reform in this country, they not only need to look 
at these statistics but the statistics that average American 
families, middle-class families are dealing with every day.
    Thank you very much, Mr. Chairman.
    Mr. Pallone. Thank you.
    Next is the gentleman from Texas, Dr. Burgess.

          OPENING STATEMENT OF HON. MICHAEL C. BURGESS

    Mr. Burgess. Thank you, Mr. Chairman. I appreciate you 
holding this hearing as well, you know, so much of what we 
discuss. I have an opening statement that I will submit for the 
record. It is very thoughtful and well written. But let me just 
make a few comments because of what I have heard.
    We spend so much time talking about cost and coverage, and 
I do implore us to remember that health care is first and 
foremost and always about taking care of people. I also urge us 
not to let the perfect become the enemy of the good. Now, we 
have heard the President talk on Thursday of last week at the 
White House at the forum that the only thing that was not 
acceptable is the status quo. Well, true, there are things we 
can make better and that we should strive to make better but I 
promise you, having spent 6 years now in this body, I know we 
can make things worse and we must be careful that we don't do 
that. I certainly don't want to diminish the contributions of 
any of the men and women who work in the American health care 
system because I know firsthand what they do day in and day 
out, a tremendous job.
    Now, just a word about 1993 and 1994. I was not here then. 
It is often talked about in health care policy circles as the 
failure to improve health care in this country but I would just 
simply submit, the health care world in the United States has 
not been static since 1993 and 1994. Indeed, some of the things 
that came out of the failure of the Clinton health care plan, 
certainly medical savings account were one of the things that 
came out of that. The State Children's Health Insurance Program 
was one of the things that came out of the failure of the 
Clintons' plan, and I would argue that these are good things. 
On the issue of medical savings accounts, fast-forward to the 
present time with what we have seen in the improvements with 
health savings accounts. Just a personal story that I will 
share with you. In 1994 I had an adult child who finished 
college and moved back home and chose not to go to work. I 
don't recommend that if anyone is considering that for 
themselves. Don't try this at home. But I could not get an 
insurance policy for any price. I was willing to write a large 
check for that insurance policy. Fast-forward to today, and 
last Friday I went on the Internet and looked under 
ehealthinsurance.com, and for what would be a comparable 
situation, a 25-year-old female, and I used the Washington, 
D.C., area code, actually you could purchase an HMO plan 
through Kaiser here in D.C., $98 a month with a $20 copay but 
not a high-deductible plan. In fact, there was no deductible. 
So there are options out there for people who find themselves 
without insurance that were not available in 1993 and 1994. So 
please let us not fool ourselves that the world has been static 
since then.
    Certainly there are examples of how we can make things 
worse. Look what we did with the health information technology 
in the stimulus bill, and I tried to offer an amendment so that 
we could use these funds in June of this year but instead it is 
June of 2011, and we have doctors' practices all over the 
country that have literally listed the pen off the check and 
are going to wait an additional 2 years before they write that 
out.
    We must look at the things that are actually working today. 
Affordability does remain key in the equation but let us look 
at the things that work and not just focus on trying to expand 
the things that don't. Certainly employer-sponsored insurance, 
the price is increasing over 7 percent a year. Medicare and 
Medicaid we know increase at 7.4 percent a year. Consumer-
directed health plans increase at 2.2 percent a year. Shouldn't 
we take a lesson from Safeway and Walmart and what they have 
been able to do with forward-leaning plans that they have 
implemented before we just simply provide a program essentially 
equivalent to Medicaid for all? And if we are going to do 
Medicaid for all, shouldn't we also do that for Members of 
Congress? I introduced an amendment like that on the SCHIP bill 
and I got no votes in the Rules Committee for that.
    Dr. Zerhouni has come to this committee and talked about a 
time when medical care is going to become a great deal more 
personalized. He said because of the human genome we are going 
to be a great deal more predictive. We can as a consequence be 
a great deal more preventive, and it is going to require us to 
be more participatory. That is the direction in which we need 
to be moving, not in a direction that is going to harm that 
forward progress that we have already made.
    Mr. Chairman, you have been generous with your time and I 
will yield back.
    [The prepared statement of Mr. Burgess follows:]

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    Mr. Pallone. Thank you.
    Next for an opening statement is Ms. Capps. Let me mention 
that once again she is the vice chair of this subcommittee and 
deservedly so since she has done so much work on health care, 
particularly on health care professionals.

              OPENING STATEMENT OF HON. LOIS CAPPS

    Ms. Capps. Thank you, Mr. Chairman. I am so pleased we are 
beginning our hearings in this Congress on health reform. It is 
clearly, in my opinion, the number one issue this subcommittee 
needs to address, and as the President has articulated in his 
health summit and so many other places, our efforts at 
overhauling our Nation's broken health system are really 
integral to our work in improving the economy.
    I am eager to hear from today's witnesses about how we 
arrived at this point in the first place. Why does the United 
States--and we have heard a lot of documentation in the opening 
statements so far--with all of our innovation and our spending, 
why do we measure up so purely against other industrialized 
nations? Why do we have such high infant and maternal mortality 
rates? Why do we have a lower life expectancy? Why do we pay so 
much more but receive so much less? Our next steps, of course, 
are how to address these factors that plague our health care 
system. I am counting on a certain absolute, that in any 
solution we offer or pursue, we should bring and will bring 
prevention and wellness back into the fold as a core ideal.
    During the Bush Administration particularly, there was very 
little attention given to the importance of prevention in 
health care, and because of that our Nation's public health 
infrastructure has suffered. We need a system that incentivizes 
primary and preventive care, not only that simply responds to 
chronic diseases and emergencies, often in the emergency room. 
We need a system that invests in our health workforce so that 
enough nurses, physicians and a myriad of other professionals 
are available to treat people and to work with them, not only 
that divests from medical and nursing education or cuts 
reimbursements. I am glad to see this issue is on the agenda 
for future hearings.
    In closing, I just want to underscore the urgency with 
which we must address the current crisis. It is very real today 
in the communities we represent and communities across this 
Nation in rural areas and in the inner cities. I very much look 
forward to hearing what our witnesses are saying today, and I 
yield back.
    Mr. Pallone. Thank you, Ms. Capps.
    And next for an opening statement, another one of our 
health care professionals which we have quite a few on this 
subcommittee, the gentleman from Georgia, Mr. Gingrey.

             OPENING STATEMENT OF HON. PHIL GINGREY

    Mr. Gingrey. Mr. Chairman, I thank you and I want to thank 
of course overall committee Chairman Waxman and former Chairman 
Dingell, our ranking member, Joe Barton, and the ranking member 
on this health subcommittee, my colleague from Georgia, 
Congressman Nathan Deal. I also want to thank Dr. Todd 
Williamson from the great State of Georgia, who is chairman of 
the Medical Association of Georgia, a neurologist, a practicing 
physician from Lawrenceville, Georgia.
    Like my colleague from Texas, Mr. Chairman, I have a 
statement too that is fantastically written and I want to just 
submit that for the record, but I actually didn't write it, my 
staff wrote it, and I want to give them all due credit but I 
would like to ask unanimous consent to submit my written 
statement for the record, and I will just make a few off-the-
cuff comments.
    I agree with the President, I agree with the Democratic 
majority and many of my Republican colleagues that we need to 
do something on health care in this country which I believe is 
the best in the world. At the same thing, I think that we have 
the best of times and the worst of times, and that is to say 
that while what we are doing with medical care in this country 
I believe is the best in the world, the reason the statistics 
are so bad as Ms. DeGette and others have mentioned is the fact 
that we have 47 million people who don't have access to 
affordable coverage and we have too many underinsured, and as a 
result of that they put off getting needed care, going to the 
emergency room, going to their doctor. The availability is 
there but they don't have the money so they wait until things 
are so bad that it is really costly and that is why it is the 
best of times and the worst of times.
    I think we need to look very closely though at what we can 
do to make sure that we improve our system. There is so much 
room for improvement. My thoughts have always been that if 
there is a real emergency to get something done by August 1 of 
this year, even when we our economy is suffering tremendously 
and we are trying to get that back on track, then maybe the 
money that we are spending, the $19 billion on having a fully 
integrated comprehensive electronic medical records system is a 
direction in which we need to go as well as a liability reform, 
which we have needed since California did it way back in the 
late 1970s. So there are many things, Mr. Chairman, that we can 
do.
    As I close my remarks, I just want to say that we don't 
want to destroy the marketplace and we don't want to destroy 
the doctor-patient relationship, which is so important if we 
are going to continue to get the brightest and the best young 
people to go into this wonderful profession, and I will yield 
back at this time, Mr. Chairman.
    [The prepared statement of Mr. Gingrey follows:]

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    Mr. Pallone. Thank you.
    I next recognize for an opening statement the gentleman 
from Texas, Mr. Gonzalez.
    Mr. Gonzalez. Waive opening.
    Mr. Pallone. Thank you.
    And next, the gentleman from Pennsylvania, Mr. Murphy.

              OPENING STATEMENT OF HON. TIM MURPHY

    Mr. Murphy of Pennsylvania. Thank you, Mr. Chairman, and 
thank you for doing another hearing on what we need to do with 
health care reform.
    I want to bring attention an aspect here which I still hope 
that someone in this federal government will deal with and that 
has to do with waste and inefficiency and its additional costs 
in this whole system here, and I do believe we have a great 
system of health care. I also believe that unfortunately sadly 
enough we waste a lot of money in this whole system and that 
leads to a lot of deaths. Let me just raise a few issues here, 
and here I also want to credit Dr. Gawande. Thank you for the 
great article in the New Yorker. I hope I am here later when 
you testify, but you point out a couple of things we need to 
pay attention to and that is that there is a lot of money and a 
great many lives we can save by practicing health care and 
along these lines making sure government supports the doctor-
patient relationship and doesn't get in the way.
    We look at statistics such as 90,000 to 100,000 deaths each 
year from infection and costs $50 billion to $52 billion. 
Programs like the Keystone Initiative have been able to save a 
lot of lives and save a lot of money, which helps make health 
care more affordable. Using these numbers, so far this year 
there has been 378,082 cases up to this moment of this hearing, 
18,713 deaths and a cost of $9,452,000,000. These are 
unacceptable, and as long as we continue to talk about quality, 
affordable, accessible health care, we have got to deal with 
these issues of true quality. The list goes on and on. The 
underuse of appropriate medication such as generic 
antihypertensives could safe us another $3 billion a year if 
that was corrected. The underuse of medications for pediatric 
asthma could save us another $2.5 billion. One of the things 
that the government did in its infinite wisdom has said that 
the aerosol for asthma should no longer contain air that 
affects the ozone, so that was removed, new substances were put 
in that made the asthma medications brand name and raised the 
prices and I don't know what that has done in terms of 
increasing admissions to hospitals since those studies have 
been reported.
    The overuse of medications such as antibiotics adds $8 
billion to the cost. You also have to deal with untreated 
complications that come from mental illness that is associated 
with chronic illness and yet what is happening in situations 
like this, we need programs that do real case and disease 
management to look at what kind of complications and problems 
are coming from underuse of medications, overuse of 
medications, referrals that are not needed, treatments that are 
needed, but instead we are talking about cutting programs like 
Medicare Advantage without looking at what Medicare Advantage 
does.
    To the extent that it works on prevention, disease 
management and wellness programs, I hope this committee reviews 
what can be done in assisting those things, but this idea of 
saying that what we ought to do is just look at universal 
health care without looking at what we are doing for health 
care has got to stop. Along those lines, Mr. Chairman, a report 
came out in the last couple weeks from the New England Health 
Care Institute called Waste and Inefficiency in the U.S. Health 
Care System, clinical care conference of analysis in support of 
systemwide improvements. This report says that in our $2.3 
trillion health care system, we have between $600 and $800 
billion of waste that is hurting people, that if we removed 
this it doesn't hurt health care, it actually improves health 
care, and that certainly helps meet our goal of affordable, 
accessible, quality health care.
    Mr. Chairman, I would like to submit this to you and hope 
this is something that members of the committee would have 
access to and perhaps include this in the record. It is a 
review of a lot of studies and the kind of things we should be 
looking at.
    I end with this. I have known a number of people who have 
been hurt and harmed in hospitals, and we don't usually do this 
but I am just curious. We have a good-sized audience out here. 
How many people here know of someone who went into a hospital 
or clinic and ended up getting an infection that made it worse? 
Raise your hand. I submit for the record, Mr. Chairman, there 
are a lot of lives we can be saving out here if we took efforts 
on this.
    I yield back.
    Mr. Pallone. I thought that we were going to have like we 
did the other day with Mr. Buyer and you were going to get up 
with the chart and I was going to feel like I was in a 
classroom again. But thank you.
    As I mentioned, we have quite a few health professionals. 
Mr. Murphy is a psychologist and now we have our colleague from 
the Virgin Islands who is also a physician, Ms. Christensen.

         OPENING STATEMENT OF HON. DONNA M. CHRISTENSEN

    Ms. Christensen. Thank you, Mr. Chairman, and thank you, 
Chairman Pallone and Ranking Member Deal, for bringing the 
subcommittee into the health care reform process early and 
planning a series of hearings that we are going to have so that 
we can fulfill our responsibility on this vital issue, and 
although I am not practicing medicine today, I am always going 
to be a physician so I come to this from the same perspective 
of Dr. Williamson and others that I have heard speak to this 
today. Physicians though too often blamed are not the cause of 
the problem but restoring the integrity of the physician-
patient relationship can be a part of the solution and I hope 
it will be. I put the blame, largely it rests with the 
reimbursement system and the failure of our country to provide 
universal coverage, but fixing this country's system of non-
health care delivery and making it work for families will 
require far more than providing coverage. It must include 
addressing and ending our long history of unequal access to 
health care for racial and ethic minorities, for women, for 
families in rural areas, for gay, lesbian and transgender 
communities and anyone perceived as different or who speaks 
differently or who is far enough away to be ignored such as 
those of us who live in the territories.
    I had a chance to look at some of the testimony and I just 
want to make some comments. Mr. Levine, I support increasing 
and expanding Medicaid but I do share some of your concerns 
about Medicaid because increased access has not always resulted 
in better health outcomes but I think that this is due in part 
to assumptions that discriminate against women, against people 
of color and the poor, and that is why aggressively moving to 
increase providers of diverse backgrounds at all levels of our 
health care system has to be a part of designing a high-
performance health care system.
    Mr. Hackbarth, the commission has a heavy responsibility 
because so many important policy decisions rely on your 
recommendations and I hope that you will be able to assure me 
that the territories will receive equity in those 
recommendations.
    Dr. Gawande, I have really been impressed with not only 
your testimony but what I have heard and read from you in the 
past. I am concerned, though, that you don't reference the 
issue of disproportionate burden of disease borne by people of 
color and rural Americans in your testimony or address the 
elimination of health disparities in your recommendations.
    Director Elmendorf, you are part of our Congressional 
family and I look forward to working with you, especially 
because I think we have a little work to do to convince you on 
the savings that really will be realized from universal 
coverage and prevention, so I look forward to that.
    And lastly, Mr. Ebeler, I thank you for all of the work 
that the IOM has done on the issue of the uninsured. The 
institute has clearly shown that this is not just a problem of 
those who are unfortunate as not to have coverage but it is a 
problem that increases the cost and undermines care for 
everyone. All of the vulnerabilities you list speak directly to 
health disparities which must be an essential focus as we work 
on health care reform if it is to be successful.
    So I look forward to all of the oral testimony and the 
dialog that will follow and I thank all of you for being here 
this morning.
    Mr. Pallone. Thank you.
    Next is the gentlewoman from Tennessee, Ms. Blackburn.

           OPENING STATEMENT OF HON. MARSHA BLACKBURN

    Ms. Blackburn. Thank you, Mr. Chairman. I thank you for the 
hearing, and I along with my colleagues am looking forward to a 
discussion of how we reform the health care system and what 
route we are going to travel here. There are some who would 
like to see it move toward a government-run entity, and coming 
from Tennessee, where we have had the TennCare experience and 
many would argue that the TennCare delivery system is probably 
the most broken health care delivery system in the Nation and 
that it is evidence or should be evidence to us that a 
government-run system will encourage cost overruns, 
mismanagement, inadequate service, rationing or elimination or 
diminishment of care in certain areas of the State and also it 
has become evident from the TennCare experience that the 
estimated savings or the projected savings, the expected 
savings were not evident because of increased usage and the 
other problems that I previously mentioned.
    Rather than encouraging expansion of inefficient and 
ineffective government bureaucracy for a health care delivery 
system, I feel that we should be putting our time and energy 
focusing on how to foster competition, how we would actually 
reduce cost and provide choices for patients and consumers. I 
do believe in consumer-driven health care, which empowers 
patients to make the best choices for their individual needs 
and to do that with a physician and also as they are choosing 
an insurance product that best suits them, and the medical 
savings accounts were mentioned earlier by Dr. Burgess and the 
impact that they have had. Transformation to consumer-driven 
health care and putting our focus there would create consumer 
demand for information on prices, on quality. It would also 
shift us toward greater transparency, which other of my 
colleagues have mentioned is a need that we have for the health 
care delivery system. Our constituents are telling us they 
would like to have access to information about quality, about 
outcomes, testing procedures so that they can be an informed 
consumer. Mr. Deal had mentioned the need for medical liability 
reform. I associate myself with his remarks there.
    I welcome our witnesses today. We look forward to a robust 
debate and for continuing the hearings, Mr. Chairman, that you 
will continue to have on this issue, and I yield back.
    Mr. Pallone. Thank you, Ms. Blackburn.
    Next is the gentlewoman from California, Ms. Eshoo.

            OPENING STATEMENT OF HON. ANNA G. ESHOO

    Ms. Eshoo. Thank you, Mr. Chairman, for holding this 
important hearing. We know it is important just looking at the 
first panel, the director of CBO and the chairman of MedPAC, 
and of course, to be followed by the other witnesses.
    I think that this is really the easy part is having the 
hearings, but the hearings are really the foundation for what 
we will come to do and that is to reform our Nation's health 
care system. I have been on this subcommittee for--this is my, 
I believe, 15th year, and what I have seen over the years are 
stops and starts. We have gone body part by body part to try 
and improve different parts of the system, have been successful 
in doing some of them. We have, I think, the world's finest 
doctors. I think we have the most innovative medical centers. 
We have progressed in leaps and bounds in bi technology and the 
life science technologies but our means of delivering care to 
patients is really inefficient and it is costly and it is often 
really counterproductive to maintaining good health, and this 
is now not only an issue for every American, and the American 
people are ahead of us on this, this is front and center an 
economic issue. The costs of our health care system in the 
country are just absolutely killing us. We have increased it at 
a rate that has doubled that of inflation and that really 
should take everyone's breath away.
    So obviously we need to reform, but I am very mindful that 
this isn't called the health care industry for nothing. There 
are tens or maybe hundreds of thousands of players and 
stakeholders so we have a ways to go, but as the President 
said, in good times we didn't do it, in recession we didn't do 
it, after wars we didn't do it; now is the time to do it. I 
don't think we can afford to keep going this way, and I think 
the Congress will work its will. I think that there are going 
to be a lot of very good ideas placed on the table. Some will 
be somewhat startling because they will take down some of the 
old systems and bring about new ones. I am open to all of those 
ideas, and I think that it is important for all of us to do 
that, and I don't think this is going to be done just by one 
party. We are going to really have to work together to get this 
done for the American people. I look forward to it, and maybe 
this will be--I have confidence, I am not going to say 
``maybe'' that in my 15th year on the committee that we will 
get this done, so I welcome all the experts. We need the best 
ideas from the brightest and the best in our country, and I 
think that America is up for this. In fact, I think it is a 
demand of the American people that we do so, and when we do, I 
think that the rest of the world will watch and learn from us 
because what America does is always a great lesson for the rest 
of the world.
    So thank you, Mr. Chairman, for the kickoff on this and I 
look forward to the rest of it.
    Mr. Pallone. Thank you.
    The gentleman from Arizona, Mr. Shadegg.

           OPENING STATEMENT OF HON. JOHN B. SHADEGG

    Mr. Shadegg. Thank you, Mr. Chairman, and I want to thank 
you for holding this hearing.
    I want to jump off on the title, ``Making Health Care Work 
for American Families'' is the first part of the title and I 
think that is essential. I think this Congress can no longer 
tolerate the problems with the current system and therefore it 
must be reformed. The second half of the title is ``Designing a 
High-Performance Health Care System,'' and I believe we can do 
that but I believe we have to do that by beginning with an 
analysis of what is wrong with the current system. As the 
gentlelady just mentioned, one of the things that is wrong with 
the current system is that costs have spun out of control. It 
is not exactly difficult to figure out why costs have spun out 
of control. We do not have a system in America that rewards the 
efficient delivery of health care. We have a system that 
rewards the inefficient system of health care. What we have is 
a third-party control system where your employer picks out your 
health care plan and your health care plan picks out your 
doctor. I suggested to a colleague this morning, that would 
make about as much sense as if he said to me, OK, for the rest 
of my life you, John, will pick out my homes, pick out my cars, 
pick out my suits and pick out my shoes and pick out everything 
else, pick out the food I eat and I will give those decisions 
to you. I suggested if he gave those decisions to me and I 
tried my best to make him happy, I wouldn't make him happy. We 
have created a system in health care in America where we have 
divorced the consumer of the health good from the person paying 
or selecting that good. Right now that system is a third-party 
control system where the employers pick the health care plan 
for their employees. Employees don't pick their own health care 
plan and we have biased the system to say the only economic 
system that works is employer care, and oh, by the way, if your 
employer doesn't provide you care, we are going to encourage 
you to buy care but we are going to punish you by saying that 
under the tax code you have to pay a third more for that health 
care than your employer does if he buys it. So we have rewarded 
a system that gives the decision to somebody other than you to 
select your health care and then we wonder why Americans aren't 
fit, why they don't eat right, why they don't control their 
blood pressure, why they don't control their cholesterol. I 
think if we look at the flaws in the current system that it is 
easy to understand where we should go. We should not go to 
another third-party control. It seems to me it makes no sense 
to take third-party control by employers and plans and give 
that third-party control to the government. I got a flash. If I 
said to the government, you buy my cars in the future, you buy 
my house in the future, you buy my suits and my shirts and you 
pick out the food I eat, the government wouldn't do any better 
job at making those decisions for me than my employer is, so 
what is the option? The option is in fact universal health 
care. This country has decided that nobody should go without 
health care, that we can give every single American health care 
and at the same time preserve choice. How do you do that? Well, 
you let the people that have the financial means to buy their 
own health care and you give them a tax credit to do that and 
you say go buy your own health care, but for every other 
American you say to them, we are going to give you a stipend, 
we are going to give you a chunk of money and you go make 
choices about your own health care, you buy a plan that meets 
you. Now, what about some person who doesn't respond and 
doesn't take up that plan? We put them in a pool and we say to 
them, if you need health care and you show up at a doctor's 
office, we are going to give you the health care. That way we 
preserve choice, we preserve consumers' ability to make their 
own individual choices about health care. That will both bring 
down cost and bring up quality, and it is a system we can 
implement and will cover every single American. I hope when we 
begin to design a system for health care in America, we look at 
the President's eight points. I think every single of those 
fits with what I have just described and I believe we can do it 
and we can do it for every single American, and I thank the 
gentleman and yield back the time I don't have.
    Mr. Pallone. Thank you.
    The gentleman from Maryland, Mr. Sarbanes.

           OPENING STATEMENT OF HON. JOHN P. SARBANES

    Mr. Sarbanes. Thank you very much, Mr. Chairman, and I want 
to congratulate you on now launching this discussion on health 
care reform, much needed, and I am looking forward to the 
various panels that we see. If and when, as Congresswoman 
Schakowsky said, we achieve health care reform, it will only be 
partly because of the arrival of some of the newer members in 
recent years. It will be mostly because of the incredible work 
that you and others, Chairman Waxman, Chairman Dingell and 
other distinguished members of this committee have performed 
for so many years. It is a great committee with a great 
challenge before it.
    The broken health care system that we are all alluding to 
is one that really has two sets of victims. I had the privilege 
of working for almost 18 years as a lawyer with hospitals and 
physicians and clinics and nurses and other providers, and I 
say ``privilege'' because I have never witnessed the level of 
professionalism that I have when it comes to people that work 
so hard in our health care industry every day on the provider 
say, and they are one of the victims. They are one of the sets 
of victims here in this broken health care system because they 
are carrying it on their back right now. The other set of 
victims of course are patients and the consumers of health 
care, and, you know, most Americans don't really have any idea 
what the perfect design or even close to good design of our 
health care system will be. But for millions of Americans who 
are uninsured and underinsured, what they do know is that they 
get up every morning and they can't breathe. They are burdened 
by a corrosive anxiety that eats away at their self-dignity and 
eats away at the stability of their families, and that is why 
we have got to get this done and I look forward to the hearings 
that are coming forward and I look forward to getting health 
care reform done in a timely fashion.
    I yield back. Thank you.
    Mr. Pallone. Thank you.
    The gentleman from Pennsylvania, Mr. Pitts.
    Mr. Pitts. I will waive.
    Mr. Pallone. The gentleman waives. The gentleman from Ohio, 
Mr. Braley.
    Mr. Braley. I was confused by the reference to Ohio but I 
will be glad to----
    Mr. Pallone. Did I say Ohio? I meant Iowa. I apologize.

           OPENING STATEMENT OF HON. BRUCE L. BRALEY

    Mr. Braley. Thank you, Mr. Chairman, and thank you for 
holding this important hearing. I am looking forward like many 
of the other members of the panel to helping the subcommittee 
address health care reform over the coming months, but as we 
look at ways to design a high-performance health care system, I 
want to draw everyone's attention to two issues that directly 
impact the overall performance of this system: one, geographic 
inequity in Medicare reimbursement, and two, the considerable 
variation in health care quality across this country.
    The current system that we have in place has built-in 
inequities that result in a lack of access to care for 
residents in many rural states like Iowa. An example of this 
can be found in the Geographic Practice Cost Indices, or GPCIs. 
These antiquated figures ensure that some parts of the country 
receive drastically lower Medicare reimbursement rates than 
other parts and have led to a tremendous shortage of health 
care providers in certain parts of the country, and in an 
attempt to achieve some leveling of geographic inequity in 
physician reimbursements, the Medicare Modernization Act of 
2003 established a temporary floor of 1.0 for the work GPCI, 
which helps level the playing field for physicians in Iowa and 
other rural States. Congress has had to extend this floor 
repeatedly yet the floor on the work GPCI still does not go far 
enough. Despite the well-documented efficiencies of Iowa's 
health care system, Iowa health care providers still lose 
millions of dollars because they choose to care for Medicare 
patients. Last Congress I introduced the Medicare Equity and 
Accessibility Act, which addresses the GPCI problems. I will 
continue fighting for a permanent work GPCI floor as well as a 
practice expense GPCI floor, but frankly, this is only a Band-
Aid for a broader problem. While Iowa's access to care ranks 
low, the State's quality of care consistently ranks right at 
the top. Iowa physicians, hospitals and health care personnel 
are unrivaled and are a primary reason why Iowa consistently 
ranks in the top 10 healthiest States. Unfortunately, the way 
our current health reimbursement system is set up, it is not 
based on the quality of care provided but instead incentivizes 
quantity of care, which results in considerable variation in 
quality around the country.
    I hope this committee takes a serious look at proposals to 
incentivize quality and efficiency such as value-based 
purchasing models. This fundamental shift in our reimbursement 
system would lead to a tremendous improvement in the quality of 
American health care. Instead of a business model that 
encourages physicians and hospitals to get patients in and out 
as quickly as possible, we would have a system that encourages 
them to make sure the patient is healthy. That is what really 
matters. By including efficiency measure and value-based 
payment programs, we can keep costs down for our patients in 
our federal payment programs. By aligning incentives across 
hospitals, programs and physicians, we could achieve greater 
interoperability, and by encouraging care coordination such as 
through the medical home concept, we can further deliver better 
and more efficient health care.
    So I want to thank you, Mr. Chairman, for tackling the 
important issue of health care reform and I want to thank all 
the witnesses for spending time with us today.
    [The prepared statement of Mr. Braley follows:]

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    Mr. Pallone. I thank the gentleman from Iowa.
    Next is the gentleman from Michigan, Mr. Rogers.
    Mr. Rogers. Mr. Chairman, I will submit my statement for 
the record in lieu of questioning time.
    [The prepared statement of Mr. Rogers follows:]

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    Mr. Pallone. Thank you.
    Next is the gentlewoman from Illinois, Ms. Schakowsky.

         OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY

    Ms. Schakowsky. Thank you, Mr. Chairman. In some ways I 
think I have been waiting for this hearing all of my adult 
life. As my goal as a public official, I will die a happy woman 
if it says on my tombstone or urn or whatever they do with me, 
that she helped bring health care to all Americans, and I think 
this is the first of a process that I hope moves rather 
speedily. The President has targeted actually signing the bill 
after the August recess so we have a lot of work to do.
    I think it is a total embarrassment that the United States 
of America, the wealthiest country in the world, does not 
provide health care to all of its people like every other 
country in the industrialized world. It is a moral issue, it is 
an economic issue, and one that may be controversial here in 
this body but actually outside of this room and in the country 
most Americans are ready for change, they are ready for big 
change and they see an important role for government in that 
change. Anyone who thinks that we have good access to health 
care doesn't live in the real world. In my State alone, 1.8 
million people have no health care but that is just the 
beginning, the tip of the iceberg. The number of people who are 
uninsured, over half of Americans say that they have delayed 
health care or foregone health care because they can't afford 
it. As people lose their jobs, 650 people every day in Illinois 
right now are losing their jobs, 14,000 people are losing their 
health insurance every single day, this is a crisis that cannot 
wait to be solved.
    So I want to make one other point. There has been a lot 
said about having a public health insurance option, the choice 
which 73 percent of Americans say they would rather have a 
choice of a public option or a private option. If their private 
plan works for them, fine. But I would say it is the private 
health insurance industry that has some explaining to do. 
Medicare is one of the--people come into my office and say I 
can't wait until I am 65 years old, I am sick right now and I 
am looking forward to my 65th birthday so that I can actually 
get the health care that I need, and persons with disabilities 
and seniors have been lifted out of poverty because of the 
successful social insurance program along with Social Security. 
The Commonwealth Fund did a study and found that designing a 
health care system that covered everyone including a public 
health insurance option over 11 years would take $3 trillion to 
do that. In 2008, private market health insurance premiums rose 
by 5 percent to nearly $12,700 for a family of four, $4,700 for 
individual coverage, and so private insurance is increasingly 
out of the reach of Americans, and so what the President has 
proposed is to have this option of the public health insurance 
program or private. I think that ought to be a centerpiece of 
any plan that we adopt, and I yield back. Thank you.
    Mr. Pallone. The gentleman from Texas, Mr. Green.

              OPENING STATEMENT OF HON. GENE GREEN

    Mr. Green. Thank you, Mr. Chairman, and I appreciate the 
time. Following my colleague from Illinois, I know your current 
Senator was concerned about what was going to be on his 
tombstone. I want to, like my colleague from Illinois though, 
having moved to the Energy and Commerce Committee in 1997, this 
is one of the most important hearings I think we can have 
because it is a start on what we are going to do in this 
Congress to change how health care is provided to our country.
    I come from the State of Texas, where we have the highest 
percentage of uninsured in the country and have the highest 
number of uninsured in the country. There are a lot of reasons 
for that, and I am glad the President also in his budget 
released a couple weeks ago is planning to take action on 
health care. I also like the principles he laid out for us last 
Thursday instead of sending down a large piece of legislation 
to try to dot all the i's and cross the t's, that is Congress's 
job is to draft legislation. Give us the goals and we will do 
everything we can to get to it.
    Again, this is our first hearing. We currently have 47 
million people uninsured in our country, and overall health 
care is consuming an ever-increasing amount of our resources. 
Health care expenditures are now 16 percent of the GDP with the 
rate going to maybe 2017. Unfortunately, we are paying more for 
the cost of health care but seem to be receiving less and fewer 
people have access to quality and affordable health care. The 
current economic times make it even harder for individuals that 
are uninsured simply because their companies can't afford 
health premiums so their employees can't afford to pay their 
percentage of the premium.
    We recently passed the American Reinvestment and Recovery 
Act, which I strongly supported and extended COBRA subsidies 
for these individuals that lost their jobs, which is wonderful 
for those who had insurance before they lost their jobs. 
Unfortunately, in a blue-collar district like I represent, most 
individuals never had access to health care in the first place 
because they are in low-wage jobs. Too many individuals in our 
country are unemployed or uninsured and all too often end up in 
the emergency room with very costly medical issues that could 
have been prevented with access to primary and preventative 
care. We can't continue to shore up a health care system with 
short-term fixes instead of long-term solutions. We also cannot 
continue down the path with costly health care and more 
uninsured.
    I am glad we are taking our first step in addressing the 
health care crisis, and I welcome our witnesses today to be the 
leadoff witnesses. I have a saying in Houston. We have one of 
the greatest medical centers in the world, the Texas Medical 
Center. On a clear day in Houston, we can see the medical 
center but most folks in my area can't get to it because they 
lack health care unless it is through our public hospital 
system.
    And with that, Mr. Chairman, I yield back my time.
    Mr. Pallone. Thank you.
    The gentleman from Ohio, Mr. Space.

           OPENING STATEMENT OF HON. ZACHARY T. SPACE

    Mr. Space. Thank you, Mr. Chairman. I look forward to 
working with you as we begin this comprehensive debate on how 
we deliver health care in America.
    I think as we move forward, many of my colleagues have 
raised very important and legitimate issues. The health IT 
program, coordinated care, preventative measures, rewarding 
positive lifestyles, punishing negative lifestyles, but one 
element that I am hoping we won't forget about is the 
importance of cure, curing disease. There has not been a 
significant breakthrough on a cure in this country since polio 
was cured, and cures are within our grasp and not only do we 
have a moral obligation to alleviate or mitigate human 
suffering, cures end up being a very economically effective way 
of handling the health care crisis. In 2007 this Nation spent 
$178 billion on one disease, diabetes. That is more money than 
we spent in Iraq. With a small percentage of those monies that 
were spent in that one year and that are spent every year at an 
increasing rate, we could cure the disease within 5 to 10 years 
either naturally or artificially, providing every type 1 
diabetic with a closed-loop artificial pancreas, mitigating and 
eliminating the expenditure of trillions of dollars over the 
next 30 years. That is one disease. Imagine what we could do if 
we invested in a cure for cancer, for heart disease, for liver 
failure, even for things like autism. We are, Mr. Chairman, I 
think, remiss in failing to address cures with an aggressive 
posture, and I am hopeful that that will be a part of this 
debate as we move forward. In the end, I think we all share a 
common goal and that is providing affordable access to quality 
health care. I don't care how we get there but we have to get 
there.
    I yield back.
    Mr. Pallone. Thank you.
    The gentlewoman from Wisconsin, Ms. Baldwin.

            OPENING STATEMENT OF HON. TAMMY BALDWIN

    Ms. Baldwin. Thank you, Mr. Chairman.
    Addressing our health care crisis is the issue that brought 
me to public service in the first place so I do want to truly 
thank you, Mr. Chairman, for holding this hearing and getting 
us started on this enormous task that is before us, and I want 
to thank all of our witnesses in advance because your expertise 
is going to be invaluable to us in the process.
    In a report released last week on the series of health care 
communities' discussions held around the country, the 
Department of Health and Human Services found that more than 
anything else, Americans want a system that is fair. No matter 
what your circumstance or background, the American health care 
system should perform well for you too. To that end, I will 
address briefly the three major issues that we all know so 
well: access, quality and cost.
    As we will hear today, being shut out of the system is 
deadly. Uninsured adults are 25 percent more likely to die 
prematurely than insured adults, and if they have a serious 
chronic condition, the situation is worse, and every day more 
and more people are falling into the ranks of the uninsured. 
Erosion of employer-based coverage and the challenges of the 
individual market demand our immediate attention.
    A high-performance health care system by definition must 
also deliver quality care, and I strongly believe that 
providers can use performance measurements to drive quality 
improvements. A leader in this respect is a hospital in my own 
district, the University of Wisconsin Hospital on Clinics. They 
have led the way in several nationwide efforts to benchmark 
performance. They consistently rank among the top five academic 
medical centers in the country according to five key metrics: 
mortality, effectiveness of care, safety, equity and patient 
centeredness. These efforts at public reporting and the sharing 
of best practices demand excellence from our health care 
system.
    Lastly, I want to quickly address the issue of cost. We are 
operating under an assumption today that at first glance seems 
implausible, that we can pay less for our health care and get 
more from it, and yet the data is clear. Our current system is 
wildly inefficient. Some of the highest cost regions produce 
poor patient outcomes. Some of our lower cost regions produce 
some of the highest outcomes.
    I would like to personally thank our witnesses on our first 
panel today for your invaluable assistance in helping us to 
solve this problem. MedPAC has recommended significant 
restructuring of the payment system, suggesting that we pay for 
care that spans across provider groups and types and time in 
order to hold providers accountable. For me, health reform is 
an endeavor that is both intellectual and emotional. As a 
Member of Congress, I know that we must control the 
unsustainable spending in our health care system. As a 
representative of the men, women and children in the Second 
District of Wisconsin, I know we must fix our broken system so 
it can reach and serve everyone.
    Again, thank you to our witnesses today for being here and, 
Mr. Chairman, for beginning our work in earnest.
    Mr. Pallone. Thank you.
    The gentleman from Arkansas, Mr. Ross.

              OPENING STATEMENT OF HON. MIKE ROSS

    Mr. Ross. Thank you, Mr. Chairman, and like Dr. Burgess and 
some of the others, I had a prepared statement that I will 
submit for the record but most of what I said in that has 
already been said, but I would like to speak for a moment from 
experience and from a rural perspective, if I may.
    I served for 10 years on the State health committee in 
Arkansas in the State Senate and that is where I learned that 
any real reform had to happen at a national level and it 
inspired me to run for Congress and to seek this committee and 
seek this subcommittee. It is the rural perspective I took to 
the health care summit at the White House last week in our 
breakout session. My experience as a pharmacy owner, someone 
married to a pharmacist and being from a small town, I can tell 
you I have seen too many people walk through the doors of that 
pharmacy that could not afford a $30, $40 or $50 medication, 
and living in a small town, I would learn when they were in the 
hospital a week later running up a much higher bill, if you 
will.
    We have got to make health care affordable and accessible 
and available for everyone. My hometown is much like my 
district. I represent 150 towns, and half my constituents don't 
live in any of them. They live down this gravel road or that 
gravel road, and it is important that those folks have access 
to health care too. My hometown is a good representation of my 
district. It is 3,600 people when I am home and two traffic 
lights. Just a few years ago we had six doctors, five 
pharmacies and a hospital. Today we have got three doctors, two 
are over the age of 60, two pharmacies and no hospital. The 
nearest hospital is in Hope, Arkansas, 16 miles away, and now 
it is struggling to keep its doors open. If it closes, we will 
be 40 miles from the nearest hospital.
    The leadership of the hospital in Hot Springs, Arkansas, 
the largest town in my district, wanted to meet with me 
recently and they wanted to tell me how Hot Springs cannot 
attract doctors. It has got a high retirement-age population, a 
lot of sick folks, it is on a lake, and it is in a national 
park. By Arkansas standards, it is a prime place to live, and 
if we can't attract doctors there, what about these other 149 
towns that are much smaller and much more rural? So I would ask 
that rural health care be an important part of any reform, and 
I can't help but think, Mr. Chairman, back to the days of Oren 
Harris. His portrait is right here. He comes from my district. 
He chaired this committee. He began chairing this committee 5 
years before I was born and he was trying to reform health care 
then, and that was 53 years ago, and I hope that we can get it 
done and get it done right this time.
    With that, Mr. Chairman, I pledge to work with you. Please 
keep rural health care an important part of any reform debate. 
Thank you, and I yield back the balance of my time.
    Mr. Pallone. Thank you.
    The gentlewoman from Florida, Ms. Castor.

             OPENING STATEMENT OF HON. KATHY CASTOR

    Ms. Castor. Thank you, Chairman Pallone, for this first in 
a series of hearings to reform health care in America and make 
it more affordable for businesses and families. Together with 
President Obama, we have already hit the ground running to 
improve the health care of Americans with the enactment of the 
landmark children's health bill, the SCHIP. The American 
Recovery and Reinvestment Act also provides much-needed 
assistance in COBRA payments for folks who have lost their jobs 
and aid to States for Medicaid. We are not going to let our 
families fall through the safety net.
    Now our larger challenge is to confront health care reform 
and I believe we can tackle it with commitment and 
determination to develop quality, affordable health care 
options for Americans. In my home State of Florida, where we 
have the second highest rate of uninsured, families and 
businesses have been clamoring for access to affordable health 
care well in advance of the economic downturn and the rise in 
unemployment and home foreclosures. In Florida, it is estimated 
that more than six working-age Floridians die each day due to a 
lack of health insurance. The inability to afford basic health 
care poses a major threat not only to the well-being of 
families but to our economy as a whole. Nearly half of home 
foreclosures in 2006 were caused at least in part by financial 
issues stemming from a medical problem. As President Obama 
noted just last week, the cost of health care now causes a 
bankruptcy in America every 30 seconds.
    Now, there will be many outstanding ideas and I look 
forward to hearing from our witnesses. I believe particular 
focus and attention must be paid to the primary care system and 
preventative medicine, also to the health care professions, 
especially this very arbitrary cap on physician resident slots 
that penalize States that have high growth and high population, 
nursing shortages, Medicare reform. With everyone's help and my 
colleagues' expertise, I am confident that we will reduce 
health care costs for families and businesses and hopefully our 
national budget. The time to act is now.
    I yield back my time.
    Mr. Pallone. Thank you.
    The gentlewoman from Ohio, Ms. Sutton.

             OPENING STATEMENT OF HON. BETTY SUTTON

    Ms. Sutton. Thank you, Mr. Chairman, for holding the first 
of many important hearings on health care reform.
    Health care reform is a critical component to our economic 
recovery and our Nation's competitiveness. As health care costs 
rise, neither employers nor employees can afford them, and if 
one loses their job, the situation is even more daunting.
    I would like to begin today talking about a family in my 
district, the Lee family. Mr. Lee has always had health 
insurance through his job but when his company laid him off 
last year, he and his family lost coverage. Mrs. Lee tried to 
get coverage through her job but she didn't qualify because she 
was a part-time employee. Now, having a family with medical 
problems ranging from diabetes to degenerative joint disease 
and being without health insurance has created a very, very 
difficult problem for the Lees, and unfortunately, Mr. 
Chairman, this is a situation that is familiar to far too many 
Americans. The Lee family is certainly not alone. In Ohio, 
there are over 1.2 million people without health insurance, and 
Mr. Chairman, this causes an amazing outcome. According to 
Families USA, two Ohioans die each day because they lack health 
care coverage. I want to say that again. In Ohio, two Ohioans 
die each day because they lack health care coverage.
    Many Americans have to forego health care in order to put 
food on the table or keep a roof over their head. That is 
unacceptable. Our health care system must be reformed, and as a 
member of this subcommittee, I look forward to working with my 
colleagues and the American people to make it happen finally, 
and I look forward to hearing from our panelists today about 
this important issue and their insight into how we might go 
about making this become a reality.
    I thank you, and I yield back the balance of my time.
    Mr. Pallone. Thank you.
    The gentleman from New York, Mr. Engel.

            OPENING STATEMENT OF HON. ELIOT L. ENGEL

    Mr. Engel. Well, thank you for holding, Mr. Chairman, this 
hearing today on making health care work for American families.
    It is clear to so many of us that our health care system is 
broken. For years we have been talking about the 47 million and 
growing uninsured Americans and 25 million underinsured 
Americans, and it is apparent that some people have come to 
accept this tragedy as a fact of life, that some people are 
fortunate to have health coverage and some people, millions and 
millions of people aren't, so too bad for them. In truth, it 
has often been said, everybody does better when everybody does 
better. We can do better. The status quo is no longer 
acceptable.
    In the first 2 months of the Obama Administration, we made 
significant strides toward improving our current health care 
system. Our reauthorization of the State Children's Health 
Insurance Program provided health care coverage for 11 million 
children, preserving coverage for the roughly 7 million 
children already covered by SCHIP and extending coverage to 4.1 
million uninsured children who are eligible for but not 
enrolled in SCHIP and Medicaid. We made a solid investment in 
modernizing our health care system in the stimulus by making 
key investments in health information technology. Wide-scale 
adoption and implementation of health information technology 
will be a fundamental part of any true health reform bill. The 
$19 billion designed for HIT will eventually enable our health 
care system to save billions of dollars, reduce medical errors 
and improve quality of care. Many of the measures included in 
the stimulus ranging from extra Medicaid funding for States to 
subsidizing COBRA insurance for unemployed workers will help to 
stop the bleeding during this terrible recession.
    Long term, though our health care delivery system requires 
a comprehensive implementation of sustainable reforms in order 
to succeed. The President is off to the right start with this 
commitment to health reform. His $630 billion down payment 
towards health reform coupled with the Administration's eight 
principles will guide Congress in our joint efforts to revamp 
our health care system. With the United States paying more than 
$2 trillion a year for health care, we should ensure that we 
are getting what we are paying for, a world-class health care 
system for our Nation's hardworking citizens, and yet it is 
clear that our payment systems are flawed. As MedPAC has noted 
in its testimony today, Medicare's fee-for-service payment 
system rewards more complex care without regard to the value of 
this care. Bizarrely, for those with multiple ailments, 
coordination among providers is not encouraged financially by 
Medicare where clearly coordinated care would result in 
improved health conditions.
    Mr. Chairman, thank you again for holding this hearing. You 
have a really been a champion in pushing these reforms and I 
commend you for it. I look forward to the work ahead of us this 
spring and summer on reforming and designing a quality health 
care system, and I yield back the balance of my time.
    Mr. Pallone. Thank you.
    The gentlewoman from California, Ms. Harman.

             OPENING STATEMENT OF HON. JANE HARMAN

    Ms. Harman. Thank you, Mr. Chairman. I am very pleased to 
be a new member on this subcommittee though not new to these 
issues.
    I am the sister and daughter of physicians and I recall 
very well a half century ago how my father handled his general 
practice of medicine. He was the neighborhood physician. He 
made house calls most evenings. He served three generations of 
patients in a small group practice in Culver City, California, 
during the time he practiced medicine. I was very proud of what 
he did and now I look back on it and it seems an Ozzie and 
Harriet alternate reality.
    We can't go back there, Mr. Chairman, and we surely have to 
grapple with the problems described by so many of our 
colleagues this morning, but I must commend you for the panels 
in this opening hearing today and I especially want to mention 
Doug Elmendorf and congratulate him in his new role as director 
of CBO. He has been a valuable asset to many of us as we have 
tried to grapple with budget issues, and what I think he brings 
to this is obviously an understanding of the cost piece of 
health care but also great compassion for the need to extend 
coverage to as many as possible in our country.
    So I commend you for this hearing and I commend our 
witnesses and count me in on all plots to make a huge down 
payment on solving this problem this year. I yield back.
    Mr. Pallone. Thank you.
    I believe that concludes our opening statements and so we 
will now turn to our witnesses. First of all, let me welcome 
the first panel and the two gentlemen and let me introduce you. 
On my left is Glenn Hackbarth, who is the chairman of the 
Medicare Payment Advisory Commission, or MedPAC, and to his 
right is Douglas Elmendorf, who is director of the 
Congressional Budget Office. We are really looking forward to 
your testimony. I have kind of looked at some of the written 
testimony and you deal very effectively with new ways of doing 
things and the whole cost efficiencies, which are so important 
to us.
    We will start with Mr. Hackbarth.

   STATEMENTS OF GLENN HACKBARTH, CHAIRMAN, MEDICARE PAYMENT 
ADVISORY COMMISSION (MEDPAC); AND DOUGLAS ELMENDORF, DIRECTOR, 
                  CONGRESSIONAL BUDGET OFFICE

                  STATEMENT OF GLENN HACKBARTH

    Mr. Hackbarth. Thank you, Mr. Chairman and Ranking Member 
Deal. I appreciate the opportunity. Many of my comments in my 
opening statement will echo themes that have already been 
heard.
    Let me begin with a brief definition of health reform, at 
least in my mind. Health reform equals expanded coverage plus 
lower cost growth while maintaining or even improving quality 
of care. MedPAC's focus, as you well know, is on the latter set 
of issues, in particular using payment policy to improve the 
efficiency and the effectiveness of the care provided to 
Medicare beneficiaries. In some quarters, this has been labeled 
moving the system toward high performance. Let me start by 
emphasizing that the U.S. health care system has tremendous 
resources in the professionals who serve in that system. I have 
been fortunate in my career to work with talented physicians 
and advanced practice nurses and psychologists and other 
professionals and I know what talent and commitment they bring 
to their work. The problem we have is that Medicare's payment 
systems and those of most private insurers reward more care, 
more-complex care without regard to the value of that care to 
the patients. But equally important is that Medicare's payment 
systems enable what we have referred to as siloed practice 
whereby individual clinicians and organizations act 
independently of one another, even while caring for the same 
patient. Too often efforts at coordination and integration of 
care are sporadic, and where they occur their testimony to the 
commitment of individual professionals. They are not inherent 
in the system itself. The result is the care is all too 
frequently fragmented, duplicative and gap filled, and on 
occasion even conflicting as is the case sometimes with adverse 
drug interactions. Care of this sort isn't just expensive, it 
is dangerous, and it is dangerous in particular for patients 
with multiple complex illnesses, which is a common problem, as 
you well know, in the Medicare population.
    In the last several years MedPAC has recommended a series 
of changes in Medicare payment policy that we believe would 
help move health care to a higher level of performance, and let 
me just quickly mention some of those recommendations. First is 
increased payment for primary care services and perhaps a 
different method of paying for primary care services as is 
embodied in the idea of a medical home. Research demonstrates 
conclusively, in my view, that a strong primary care system is 
the foundation of a high-performance health system. In the 
United States at this point, our primary care system is weak 
and rapidly deteriorating. The second recommendation has been 
that we begin providing confidential episode-based feedback to 
physicians about their practice so that they can better 
understand how their practice compares to their peers, both in 
their local area and in their specialty. Third, we have 
recommended authorization of what we refer to as gain sharing 
between physicians and hospitals. The goal here it to encourage 
collaboration between physicians and hospitals both in reducing 
cost and in improving quality of care. Next we have recommended 
reduced payments for hospitals experiencing unusually high 
levels of potentially avoidable readmissions. About 18 percent 
of all Medicare admissions are followed by a readmission within 
30 days at a cost of about $15 billion per year. A sixth 
recommendation is a pilot of what we have referred to as 
bundling whereby payment for a hospital and physician service 
provided during an admission would be combined into a single 
payment and perhaps combined with payment for post-acute 
services as well. Next, we have proposed reforms in the 
Medicare Advantage program so that participating private plans 
are engaged in promoting high performance in health care 
instead of offering plans that mimic traditional Medicare 
except at a higher cost. And last, we have urged public 
investment in comparative effectiveness research, which the 
Congress has already acted on in the Economic Recovery Act.
    This week at our MedPAC meeting we will also be considering 
the potential for what we have referred to as accountable care 
organizations, organizations that assume clinical and financial 
responsibility for a defined population of patients. We will be 
trying to figure out methods to pay such organizations that 
could reward efficiency and reduce cost for the Medicare 
program.
    Let me close with two quick cautions about the challenge 
ahead of us. First of all, changing payment systems and 
especially trying to do so quickly requires a lot of resources 
and I am very concerned, the Commission is very concerned about 
the level of resources that CMS has to pursue this agenda. A 
second caution is that while striving for payment reform, as 
important as it is, as vital as it is, we must also apply 
steady, indeed perhaps increasing pressure on unit prices under 
Medicare's existing payment systems.
    Thank you very much, Mr. Chairman, and I look forward to 
the discussion.
    [The prepared statement of Mr. Hackbarth follows:]

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    Mr. Pallone. Thank you, Chairman Hackbarth.
    Director Elmendorf.

                 STATEMENT OF DOUGLAS ELMENDORF

    Mr. Elmendorf. Thank you, Chairman Pallone, Ranking Member 
Deal, members of the subcommittee. I appreciate the invitation 
to talk with you today about the challenges and opportunities 
that Congress faces in trying to make the health care system 
more efficient so that it can continue to improve Americans' 
health but at lower cost.
    Policymakers could seek to improve efficiency by changing 
the way that public programs pay for health care services or by 
encouraging such changes in private health care plans. In both 
sectors, these changes could in turn exert a strong influence 
on the delivery of care. To assist the Congress in its 
deliberations on this topic, CBO released last December a 
report titled Budget Options for Health Care. Drawing on this 
report, my testimony makes three key points.
    First, a substantial share of spending on health care 
contributes little, if anything, to the overall health of the 
Nation. Second, reducing unnecessary spending without also 
affecting services that do improve health is challenging but 
many analysts will concur with the importance of providing 
stronger incentives to control costs and generating and 
disseminating more information about the effectiveness of care. 
Third, despite broad support among analysts for moving in these 
directions, there is substantial uncertainty about the effects 
of many specific policies and many policies might not yield 
substantial budget savings or reductions in national health 
spending within a 10-year window.
    Let me discuss these points briefly in turn. First, as you 
know, spending on health care has grown much faster than the 
overall economy for decades. This imposes an increasing burden 
on the federal government for which the principal driver of the 
unsustainable budget outlook is growth in per capita health 
costs, not aging. It also imposes an increasing burden on the 
private sector where the growth of health spending has 
contributed to slower growth in wages because workers must give 
up other forms of compensation to offset the rising costs of 
health insurance. When confronted with these costs, ever more 
firms and families drop their health insurance coverage. 
Concerns about the level and growth of health care spending 
might be less prominent if that spending was producing 
commensurately good and improving health. Unfortunately, 
substantial evidence, detailed in my written testimony, 
suggests that more spending does not always mean better care.
    The second main point is that many analysts would concur 
with the importance of providing stronger incentives to control 
costs and of generating and disseminating more information 
about the effectiveness of care. Many analysts would agree that 
payment systems should move away from a fee-for-service design 
and should instead provide stronger incentives to reward value. 
These incentives could be created in a variety of ways 
including fixed payments per patient, bonuses based on 
performance or penalties for substandard care. However, the 
precise effects of these policies are highly uncertain. Many 
analysts would also agree that the current tax exclusion for 
employment-based health insurance which exempts most payments 
for such insurance from both income and payroll taxes dampens 
incentives for cost control because it is open ended. Those 
incentives could be changed by restructuring the tax exclusion 
in ways that would encourage workers to join plans with higher 
cost-sharing requirements and tighter management of benefits. 
Moreover, many analysts would agree that more information is 
needed about which treatments work best for which patients and 
about what quality of care different doctors, hospitals and 
other providers deliver. But absent stronger incentives to 
improve value and efficiency, effective information alone will 
generally be limited.
    Third, many steps that analysts would recommend might not 
yield substantial budget savings or reductions in national 
health spending within a 10-year window. There are a number of 
reasons for this, again, further details in my written 
testimony, but briefly, in some cases, savings materialize 
slowly because initiative is phased in. In other cases 
initiatives that generate savings such as prevention efforts or 
disease management have costs to implement. In some cases the 
federal budget does not capture the reductions in national 
health spending. In other cases, new structures for health care 
delivery improve health but do not provide incentives to reduce 
costs. And in yet other cases, limited evidence about the 
effects on efficiency is available.
    Let me conclude with two general observations. One is that 
given the central role of medical technology and the growth of 
health spending, slowing spending over the long term will 
probably require decreasing the pace of adopting new treatments 
and procedures or limiting the breadth of their application. 
Such changes need not involve explicit rationing but could 
occur as a result of market mechanisms or policy changes that 
affect the incentives to develop and adopt more costly 
treatments.
    The other observation concerns the urgency of health care 
reform. In contrast with the situation in the economy and 
financial markets, our system for delivering and paying for 
health care is not fundamentally different this year from last 
year. However, very few analysts think that the relatively 
gradual pace of change in health care is an argument for 
deferring reform. On the contrary, our current health system 
evolved over years and decades, and the changes needed to 
substantially improve efficiency will take years and decades to 
come fully to fruition. Nearly all analysts think those changes 
should begin soon.
    Thank you.
    [The prepared statement of Mr. Elmendorf follows:]

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    Mr. Pallone. Thank you.
    So we are going to have questions now from the members, 5 
minutes, in some cases more, I think, if the members passed on 
their opening.
    I wanted to start with Mr. Elmendorf because of the issue 
of primary care. Many experts such as Dartmouth researchers 
maintain that a lack of access to high-quality primary care 
contributes to inefficient care and geographic variations 
around the Nation and they say that if we invest more in 
primary care to improve quality and lower cost, you know, that 
that would be one of the main efficiencies that we could 
achieve. And I have to say that when you listened to President 
Obama at the summit last Thursday, he stressed, you know, this 
whole idea of health inflation and that somehow we have to curb 
the growth in cost. I think Karen Ignani from the health 
insurance trade group or whatever actually at my breakout 
session talked about, you know, curbing the growth of the 
inflation, if you will, and I have to give you a person 
experience. A couple of my staff people in my office in New 
Jersey have Cadillac health insurance, Blue Cross, whatever, 
and have had a problem getting a primary care doctor and on two 
occasions because they couldn't get a primary care doctor ended 
up going to an emergency room for something that really wasn't 
necessary to go to the emergency room. We keep talking about 
people who have no insurance that go to the emergency room. 
Well, what about a Congressional staff person who has insurance 
and can't get a primary care doctor and goes to an emergency 
room?
    So my question is, with regard to primary care and 
particularly within the Medicare program, I mean, you mentioned 
this patient-centered medical home as an option but talk a 
little bit more about what you see in terms of enhancing 
primary care and how important that is to the overall system in 
terms of cost efficiencies and trying to make a better quality 
system.
    Mr. Elmendorf. Mr. Chairman, many analysts have worried for 
some time that our system does not reward primary care 
physicians the same way that it rewards physicians in 
specialties, and if you look across the country and compare 
medical centers that seem to be delivering very efficient 
medical care in the sense of low cost but medical care of high 
quality, those medical centers tend to have higher relative 
numbers of primary care physicians to specialists, and I think 
that sort of evidences the basis of some of MedPAC's 
recommendations in this area.
    The options that CBO looks at, we looked at a number of 
them, regarding ways to empower or reward primary care 
physicians, one is a proposal for establishing medical homes in 
which all Medicare recipients are assigned to primary care 
physicians and those physicians then oversee the way in which 
those patients receive care from other providers. The crucial 
issue for--and I think many analysts would agree that sort of 
focus on primary care physicians would lead to greater 
coordination of care, fewer duplicative tests and better 
health. Whether it leads to cost reductions depends in our 
judgment crucially on the incentives that those primary care 
physicians receive. So one approach to this is to provide those 
incentives to primary care physicians by rewarding them for 
reductions in spending while maintaining high quality and the 
effectiveness of those sorts of provisions, so we look at some 
other provisions. There are other ways in addition to medical 
homes in which primary care physicians can be empowered to make 
decisions and to coordinate care but again it is crucial if one 
wants to reduce federal outlays that they have incentives 
focused on not just recommending a whole range of additional 
services that aren't necessary.
    Mr. Pallone. OK. I want to get a second question in but I 
appreciate that. You know, I want to ask Mr. Hackbarth this. 
Mr. Elmendorf talked about how you might limit the pace of new 
procedures not through rationing but through some other means. 
You know, the President, I commend him. He has been so honest 
about everything in terms of budgeting. You know, he came up 
with this $600 billion reserve fund. He said look, that is only 
going to pay for half the cost of covering everyone. Within 
that he said, you know, half of it can be done through cost 
efficiencies, the other half you are going to need a new source 
of funding. All these things are very controversial but he 
doesn't hesitate to bring them up, to his credit. But, you 
know, when you talk about these cost efficiencies which MedPAC 
is really the key, you know, as you know, you came out with 
your report I guess a week or so ago and, I mean, every time it 
comes out the phone rings endlessly in my office because they 
see you as like their ultimate bad guys that want to cut back 
on all the providers and on the imaging and everything else.
    So the question is, how realistic is this? Can we really 
pay for all these things through cost efficiencies? I mean, are 
we really going to be able to pay for a quarter of the cost of 
expanded coverage through these cost efficiencies? Can we pay 
for even more than that? Because the President's reserve is 
only half. Can you move towards what Mr. Elmendorf said and 
actually limit new procedures without having an uproar and 
without--I mean, I am not asking you to--I know you are not a 
politician but I just wanted you to comment on that, if you 
could. It is endlessly obviously but----
    Mr. Hackbarth. Yes. Well, let me break it into two parts, 
first addressing the issue of new technology, how it is 
introduced to the system, how it diffuses. In terms of slowing 
the rate of increase and long-term health care costs, that is 
going to be a principal focus of our efforts, and that is why 
we strongly supported the idea of a large-scale public 
investment in comparative effectiveness information. We don't 
think that that necessarily means that you have to have a 
single entity making rationing decisions. Indeed, what we have 
advocated is creating more information so that individual 
physicians and their patients, private health plans, public 
health plans and others can more thoroughly evaluate the 
choices that need to be made, and we have advocated that the 
choices continue to be made on a decentralized basis, not in 
one federal bureaucracy, but we can't make sufficient progress 
on this technology issue without far better information than we 
have had in the past. The private market has not and will not 
produce that information so public investment is very welcome 
in that.
    Having set aside the technology issue for a second, there 
are very large inefficiencies in the delivery of care, many of 
them, most of them rooted in how we pay for care. Realistically 
though, as you say, Mr. Chairman, when you change those payment 
systems, you are doing two things. One, you are redistributing 
income across different types of providers, sometimes 
geographically. In addition to that, you are bumping up against 
really entrenched ways of behaving, you know, cultures that 
exist within these organizations, and we need to be realistic 
about how quickly those things will change. They will not 
change overnight. But to me, what that does is emphasize how 
important it is we start today and not delay these things 
further and further into the future. The decisions will be 
controversial. You are going to need to make those decisions. 
We will provide you the best information and analysis we can to 
support you in that effort.
    Mr. Pallone. Thank you.
    Mr. Deal.
    Mr. Deal. Thank you.
    As I listen to opening statements and your testimony, two 
words come to mind, and I want to focus on those two words. 
Much of what you just responded to in the chairman's questions 
you will respond I am sure the same to mine but maybe you want 
to elaborate further. The two words are cost and results. Now, 
they are not always equated with each other. In fact, we know 
the statistics. First of all, cost, and I think we all 
recognize that much of the escalation in the cost has been 
related to new procedures, new treatments, new pharmaceuticals, 
and Mr. Elmendorf, a partial quote from your testimony about 
two weeks to the Senate Finance Committee, you said, ``Reducing 
or slowing spending over the long term would probably require 
decreasing the pace of adopting new treatments and procedures 
or limiting the breadth of their application.''
    Now, I have two questions. My first question is, are there 
ways to encourage doctors and patients to take into account the 
cost when making a treatment decision without requiring third 
parties such as the insurance company or other people including 
Congress to make those decisions for them? So that is the 
question on cost. The second question relates to results. Now, 
comparative effectiveness is a term that has sent shock waves 
through the medical delivery community, as you are aware. Now, 
when I think of cost comparative effectiveness, I think it can 
be defined as either the mode of treatment which is generally 
most effective, which is, I think, the equivalent of a protocol 
or best practices, but it can also be interpreted as a 
limitation of treatment, which is where the scary part of 
rationing comes in. And in that regard, my second question is, 
what steps can we take to ensure comparative competitive 
effectiveness research helps improve patient and provider 
decision making while avoiding the blunt centralized access 
restrictions? My two questions.
    Mr. Elmendorf. On your first question, Congressman, there 
are several steps that can be taken to increase incentives for 
providers and patients to focus on value, on getting results, 
not just on spending money. One, as I mentioned in my 
testimony, is changing the tax exclusion for health insurance 
so as not to be open ended so that we don't provide essentially 
a federal subsidy at fairly high rates for people to get ever 
more expensive policies. Changing that would induce people and 
firms to be more cautious in the policies that they bought, to 
hunt harder for bargains, and that in turn would induce the 
providers to be more careful in the money that they spent. We 
could provide incentives for Medicare beneficiaries to choose 
more carefully additional treatments by increasing the cost-
sharing rates. Of course, those policies have consequences as 
well. More generally, the Medicare program reimburses providers 
in certain ways and CBO reviewed a number of potions in its 
volume of ways to encourage providers to economize on spending 
while maintaining quality, and that includes the way we pay for 
post-acute care after hospitalization. It includes the way we 
reimburse doctors, very importantly, because they tend to be 
paid now on a fee-for-service basis, not on a more bundled 
basis.
    On comparative effectiveness, more information is 
absolutely crucial. There is a very large share of medical care 
delivered in this country where many analysts think there is 
very little evidence about what works and what doesn't and the 
largest variation in spending across geographic regions is in 
the aspects of care where there is the least consensus among 
medical professionals about what is the appropriate treatment 
so that providing that information can then provide 
understanding about what is useful and not, can try to reduce 
these disparities, but I think it is absolutely crucial to 
really get the effectiveness of this sort of research to 
provide incentives for using it, and that comes up against your 
concern which is well, who is saying that you can't get a 
certain treatment. And I think the answer here is not to--don't 
rule out certain treatments. What it does is change the 
incentives so that doing another treatment is not a financial 
winner, it is more of a neutral proposition for providers who 
would then recommend services only if they really are necessary 
and not otherwise but the incentives have to go with the 
information to get the maximum effect.
    Mr. Hackbarth. If I could, I would like to focus on the 
cost-sharing piece of your question. I addressed the technology 
piece in my earlier comment. Having patients understand the 
cost of alternatives can be a part of the solution but it has 
to be structured very carefully. One of the areas where we 
think it can be particularly helpful is in Medicare Advantage 
where we give incentives, rewards to patients who enroll in 
more-efficient, high-performance private health plans. That 
could be a step in the right direction. Our chief concern about 
Medicare Advantage as currently structured is that we are 
rewarding Medicare beneficiaries for enrolling in private plans 
that simply mimic Medicare except at a much higher cost. So we 
think with restructuring, Medicare Advantage could be a 
significant contributor.
    As far as cost sharing at the point of service is 
concerned, when care is actually being delivered, of course 
that could be very problematic for very low-income Medicare 
beneficiaries who don't have much income and could impede 
access to care, and there is a body of research showing that in 
fact if you have cost sharing for some types of services, you 
can end up with worse results and higher costs. An example of 
that is drugs for diabetics. You don't want to impede access by 
having them share in the cost.
    A third point there is that well-structured cost sharing 
with protections for low-income people that doesn't discourage 
really needed things like drugs can be OK but for the really 
sick patients, they are going to exceed cost-sharing limits and 
the real money in our health care system is in the care of 
people that are really complicated and have very high bills so 
cost sharing isn't going to solve that problem, we need other 
tools to address the issue.
    Mr. Pallone. Ms. DeGette.
    Ms. DeGette. Thank you, Mr. Chairman.
    I want to explore two sort of issues as we start to think 
about how we are going to fund health care reform. The first is 
an issue that I have been thinking about for quite a long time, 
which is that under the current system the way the CBO funds 
health care is just simply by estimating how much it will cost 
to treat diseases and then paying for that, and a concept I 
have been working on, I am calling it the prevention dividend. 
That is just what I am calling it. The concept would be that we 
would try to figure out--and I have actually spent quite a bit 
of time talking to Peter Orszag about this. We would try to 
figure out if there are certain treatments or efforts that can 
prevent disease that we don't necessarily fund now because we 
can't afford it and shift the way that we fund health care in 
this country. I will give you one example. When we did the 
Medicare Part D benefit in this committee a few years ago, I 
went to then-Chairman Barton and I said Joe, I think we should 
fund smoking cessation programs for senior citizens in this 
bill, and he said I think it is a great idea, Diana, but we 
can't do it because I have got a $50 billion price tag and I 
can't go beyond that. So I thought well, that is swell. We are 
not going to give them the patch but we are going to give them 
treatment for their heart disease, lung cancer and emphysema.
    Mr. Elmendorf, I am wondering what you think of a concept 
like that and how trying to structure a payment program for 
some kind of health care reform could take advantage of 
prevention.
    Mr. Elmendorf. Congresswoman, if you propose policy to 
enhance prevention for single or a range of possible diseases, 
then we would certainly try to take account of the effects of 
that policy on the subsequent prevalence of those diseases and 
the costs of treating them and the estimates. I think there are 
a few general points to make. One is that some researchers have 
looked at a range of possible preventive measures. Some seem to 
be very cost-effective and are not done enough. Others do not 
look particularly cost-effective much like the range of results 
people see for different sorts of health treatments in which 
some things are not done enough and others are done probably 
too much. So I think it depends. The effects on the future 
disease and the cost of that disease depends importantly on the 
particular preventive service or strategy you have in mind.
    The related second point is that when one engages in 
preventive services, there are certainly some number of people 
who won't suffer very health-damaging and costly problems later 
but one is providing a lot of additional services to a very 
large number of people, many of whom would not have had that 
cost later. So part of the reason that preventive actions end 
up being less cost-saving than one might think is because one 
is providing them to a lot of people at a small cost per person 
to be sure but----
    Ms. DeGette. But some of them do--I mean, in line with what 
the President said yesterday, I think all of this should be 
based on science rather than just our gut feeling and so that 
would be part of what I would say is, you would have to have 
some kind of longitudinal studies or some evidence that would 
show in fact that by giving a dividend to these prevention 
efforts you would either, A, improve people's health, or B, 
prevent longer term disease. It is not just about preventing 
long-term diseases, it is also about improving quality of life.
    Mr. Elmendorf. Yes.
    Ms. DeGette. Mr. Hackbarth, I see you nodding your head. I 
am wondering if you can comment on this as well.
    Mr. Hackbarth. Yes, I very much like the idea of it being 
science based because I agree with Mr. Elmendorf that you will 
have cases where prevention can improve quality but it may not 
reduce cost and then you have cases where it would reduce cost 
a little bit but not as much as the investment. So you need to 
have a very focused effort driven by science.
    Ms. DeGette. And you have to decide your criteria because 
is your sole criterion saving money or do you have the 
additional criterion of improving quality of life. I completely 
agree, but would you think that would be an appropriate 
consideration, prevention as we develop----
    Mr. Hackbarth. Oh, absolutely, guided by science as you 
have described.
    Ms. DeGette. Thank you very much.
    Mr. Pallone. Thank you.
    Mr. Burgess.
    Mr. Burgess. Thank you, Mr. Chairman.
    Glenn, always good to see you and glad you are back here in 
front of our committee. It seems like old times. Let me just 
concentrate on a few things that you listed in your list of 
where we can see savings. I was really encouraged by the 
physician group practice demonstration project at CMS and I 
hope that has not died a natural death with the change in helm, 
but really that seemed to be--you look at the 20 percent of the 
people that account for 80 percent of the costs and that really 
seemed to follow the old Willie Sutton's law: you rob the bank 
because that is where the money is. That is where the money is 
in the Medicare system. I am concerned and I think I heard both 
of you talk about increasing dollars to primary care 
physicians, a good thing, but any time--since we are in a 
purely transactional environment, any time we increase dollars 
to one, we are probably taking it from somewhere else. Is that 
a fair assumption, that this would be a redistribution across 
providers?
    Mr. Hackbarth. That has been MedPAC's recommendation, yes, 
that it be a budget-neutral change, and the reason that we have 
taken that approach is that as you know, total expenditures on 
physician services have been growing quite rapidly. As that has 
been happening, there has also been a shift in the distribution 
of dollars away from primary care services towards more 
subspecialty services and imaging and the like, so there has 
been a shift that we think needs to be addressed in the name of 
enhancing our primary care system. We don't think the problem 
is too few dollars in the pool, just how they are distributed.
    Mr. Burgess. And along that line, and of course, we always 
hear that removing the cost to administer drugs and imaging 
would be some way to provide perhaps more equanimity in that 
situation. Is that possible to do that in the current 
structure?
    Mr. Hackbarth. Are you talking about under the SGR, how the 
SGR is calculated?
    Mr. Burgess. Yes.
    Mr. Hackbarth. We have not really looked at the issues, not 
taken a position on the issue of whether drugs ought to be 
included. We think that those are more issues of budget 
baselines than they are of health policy.
    Mr. Burgess. Let me ask you a question on--because you had 
talked about readmission, and that is one of the things that 
makes me enthusiastic about the process but also frightens me 
at the same time because of some of the things I have seen us 
do in the past that tend to be heavy-handed. Now, under the 
physician group practice demonstration project, a patient is 
hospitalized for decompensation of congestive heart failure. If 
they are given as they leave the hospital the appointment to 
see their primary care physician within 5 days, the risk of 
readmission really plummets, and if they are simply given the 
instructions to see their primary care doctor within 2 weeks as 
opposed to actually having an appointment made, the readmission 
rate is significant and those readmissions are terribly costly 
readmissions. So that seems to me to be a good thing. But if we 
simply say that we want you to take care of everything that 
might happen, or this is the way it might be interpreted by the 
hospitals and the physicians, we want you to take care of 
everything that might happen within the next 30 days because we 
are not going to pay you anymore, this hospitalization is going 
to be it. Are we perhaps going to tend to drive utilization in 
a way that we hadn't intended?
    Mr. Hackbarth. Well, we too, like the physician group 
practice model, that is what we refer to as accountable care 
organizations, and the ideal approach is to have aggregations 
of clinicians and providers with a broad target and then give 
them freedom to allocate resources in the name of both 
improving quality and reducing cost, just as you described it. 
The challenge that we face in Medicare is that not everybody is 
prepared for that format. Not all physicians are part of large 
group practices or even involved in, you know, a hospital IPA-
type format as is used in Connecticut in the demo. And so we 
need tools to apply in situations where the group practice 
model doesn't fit.
    Mr. Burgess. Correct, and that is why of course it was 
important to do it as a demonstration project and I understand 
from the 10 institutions that participated, there was probably 
one that was not actually institutionalized as an IPA. It was 
more of a group without walls and organized through the 
hospital structure. But at the same time, these were groups 
that were then allowed to, gain sharing is perhaps not the 
right word but if they met a certain threshold, they certainly 
were rewarded for meeting that threshold and that incentive to 
drive behavior. You don't want to pay doctors not to see 
patients because that it what we will do, we will not see 
patients, and then you get into the problem of his staff not 
being able to find a primary care doctor. That was the whole 
problem with the staff model HMO and a fully capitated 
environment. We don't work. We made all our money at the 
beginning of the money. Why struggle? You close the doors and 
take the phone off the hook. That is the way to make money in 
that environment. Doctors are not stupid. We will do that if 
that is what you pay us to do. We have to be paid based on 
productivity as a general rule.
    Mr. Hackbarth. So our goal, which I think aligns with 
yours, is to find ways to align physicians and hospitals and 
other providers to do the right thing, which is what they want 
to do, better quality at a lower cost. Our payment systems get 
in the way. So what we are trying to do is put some pressure on 
some places like readmissions, open some doors for people to go 
through with new opportunities like gain sharing and bundling 
of hospital with post-acute services and say collaboratively 
physicians, hospitals work together, reduce the cost, improve 
the quality and share in the benefits with the Medicare 
program.
    Mr. Burgess. I think the group practice model is on the 
right track and I think sharing in the savings that occurs is 
on the right track. We will save bundling for another day 
because I am not sure I am ready to go there yet. Doctors and 
hospitals and insurance companies do not trust each other at 
the present time.
    Thank you, Mr. Chairman.
    Mr. Pallone. The gentlewoman from the Virgin Islands, Ms. 
Christensen.
    Ms. Christensen. Thank you, Mr. Chairman.
    I will begin with Director Elmendorf as well, and I am 
going to follow up, try to follow up on Congresswoman DeGette's 
question. I was reading in Congress Daily today that there is a 
coalition of high-profile organizations on the Hill arguing 
that requiring offsets within a 10-year budget window does not 
look at the full picture and it becomes a barrier to doing 
things that we are going to have to do if we are going to 
reform health care as well as eliminate health care 
disparities. Because you don't see the benefits, you don't see 
the savings inside of that 10-year window necessarily. It takes 
a longer period of time. So what can we expect from CBO? Will 
this continue to be a barrier? Can we go outside of that 10-
year window and budget for the savings that would be realized 
both to fix the broken system that we have, to eliminate the 
health care disparities so that we won't be behind every 
industrialized nation and some developing ones for health 
status?
    Mr. Elmendorf. So Congresswoman, CBO will continue to 
provide detailed estimates of the effects of health reform 
proposals over the 10-year window. We will try where the 
evidence allows to offer our qualitative judgment about the 
effects of certain reforms on spending beyond that. I 
understand your concern that there can be larger savings down 
the road that aren't captured. Unfortunately, we don't have the 
evidence or the modeling capacity to play out a whole set of 
specific reforms and how they are going to matter 10, 20, 30 
years down the road. As I said in my remarks, many analysts 
agree on the general directions of policy but there is much 
less consensus about whether the particular approach should be 
bundling, should be accountable care organizations, should be 
penalties for readmission rates and things like that, and that 
is the limits of the evidence as it currently exists.
    Ms. Christensen. We look forward to continuing this 
conversation and seeing if we can find a way to address the 
costs that will have to be--the money that will have to be 
invested to get to where we need to be.
    Mr. Hackbarth, we all know that Medicare plays a key role 
in our health care system and there are several very strong 
aspects of the system but there are still some areas that need 
work. We found that reimbursement rates within a city vary by 
zip code, for example, and we know that some of the proposed 
changes to Medicare like those to Medicare Advantage and some 
of the ESRD reimbursement provisions sometimes have a negative 
impact on some populations, largely African-Americans and other 
communities of color. So we make changes to programs, is MedPAC 
taking this into consideration and looking for ways to reassure 
us or to assure us that we are not inadvertently cutting access 
to needed services to some populations?
    Mr. Hackbarth. That is an area of increasing focus for us. 
For a number of years now, 3 or 4 years at least, we have been 
looking in particular at ESRD, the dialysis program, because 
that is so important to African-Americans as well as others, 
and looking for any indication that changes in that system have 
eroded repeated access for African-Americans. In addition, we 
will be looking at the issue of access to kidney transplants 
where there are some disparities in terms of access. So this is 
going to be a focus of ours. We have also tried to look more 
broadly at differences in access to physicians and satisfaction 
with access to physicians. We found some issues.
    Ms. Christensen. So you are looking at it. The bundling 
does bother me, and I believe as a physician and having been a 
medical director that information will change behavior. You are 
going to make the information public. Hospitals are not going 
to want to have a negative report given to the public. And I 
believe also that once hospitals are better reimbursed, which 
they would be when everyone is covered, they will be able to 
provide the better services, so why a bundling pilot? It is 
going to put doctors and hospitals in competition, you know, in 
ways that--I just don't see why you think that would work.
    Mr. Hackbarth. Well, our goal is the opposite, not to put 
them in competition----
    Ms. Christensen. Or why it is needed.
    Mr. Hackbarth [continuing].--But to put them in 
collaboration with one another. In the current system where 
they are paid separately, there is often competition, and as 
Dr. Burgess indicated, unfortunately some places, some open 
conflict and hostility. We think that they need to be engaged 
working together collaboratively to improve care, and we think 
bundling could be a step in that direction.
    Ms. Christensen. I agree, but I think--that they need to 
work collaboratively. I just think there are other ways to do 
it. Thank you.
    Mr. Pallone. Mr. Gingrey.
    Mr. Gingrey. Mr. Chairman, thank you.
    Chairman Hackbarth, you had mentioned in your testimony, 
your written testimony on page 7, regarding payment system bias 
and the fact that many physicians who are subspecialists who do 
a lot of procedures are causing a problem in our manpower, 
physician supply, particularly in regard to our primary care 
physicians. I know we have one sitting here in the audience 
from my State of Georgia, Dr. John Antalis, a former president 
of the Medical Association of Georgia, who is a primary care 
physician, and, you know, I think about him. I think about my 
colleague, Donna Christensen, who is also a family doctor. Do 
you feel like this patient bias system may be a factor 
contributing to the various physician and nursing shortages we 
are seeing across the country, and what would you recommend 
that we do about that possibly in regard to payment incentives?
    Mr. Hackbarth. Well, first of all, I want to emphasize that 
physicians are responding to the system that we created and the 
incentives that we create speak volumes about what kind of 
activities we value, and over a period of years that means more 
subspecialization, more high-end imaging and the like. So I am 
not blaming them for what they are doing. They are responding 
to a system that we created.
    In the interest of a high-performance system, though, we 
need to redirect those signals that we are sending, and as I 
said earlier, we do think that payment deficiencies is one 
reason for the growing problems that we have in primary care. 
It is not the only reason by any stretch but we think it is a 
very important reason, and so we need to go about changing that 
and we have made a series of recommendations about how to 
change primary care payment.
    Mr. Gingrey. Well, certainly, Chairman, that makes sense to 
me, and as a practicing physician for 26 years, as an OB/GYN 
specialist, I concur that we need to do something about that, 
to increase the number of primary care physicians and 
opportunities for medical homes as we have talked about for all 
of our Medicare recipients.
    Director Elmendorf, let me shift to you for just a second. 
You talked about in your testimony in response to some of my 
colleagues' questions in regard to 10-year window and that, you 
know, a lot of times you can't really measure or see the 
savings that are going to occur from various and sundry things 
that we have done, and it made me think about Medicare 
Advantage or Medicare Plus Choice, and the fact that we are on 
the verge if we follow the President, well, indeed in the 
economic stimulus package and what he plans for health care to 
create that reserve account so we can do all of this reform of 
health care to take, I think it is $178 billion out of the hide 
of Medicare Advantage. Now, I don't know whether Medicare 
Advantage is working the way Congress originally intended for 
it to work but certainly it was my understanding that the 10 
million people that have signed up for Medicare Advantage are 
getting more than just episodic care. You know, they are not 
just going when their head hurts or their tummy hurts or 
whatever. They are getting a good annual physical, they are 
getting a call back from a nurse practitioner to make sure they 
are taking their medication, and clearly that is going to cost 
a little bit more. Now, I am not sure it is worth 15 percent 
more and I know that is a concern of Congress, but it is worth 
more in that you are investing in something and you are 
investing, I would think, that in the long run, in the final 
analysis that at the end of life, let us say, we don't spend 
beaucoodles of money on those who have been under Medicare 
Advantage because they are healthier, they have taken care of 
themselves and the doctors have taken care of them in a better 
way. We can't capture that. We can't score that dynamically, 
unfortunately. But I think at the end of their lives when you 
look at it and compare the cost of fee for service versus 
something like Medicare Advantage, there may be a tremendous 
savings, and we are on the verge of gutting that. Would you 
like to respond to that in the few seconds that I have got 
left?
    Mr. Elmendorf. I think you were right that the patients in 
Medicare Advantage who are under the care of managed care 
organization are receiving more-integrated, more-coordinated 
care than they might otherwise. Not all patients in Medicare 
Advantage are being seen by HMOs, though, for example. There 
have been patients under Medicare Advantage who are going 
through private fee-for-service plans and Congress has taken 
action to reduce the number of people in that category, and 
that is the point that Mr. Hackbarth has made before about the 
importance of not just paying more for patients to receive 
essentially the same kind of care in Medicare Advantage, 
because some have been in that category. The others who are 
receiving this more-integrated care, I think there are some 
advantages to that. I think most analysts though would be 
concerned about the point that you alluded to which is that the 
reimbursement rates have risen relative to costs over time and 
those patients are now receiving a variety of additional 
benefits that are of some value to them but are costing 
taxpayers more per patient than would be the case in the 
traditional Medicare program.
    Mr. Gingrey. Thank you.
    Mr. Chairman, thank you for your patience in letting us go 
a little bit over. Thank you.
    Mr. Pallone. Thank you.
    Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman. Thank you all for 
being here.
    I wanted to pick up on this discussion of the primary care 
providers again because to me, in many respects, that is sort 
of the elephant in the room. In other words, I have seen some 
statistics that say that if we were able to provide coverage 
for all those who don't currently have it, that in order to 
meet the demand that represents, we need another 60,000 primary 
care physicians. That is not even talking about nurses and 
other primary care professionals. So that is potentially a new 
train wreck that is coming. We talk a lot, and much of the 
debate and much of the focus is over the coverage side of this 
discussion. Is it going to be hybrid public-private, is it 
going to be Medicare for all, is it going to be single payer, 
is it going to be employer based, et cetera. But if we make the 
assumption for the moment that we will achieve universal 
coverage, then the question of who is going to provide that 
care becomes critical, and there is a kind of chicken-and-egg 
dimension to this so if you could speak to that just a little 
bit more and maybe comment on the notion of having the design 
of the insurance be driven by the kind of providers that we are 
trying to bring, you know, if we build it, then will come kind 
of concept. Because I can make the argument that we should 
choose the insurance model based on which providers--I am going 
to talk through this. We should pick the insurance model based 
on wanting to get more primary care providers so what will 
incentive them to do that. You can wait until that stops.
    Mr. Pallone. I am sorry. I don't know exactly what is going 
on. Hold on. Does somebody have their phone on? I think it is 
over. All right. We will continue.
    Mr. Elmendorf. On your first point, Mr. Sarbanes, that if 
we move towards universal coverage we may increase the demands 
on an already weak primary care system, I think that may well 
be true. Dr. Gawande can maybe talk about Massachusetts where 
anecdotally, at least, I have heard that that become something 
of an issue. We think there are several responses appropriate 
within Medicare, and if you want, I can talk in detail about 
those but in general there are ways of increasing the payment 
for primary care and changing the method of payment so that 
primary care practices can afford the infrastructure that 
allows them to provide appropriate coordination of care. 
Realistically, no matter what we do in the payment side, even 
if we did all of these things tomorrow, the increase in the 
primary care physicians is going to occur slowly over a period 
of years, and that is going to be a real challenge for us. I 
think practically speaking, what we are going to have to do is 
expand our use of some non-physician clinicians, advanced-
practice nurses, for example, so that we can provide basic 
primary care to a broader population. I used to be the CEO of 
Harvard Vanguard Medical Associates in Boston, a very large 
group practice, that made extensive use of advanced-practice 
nurses to improve access to primary care, and I think as a 
national health care system we are going to need to do more of 
that to deal with this issue as well.
    Mr. Sarbanes. I think one way to approach this health care 
reform is to figure out what elements of everybody's proposal 
are in common and that is where the final design will be in 
terms of critical components, and I haven't heard any proposal 
with regard to coverage or provider or anything else that 
doesn't include the notion that we need more focus on primary 
care. So because it is going to take so long to get the 
pipeline going, we probably need to bet now that that need is 
going to be there regardless of what we design and get going on 
it.
    Mr. Hackbarth. Absolutely. There is a real urgency to move 
quickly on that front.
    Mr. Sarbanes. Thank you.
    Mr. Pallone. Thank you.
    The gentleman from Illinois, Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman.
    I want to congratulate my colleague, Mr. Sarbanes, too. I 
think that was a great line of questioning, something I hadn't 
considered, so I thought it was good. I think if we adequately 
compensate and then I would say protect physicians. I come from 
a big litigious State and medical liability issues really drive 
people out and my family practitioner, who delivered my three 
boys, no longer delivers babies because of--and we have talked 
about that but in comprehensive reform, especially if the 
government takes a larger role in our community health clinics, 
there is liability protection there, I mean, the programs that 
are funded and so that--some people aren't going to want to 
debate this but it is a way to incentivize people to be in 
these professions, to give them some security. We still want 
people to get a redress for their grievances, especially if 
they are harmed, but that has got to be, I would think, a 
very--and I didn't think about that until the line of 
questioning, so I do appreciate that.
    I would also--in an opening statement, my colleague from 
California listed the things, well, why don't we do this, why 
don't we do that. I would ask the question, why do people from 
industrialized nations that have national health care, why do 
they come here for catastrophic care? Or I would ask another 
question. Why are all the major medical advances around the 
world, whether it is in devices or pharmaceuticals, why is that 
done here for the most part? There is something that is still 
going right in this country that is helpful to health and 
lifestyle and longevity that we just want to be careful that we 
don't disregard.
    To that point, I think the thing that I fear most is a one-
payer system, and the OMB Director Orszag talked about no one 
is talking about using cost information to deny needed care to 
beneficiaries and that patients need to be protected from being 
denied what they need. This comparative effectiveness debate 
that we have now entered into raises, maybe not intentionally 
but raises that concern that we are going to use cost, and I 
will let you answer. I will just tell you the story that I 
used. I was at a local university talking to nurse 
anesthetists, and it was a pretty big group and we were talking 
about a competitive model versus a one-payer system and they 
were asking about it. Readily upfront, I am highly biased in 
opposition to a one-payer government-run system and I am a 
market-driven individual, so I wasn't trying to deceive them so 
I said here is an example and I talked about some of the 
industrialized nations having formularies and if you don't fit 
that formula, you get denied care. And then I get a hand raised 
in the back of the room. I used New Zealand as an example. And 
the lady stood up and she said I am from New Zealand, and I 
thought I am either right or I am busted. And she told me that 
her father had to wait for kidney stone surgery for 8 months. 
Now, for those of you who have had kidney stones knows that 
that was a terribly long wait. I guess my question would be, do 
you share these concerns as we move in this direction on a 
debate on a national policy?
    Mr. Elmendorf. So Congressman, I think many analysts worry 
that our current system provides no reason for many providers 
and patients to think about whether extra treatments are cost-
effective or not. It is also quite fair to worry as you do that 
we could device a national health system in which costs would 
become the predominant criterion for what is provided or not. 
And that is why I think many analysts suggest moving in the 
direction of learning what works and providing incentives to 
take that knowledge seriously, but I think few analysts suggest 
that we should move to a system where one person in Washington 
decides who gets what, and one thing we will discover in future 
comparative effectiveness research, as has been discovered in 
past research of this sort, is that some procedures are very 
good for some patients and not very helpful for others.
    Mr. Shimkus. Can I follow up? And I don't want to cut you 
off but I want to--I am going to ask this of the second panel, 
defensive medicine and liability protection, will that be part 
of the cost-effectiveness analysis?
    Mr. Elmendorf. I think the consensus of researchers is that 
defensive medicine is a factor but not a particularly large 
factor in the decisions of providers.
    Mr. Shimkus. But do you think we will see that in this 
cost-effectiveness analysis? Will that be considered? I mean, 
we won't know until we get the stats, and if this is an issue 
of trying to figure out the cost, you would think that that 
would be part of the variables.
    Mr. Elmendorf. So I think the most direct connection is 
that currently if one is facing a patient with a particular 
problem and there is very little evidence about what to do, 
then there can be reason for the provider to do the most that 
can be done and that can be expensive, whereas if there were 
clear evidence on what worked and what didn't, that would help 
providers avoid having to prescribe everything to protect 
themselves. So in that sense I think having the knowledge can 
reduce the amount of defensive medicine that is practiced, 
apart from the liability issues that you have raised as well.
    Mr. Pallone. Thank you.
    Mr. Shimkus. The chairman is going to let me----
    Mr. Pallone. You wanted Mr. Hackbarth to answer the same 
question?
    Mr. Shimkus. Yes.
    Mr. Hackbarth. I was going to pick up where Mr. Elmendorf 
left off. Ideally what we do is develop scientifically based, 
evidence-based standards of practice based on the best 
available evidence. It seems to me that if you have that 
information, then it can provide some comfort and protection to 
physicians that practice in accordance with that guideline, 
that standard of practice. When we are information starved, as 
we are so often now, the response is well, do more. More is 
synonymous with better because we don't have sufficient 
evidence to show otherwise. That is the refuge. We need to 
create another refuge, if you will, so more isn't always the 
response to uncertainty.
    Mr. Pallone. Thank you.
    Ms. Schakowsky.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    You know, we just heard an anecdotal story about somebody 
who had to wait for kidney stone surgery, which my husband 
having had them, that certainly is a problem. But you know 
what? There is also millions of people insured as well as 
uninsured who wait a lifetime for the care that they need in 
this country because we do ration health care, and by and large 
that ration card is a dollar bill. You can shake your head 
but----
    Mr. Shimkus. If the gentlelady would yield, everyone who 
needs care gets it because when they go into the emergency 
room, the hospital has to serve them.
    Mr. Pallone. The gentlewoman I assume has yielded to the 
gentleman?
    Ms. Schakowsky. No, I am going to take back my time because 
the myth that everyone in this country receives the care they 
need has got to be dismissed because that is not true. Over 
half of Americans, I said in my opening statement, the data 
shows actually have gone without or postponed health care 
because they can't afford it. That is just a scientific fact. 
We have looked at the American people and that is just true.
    But here is my question. First of all, I wanted to ask Mr. 
Hackbarth, you talked about the percent of readmissions in 
hospitals. What was that percentage?
    Mr. Hackbarth. About 18 percent of Medicare admissions are 
followed by a readmission within 30 days.
    Ms. Schakowsky. OK. I just wanted to have that. I wanted to 
get back to this model. You know, we do have a single-payer 
health care system in Medicare right now for elderly people and 
again, I had said before, that this is a widely accepted and 
much liked and it still has holes on it, and I wanted to ask 
about what are those holes. We have heard Medicare Part D 
lauded as something that has worked so well but certainly in my 
office, we get people all the time confused over those many, 
many options. Senator Durbin and I and others in the House have 
introduced legislation that would create a public 
pharmaceutical option under Medicare. I wanted to get comments 
from both of you on whether or not--and that that option would 
be able to negotiate with Medicare for--with the pharmaceutical 
companies for lower prices, hopefully to fill the donut hole. I 
wanted to get your opinion on that.
    Mr. Elmendorf. So referring to drugs specifically, CBO's 
judgment is that the private providers of the drug benefit do 
negotiate for low prices. They negotiate with the threat of 
moving drugs off of their formularies or charging higher prices 
for their use and that there is no reason to expect that a 
public program would do better unless it were prepared to be 
tougher in not covering certain drugs. If it were tougher in 
writing its formulary, then it could avoid--then it might 
negotiate for lower benefits, but that would be the crucial--
lower drug costs, that would be the crucial factor.
    More generally in health care reform, when people talk 
about public plans competing with private plans, I think 
designing a system in which a public plan could compete on a 
level playing field is extremely difficult. It raises issues of 
what the providers are paid. It also raises issues of 
selection, of patients across plans and how sick they are. It 
is issues about how the financial risk is dealt with.
    Ms. Schakowsky. Are you saying whether a public plan could 
compete with a private plan? Who would be disadvantaged? Which 
would be disadvantaged?
    Mr. Elmendorf. I am saying that if the objective is to have 
them complete on a level playing field----
    Ms. Schakowsky. Well, I know. Who would be disadvantaged? 
For whom would it not be level?
    Mr. Elmendorf. Well, under current payment rates, then a 
public plan would be less expensive because--than the private 
plan, the reasoning from the Medicare example, where the 
government does push down reimbursement rates. That would be a 
benefit for the public plan. The issue is, it depends on how 
you design the system. So there are risks associated with 
running health plans. If the public plan didn't have to insure 
itself against that risk, it was just the taxpayers holding the 
bag, then that would be an advantage for a public plan relative 
to private plans that have to charge enough to cover that risk. 
It depends on how it is designed. If public plans ended up with 
sicker patients than private plans because perhaps they managed 
benefits less tightly, that would be a disadvantage to public 
plans relative to private plans. So it is a set of parameters 
that you and your colleagues will pick that would affect 
whether a public plan is advantaged or disadvantaged.
    Ms. Schakowsky. Does it matter that the CEO of Cigna in 
2007, for example, made $22.7 million, a cool $23 million more 
than the President of the United States in a year, and the 
kinds of overhead costs that private plans have as opposed to 
Medicare, for example?
    Mr. Elmendorf. Yes. So administrative costs are including 
the costs of paying executives are another fact that I forgot 
to mention. Medicare does have lower administrative costs----
    Ms. Schakowsky. For profits for shareholders.
    Mr. Elmendorf [continuing.]--And large employer returns. 
That is right. But remember, the profits for shareholders, part 
of that covers the risks that I have just discussed. It covers 
the cost of the capital that goes into managing these plans. So 
some of that--that is why I said, it depends importantly on----
    Ms. Schakowsky. How is it--my time is running out. How is 
it that the United States of America pays 40 percent more than 
the closest country for health care, causing the President of 
the United States to say I think in response to something that 
Mr. Pallone said, are you saying that there is not enough money 
in the system currently to cover everyone. Are you saying there 
is not enough money in the system right now to cover everyone?
    Mr. Elmendorf. Oh, no. I didn't say anything like that. 
What I said in my testimony, and is the position of CBO, is 
that covering everyone would be expensive, that there is also a 
lot of dollars spent in the health care system for which we are 
getting a little or no improvement in health, but that rooting 
out those dollars without also reducing some services that do 
improve health is challenging, and we talked and I think most 
people agree about the importance of information, the 
importance of incentives to use that information, but exactly 
how to do that and how to do that in the short run is not so 
clear. Again, the direction is clear but how effective that can 
be, whether that can save enough money to cover the increase in 
health care that would be delivered to the currently uninsured 
is much more difficult.
    Mr. Pallone. I am going to take 30 seconds here as the 
chairman. What the President actually said in response to my 
question at the summit, and I think, you know, it hasn't been 
laid out here, is that, you know, you can have a lot of cost 
efficiencies and that can contribute to expanding coverage but 
he said that you do need a lot of up front. In other words, 
those savings may occur as the reforms kick into place but 
initially you are going to need a new source of revenue up 
front because a lot of things that we are talking about have 
large costs up front and then the savings come later. So, I 
mean, that is one aspect of this that we have to think about. 
But I want to thank the gentlewoman.
    Mr. Rogers.
    Mr. Rogers. Thank you, Mr. Chairman.
    Thank you both for being here today. You said some things 
made me scratch my head a little bit and I think we are kind of 
dancing around some pretty important issues here because we 
don't want to use the words that we know inflame the fears of 
most Americans, and that is rationing. And I have to tell you 
that as a Michigander, you know, we can see directly the impact 
of a government-controlled system for health care in Canada, 
and as one Canadian told me, that if you break your leg in 
Canada you have the best health care ever. If you get sick, it 
is the worst in the world. And I think what they are talking 
about is sustaining that system of health care is very 
difficult, and I find it interesting that there is a great 
number of our surgeons who do cash business with Canadians on 
weekends for hips and knees because the system in Canada just 
rations care for elderly, and elderly starting in their 60s.
    And you said, Mr. Elmendorf, a couple of things that I 
found interesting. You talked about in this government-run plan 
that they would hunt for bargains and do those kinds of things 
and you said and in order to work they would limit what 
coverage they had and then later in answering questions you 
said in order for this to work there had to be some limitation 
for maximum effect on costs. And then I want to go back to 
something you said in your testimony. You were talking about 
the comparative effectiveness language would ultimately have to 
change the behavior of doctors and patients, and if they are 
basing that on information available in a doctor's decision 
between a doctor and a patient, I am for it. That is a great 
idea. But later you say bringing about those changes would 
probably require action by public and private insurers to 
incorporate the results in their coverage and payment policies. 
You are quite clearly advocating for rationing care through 
what is covered, and here is my concern. Eighty-five percent of 
Americans have coverage. We often talk about the 15 percent. 
And it seems odd to me that we are going to say because we have 
this 15 percent that we should figure out a way to get access 
to health care, we are going to start rationing care for the 
other 85 percent who enjoy some pretty good health care in the 
United States. And maybe you can help me untwine that in both 
your oral comments and your written testimony.
    Mr. Elmendorf. So first let me be clear. I am not 
advocating for anything. CBO does not make policy 
recommendations. So nothing in the testimony or in my answers 
to questions says that Congress should proceed certain ways on 
policies. What my testimony does say and which I stand by is 
that more information by itself is not going to have as large 
an effect on--just providing information will not have as large 
an effect on practice patterns and on costs as creating 
incentives for providers and patients to make use of that 
information. And I think that is consistent in what is written 
here and the answers I have given to questions.
    Mr. Rogers. OK, but it says you require action to 
incorporate the results of coverage. So when you say 
incentives, are you saying they should build that into the 
coverage, meaning they should restrict certain----
    Mr. Elmendorf. I am not saying they should. I am saying 
that the rising costs of health care, which are linked to the 
increasing utilization of expensive services, that that rate of 
increase would be changed more if private insurers or public 
insurance plans created incentives for providers to take 
account of information about what was and was not most 
effective, and some of that information will be able to get 
counted anyway but not as much if there are financial 
incentives.
    Mr. Rogers. I think we are still talking around it but you 
say that you are not advocating, even though I would say 
``probably require'' sends a pretty clear message where you are 
going there. But in the other countries, and we have seen it in 
the U.K., breast cancer, kidney cancer, Alzheimer's and hip and 
knee replacements happen to be a big one. I think in the U.K. 
they just had one as young as 62 was denied care and coverage 
for a knee replacement. How do we avoid that? I mean, I think 
if we were going to be honest with Americans, we have to tell 
them, hey, this is what is coming because the only way we can 
fix the 15 percent problem is, we are going to take it away 
from the 85 percent who have coverage. I just think we are 
smarter, better, more innovative than that. I think there is a 
way to do that. But how do you stop that from happening, given 
your testimony today?
    Mr. Elmendorf. So let me just be clear one more time. The 
testimony says to reduce health spending, results of 
comparative effectiveness would have to be used in certain 
ways. Bringing about these changes would probably require--
again, it is not a statement of CBO's preferences. It is the 
chain of logic of what would be required to affect the path of 
health spending.
    I think the crucial point that many of us have made here 
today is that a large share of U.S. health spending does not 
seem to be improving health. You can look at--and one 
particular piece of evidence for this is the geographic 
variation in spending under Medicare that does not appear to be 
correlated with quality of care, as judged by the measures that 
are available. That holds open the possibility, I think the 
very important possibility, that more evidence of what works 
and incentives to use it could squeeze out that money. It is a 
lot of money, by some estimates $700 billion a year. As I noted 
before, doing that without affecting care that does improve 
health is not an easy task to accomplish, even if analysts 
generally agree on some other plausible directions. So I think 
that holds open the possibility that we can reduce care that is 
not very useful and save a lot of money through doing that.
    Mr. Rogers. That I understand. I just--I think your words 
sometimes--you were kind of parsing around what you are trying 
to say and you are trying to say in order for it to work, you 
have to limit coverage in the future under government-run 
plans. I get it. As a matter of fact, you also said that under 
a government plan, they would push down reimbursement. Well, if 
you have ever had a meeting with a medical provider in the last 
month and a half, and I am sure you have, they can't get the 
reimbursement they need today, and it is having this inverse 
impact on private insurance companies trying to be asked to 
hold the burden of the government-run plan that pushes it down. 
So you are going to destroy competition in the market. I don't 
know how you think that works. And I don't know about my 
colleagues, we are getting calls in my office, people are in a 
panic because in cancer care reimbursement, where I think that 
you all have completely missed the boat, they are calling and 
saying they are not taking any new patients under Medicare 
because the reimbursement rates are wrong and they lose money. 
So to start out the premise that the government is going to 
push down reimbursement rates as a way to control costs and 
somehow a private plan is going to survive, it defies the logic 
of what is going to work in the marketplace. How do you 
reconcile that?
    Mr. Elmendorf. Again, I am not advocating pushing down 
reimbursement rates. What I am saying is that under the current 
Medicare system, Medicare pays less to providers than private 
payers pay. A number of options that we have considered, a 
number of MedPAC has recommended in fact, but we don't make 
recommendations, a number of those options that have been 
discussed would reduce payment rates. In fact, under current 
law, as you know, physician payment rates under Medicare will 
drop very, very sharply this year. The evidence suggests that 
the shifting of costs to the private sector is not as acute as 
one might worry, that in fact the private insurance companies 
negotiate with the providers and achieve the rates of 
reimbursement that they can. To the extent that Medicare and 
even more so Medicaid pays less to doctors and to hospitals, 
that is taken out mostly in some combination of reduced quality 
or reduced amenities for those hospitals and doctors. I am not 
clear how much of that, though, as I said, spills over to the 
private sector.
    Mr. Rogers. I appreciate it.
    And just as a follow-up to Mr. Hackbarth, if we had had a 
government-run prescription plan under Part D, what would it 
have done to the competitive plans in Part D, in your 
estimation?
    Mr. Hackbarth. Well, MedPAC has never looked at that issue 
specifically. Of course, we have spent a lot of time looking at 
Medicare Advantage, which is a system where we have a public 
plan and private plans competing with one another, and there, 
far from the playing field being tilted in favor of the public 
plan, it has been tilted significantly in favor of the private 
plans. So in one real-world experience we have with this idea, 
the fears that well, the public plan gets favorable treatment 
has in fact not been the case.
    Having said that, you know, I am a strong believer that we 
need both strong public plans and private plans in our health 
care system. I have worked in both. I worked in what was then 
HCFA, obviously deeply involved in Medicare issues now. In my 
prior lives I have worked at premier HMOs. So I understand a 
bit about both. I think they bring distinctive strengths, 
different strengths, complementary strengths. On the one hand, 
Medicare is a public plan, as noted earlier, has low 
administrative costs, in part because of scale, in part it 
doesn't incur marketing expense and profit as discussed 
earlier. In addition to that, because of its size, it is able 
to command low prices. On the other hand, private plans have 
some advantages as well. They are more flexible than a 
government plan can ever be. It is easy for a private plan to 
change how it pays providers to better regard the sort of 
behavior that we have been talking about today. It is a 
cumbersome process for Medicare to make those changes. It 
involves legislation and regulation writing in CMS and the 
like. So private plans have more flexibility there. In 
addition, private plans have the opportunity to try to identify 
a select group of particularly efficient high-quality providers 
and direct patients to them, which is not feasible in a public 
program like Medicare.
    So you have two types of health plans potentially competing 
with one another, offering different things to Medicare 
beneficiaries. Some will like the public plan for what it 
offers, the free choice of provider and the like. Others might 
like Kaiser Permanente as an alternative. Rather than saying we 
want one or the other, I think we ought to be striving to build 
a system that has both strong public plans and private plans 
competing on a level playing field.
    Mr. Pallone. Thank you.
    Ms. Baldwin.
    Ms. Baldwin. Thank you, Mr. Chairman. One quick comment 
before I get to my questions. I know we have had a little of 
discussion about public plans versus private plans and the 
playing field, and even in the Medicare Part D context. I would 
draw attention to the fact that I think Wisconsin is the only 
State that does have a public plan in the Medicare Part D 
program called Senior Care. It was based on a pharmacy waiver 
that was granted prior to enactment of the Medicare Part D 
program. It is wildly popular to the degree that on a 
bipartisan basis, every member of the Wisconsin delegation 
weighed in to try to keep that program in existence as the 
Medicare Part D program was phased in. And I think it would 
provide an interesting analysis for some of the--you know, to 
see whether some of the comments we have been hearing really 
have a basis or not.
    Chairman Hackbarth, I wanted to explore with you and have 
you talk a little bit about the value of demonstration 
projections as a way to go from current payment systems to 
perhaps testing some of the recommendations that MedPAC has 
made for reform. Congress, it seems, has funded through 
Medicare legislation for years demonstration projects such as 
the physician group practice demonstration or the premier 
hospital demonstration yet it seems like we fund those projects 
and don't insist that they are replicated elsewhere or expanded 
on a much more broad scale. I am curious about their value to 
inspire confidence that new models of payment will achieve 
desired results and whether we ought to be looking at more. 
Please comment.
    Mr. Hackbarth. I worry about this a lot, and more and more 
over time, and I think it is an issue that MedPAC is going to 
try to think through systematically, but let me offer some 
personal thoughts. We have got to make a lot of payment changes 
for all the reasons that have been discussed today. The changes 
that we need to make are sometimes operationally complex and 
uncertain in terms of their effect on cost and quality and so 
it stands to reason that we may want to do tests of them first. 
The fear that I have about the process that we have been using 
is that often the tests are small and so our ability to detect 
meaningful results is compromised. They are small projects that 
run for a few years and we are trying sometimes to affect 
things that will only materialize over a longer period of time. 
There is almost a bias in the design to finding no effect, and 
then we throw out the idea and say well, that didn't work and 
we will go on to something else when in fact it may be in part 
a function of the limits of the design.
    A second issue is that even when things work, and I think 
you were pointing in this direction, then they have to come 
back through the legislative process for further consideration, 
maybe modification, in ways that might undermine whatever 
success we found in the demonstration. And so it seems to me 
that Congress may want to consider ways that we can accelerate 
that process, do more of what we have referred to as pilots, 
large-scale tests that will be better able to find whether it 
works or not, and if it works according to pre-established 
standards, move immediately towards implementation as opposed 
to saying let us now go back through the legislative process 
again. So those are a couple ideas but I think we need to look 
at the whole process of innovation in payment and figure out 
where we can take out unnecessary steps and unnecessary 
resources and streamline that process. We have to get better 
way faster than we are right now.
    Ms. Baldwin. You and I have had a chance to talk about this 
sort of pilot idea before. You would conceive of that under the 
auspices of CMS, and are there good examples of that working in 
the past or is this something that we would need to authorize?
    Mr. Hackbarth. Well, the most recent example was in the 
disease management pilot. It was retitled, I think, Medicare 
Health Support or something like that, and the intervention 
that was being tested was having third-party disease management 
entities counsel patients, provide information, make sure they 
take their meds and whatnot. In that case, the intervention was 
pretty large scale. The test was pretty large scale and the 
finding was no effect, but the legislation had authorized the 
Department to go ahead and implement program-wide it if had 
worked, and they found that it didn't so we didn't go down that 
path. We need to do more of that. I think that is a model worth 
maybe tweaking some but exploring for future projects, and 
bundling is an example that we have suggested a pilot approach.
    Ms. Baldwin. Thank you.
    Mr. Pallone. The gentlewoman from California, Ms. Capps.
    Ms. Capps. Thank you, Mr. Chairman, and thank you both. I 
read your statements. I wasn't able to be here. But I have a 
question for each of you and I know I have 5 minutes, so we can 
base it accordingly. Both of you discussed the fact that we 
lack primary care coordination of and incentives for primary 
and preventive care.
    Mr. Elmendorf, you mentioned in your testimony that the 
potential effects of initiatives where we might invest more 
now, which preventive care is all about, and not realize the 
savings until later. This would be certainly true in efforts to 
offer preventive care services but right now the CBO doesn't 
even allow us to account for savings, and as I have often said 
about a field that I care a great deal about, which is 
preventive health care as a public health nurse, there is no 
special interest group pushing for preventive health care. And 
so my question is, how do we integrate into our proposals a way 
to realize that the savings later are what we are investing now 
for, and if you could give me your response to that. I have a 
different question for you, Mr. Hackbarth.
    Mr. Elmendorf. So Congresswoman, CBO does not just as a 
blanket matter ignore the health effects of changes in policy. 
The tobacco example was raised earlier as a case where we very 
specifically look at the effects of higher tobacco taxes or 
tougher tobacco regulation and try to trace that through to the 
effects on spending, for example, in Medicaid, the number of 
premature infants that are born and the costs of that. So we 
are very actively looking for evidence to help us trace through 
the effects of changes in policies on health and then on 
federal and on private health spending later. So in no sense 
are we putting those issues to the side. We are focused on 
them. The problems that I mentioned are lack of evidence in 
many cases or very long-run effects in many cases and it is 
just more difficult to trace things out over several decades.
    Ms. Capps. When you talk about tobacco smoking, it is a 
specific act, and when you talk about prematurity there is a 
specific entity surrounding it. I guess what I am talking about 
in the area of prevention some harder measures that may be more 
pervasive. Comprehensive health education for kids in a school 
curriculum is a subject dear to my heart. There is no--most 
school curricula have no place for it today, and if we were to 
target things like that, maybe not that specifically, where it 
is general education but targeted towards preventive health 
care, are you looking to us or to some study group to measure 
the impact of the input and then some kind of impact and 
outcome?
    Mr. Elmendorf. Yes. So we looked to outside researchers to 
guide us in the choices that we make in our estimating process. 
So on the tobacco front, there has been a wide range of 
research about the effects of tobacco on health outcomes.
    Ms. Capps. How about obesity and diet and exercise?
    Mr. Elmendorf. And I think that as well. I think on 
obesity, there are several steps of the prevention that have to 
work. So I think there is a good deal of evidence about the 
effects of obesity on health problems, less on how particular 
public policy changes will----
    Ms. Capps. So that is what we need to work on.
    Mr. Elmendorf. And that is what we look for.
    Ms. Capps. And I hope there are some outside researchers 
listening who will help us take the ball. I want to turn to 
another topic, but that is one that certainly needs to be 
explored further, and I appreciate what you have just said.
    Mr. Hackbarth, in your testimony you alluded to the 
declining number of medical students pursuing a career in 
primary care. This has been well demonstrated. Could you please 
expand on how you do the correlation between Medicare 
reimbursement structure and this decline? And if I could just 
roll all my questions together, you will understand. Could you 
offer some suggestions on how we would need to restructure a 
payment system to incentivize primary care and how this would 
then spill over to private payers?
    Mr. Hackbarth. So the first question, the relationship 
between payment levels and the decline in interest in primary 
care, I am not going to be able to point to particular studies 
off the top of my head but we could----
    Ms. Capps. Maybe you could get back to us if you know of 
some.
    Mr. Hackbarth. But certainly in talking to people involved 
in medical education including some of our commissioners and 
other people that I work with in other walks, what I hear from 
them over and over again is that medical students considering 
their career options often point to a couple things about 
primary care that make it unattractive. One is the income level 
relative to other specialties. Second is the demands, the 
lifestyle demands that they experience in primary care as 
opposed to some of the other specialties.
    Ms. Capps. Do you think the cost of medical school has 
anything to do with that? I am seeing a lot of people nod 
behind you.
    Mr. Hackbarth. Yes, it certainly could. Obviously if you 
are making a salary or an income that is two or three times 
larger you can pay off those medical school loans a lot faster.
    Ms. Capps. Exactly.
    Mr. Hackbarth. And so the cost of medical education is not 
equal for all specialties but it tends to be a real problem for 
people concerning primary care. As far as what to change, we 
have made three types of recommendations. One, you are familiar 
with the process of establishing the fee levels, the relative 
value of scale, and we have identified what we think are some 
problems with how that process works. In particular we think 
the process focuses more on things that are undervalued and 
increasing values than things that are overvalued and need to 
be reduced. The net effect of that bias that we have seen in 
the system is to hurt primary care fees.
    Ms. Capps. Exactly.
    Mr. Hackbarth. And some steps are being taken to reform 
that process that we are cautiously optimistic about. The 
second thing that we have recommended is what we refer to as a 
primary care modifier. It is basically a bonus for physicians 
and other clinicians who through their practice demonstrate 
that they are committed to primary care. So it would be a 
modifier. You would get your fee plus an increase of 5 or 10 
percent if you are designated as a primary care clinician.
    The third thing that we have recommended is a large-scale 
pilot of the medical home idea, a key element of which is to 
say for primary care because of the unique nature of the 
specialty, we ought to pay not just fee for service but on top 
of that pay a lump sum per patient to cover activities that are 
not included in the Medicare fee schedule, various counseling 
activities, following up on specialty referrals and the like, 
plus give primary care practices money to build some 
infrastructure including hiring staff that would allow them to 
more effectively coordinate care, especially for complex 
patients.
    Ms. Capps. Has that proposal----
    Mr. Pallone. We have got----
    Ms. Capps. I know. I would like to follow up on that topic 
with you.
    Mr. Hackbarth. I would be happy to talk more about it.
    Mr. Pallone. Thank you.
    The gentlewoman from Ohio, Ms. Sutton.
    Ms. Sutton. Thank you, Mr. Chairman.
    Mr. Hackbarth, I understand you may have touched on this 
already but I would just like to expand it a little bit. In 
your testimony you mentioned that one way to cut costs from 
Medicare is to reduce payments for hospitals with relatively 
high readmission rates for select conditions. You go on to say 
that we know that some readmissions are avoidable and in fact 
are a sign of poor care or missed opportunity to better 
coordinate care, the premise being of course that keeping 
readmission rates down is critical not only for saving cost but 
for quality care. I am interested though in what criteria would 
be used to deem a readmission as unnecessary or avoidable. I 
mean, how do we know that are only penalizing hospitals for 
readmissions that could have been avoided?
    Mr. Hackbarth. Let me just begin with a little bit of 
factual background. If you look at the rate of readmissions 
within 30 days, it varies according to the type of admission it 
is. The rate is higher for some things than others. Take a 
condition like congestive heart failure or chronic obstructive 
pulmonary disease, very common reasons for admission among the 
Medicare population. You see as much as a fourfold difference 
in the readmission rates between the hospitals that are the 
best and those that are lagging. So we are not talking about 
small differences here. There are quite large differences. Our 
approach would be to look at the readmission rate and set a 
threshold and obviously this is policy judgment about how high 
to set that threshold but you could set it at quite a high 
level so that, you know, you are basically hitting institutions 
that are way, way above the mean, way above the average in 
terms of this performance on this dimension and we believe that 
with appropriate incentives, and it could be structured 
different ways that by focusing people's attention on it, we 
can improve performance, and there are models that they can 
look to. There are institutions. Don Berwick's organization, 
the Institute for Health Care Improvement has really started to 
focus on teaching hospitals the things that they can do to 
reduce their readmission rates. So you want an incentive 
coupled with support information on how to improve.
    Ms. Sutton. Again, and this is an example in a way of those 
preventative measures we can take to reduce cost, what we don't 
want to do is though have an incentive that goes too far the 
other way and people who need to be readmitted aren't 
readmitted, so that is the balance there.
    Mr. Hackbarth. Absolutely.
    Ms. Sutton. Mr. Elmendorf, you know, I understand that in 
keeping with CBO's nonpartisan role you can't offer 
recommendations on any specific policy options, but do you 
think if we fail to enact some meaningful health care 
legislation in this Congress, that the cost to tackle reform 
down the road will be greater, and if so, in what specific 
areas do you foresee the highest increase of costs?
    Mr. Elmendorf. Congresswoman, I appreciate your 
understanding of the role of CBO in this regard. Many analysts 
would agree that the changes in the health care delivery system 
that would be needed to improve the efficiency of delivering 
care will be changes that cannot be made overnight. As I said 
in my testimony, there are decades of experience following the 
rules as they have been laid down, the structures, the policies 
that have been created, and a lot of ingrained habits, and 
devising the rights sorts of incentives, collecting the right 
sort of information and then letting the health care 
professionals make the improvements in what they do is a task 
that will take time. So the sooner the process is started, the 
more unnecessary and ineffective care can be avoided. The 
longer that policymakers wait to create the incentives and help 
to provide the information, the more unnecessary and 
ineffective will be given, and because the rising cost of 
health care imposes such a burden on the federal government and 
on the private sector, the more it will be necessary to make 
starker, more radical changes to balance budgets, to let 
employers and families pay for health care down the road, and 
starting sooner is a way to make the changes most based on 
evidence and the most effective way.
    Ms. Sutton. Thank you.
    Mr. Pallone. Thank you.
    Mr. Murphy.
    Mr. Murphy of Connecticut. Thank you very much, Mr. 
Chairman.
    It is curious to me listening to people talk on this panel 
and in other forums about how we talk about this issue of 
rationing as if rationing is some futuristic, catastrophic 
development that is going to happen in our health care system 
when we know it happens every day right now. Medicare makes 
decisions on who gets care and who doesn't, this Congress makes 
those decisions, and in particular private insurers make those 
decisions, sometimes based on medicine but other times based on 
cost. And so I wanted to bring one particular difference that I 
see between private plan management and public plan management 
to your attention and get your thoughts on it.
    When I was chair of the health committee in the Connecticut 
State Legislature, we brought in our insurers one afternoon to 
talk about a development that occurred in that the insurers had 
essentially stopped covering bariatric surgery across the 
board. Now, certainly there are a lot of abuses in bariatric 
surgery where it is more cosmetic than medical but we know that 
there plenty of circumstances in which it saves lives and 
reduces enormous costs later on in the system. The answer that 
we got from the insurers, not necessarily when they were all 
sitting together but privately was that because the average 
time that an individual spends on their particular plan is only 
two or three years before they switch to another plan, that it 
didn't make sense for them to pay for that enormously expensive 
surgery up front if they weren't going to bear the benefits of 
the person's extended health down the road. And it seems to me 
to be a particular handicap of a private insurance system where 
people now even if they stay with an employer or move from 
employer to employer are moving from plan to plan over a long 
period of time. It is a perfect example of the tragedy of the 
commons. If they all made the decision to cover bariatric 
surgery, they would all be benefited, but they don't because 
they are calculating that they are going to pay the cost and 
not receive the benefits.
    And so in evaluating whether we--the question to you, Mr. 
Hackbarth, is how do you look at that particular problem as you 
weigh the benefits of public or private plans? And then to Mr. 
Elmendorf, in terms of looking at how you score a new system 
that is reliant on the existing system of private plan 
management or an expanded public option, is that an issue that 
gets considered in your cost estimates?
    Mr. Hackbarth. A couple thoughts. Earlier I was talking 
about public plans and private plans, each have distinct 
advantages, and if you are a private plan and you are in a 
market where there is lots of turnover in your enrollee 
population, it would be surprising if they didn't make the sort 
of calculation that you were talking about; I am not going to 
have this patient in the long run, and that could influence 
their thinking. I don't think that is true of all private 
plans, however. There are some like Kaiser Permanente who take 
the long-term view, in part because they have pretty good 
stability in their membership but in part also because it is 
the right thing to do. So I wouldn't want to cast all private 
plans in the light of being, you know, calculating green 
eyeshade types that are just looking for short-term profit. 
Some are that way, others are not.
    The last comment I would offer on this whole subject of 
rationing is that it has been characterized, well the haves and 
the have nots. That is an important dimension of the debate but 
let us just focus on the haves for a second. I think we are all 
of two minds about the soaring cost of health care. If we are 
the patient or our loved one is the patient, of course is only 
natural that we want access to the latest, most innovative 
treatment that can help them get better. On the other hand, we 
are also all taxpayers and premium payers. You know, Mr. 
Elmendorf can correct me if I am wrong but I think this most 
recent economic expansion was pretty unusual in that the median 
income did not rise, and a big part of that was health care was 
taking the money out of people's pockets and a lot of Americans 
are very worried about that in addition to the possibility of 
losing their health insurance altogether. So, you know, I don't 
think this is a haves versus have nots. We have got finite 
resources as a society. We need to figure out how to use them 
most effectively to achieve all the things we want to achieve.
    Mr. Elmendorf. To the extent that a public plan would 
provide more services now that would save cost down the road, 
that is something we would try to incorporate in our estimates. 
As I have said a couple of times, it is very difficult to track 
all of those effects but certainly something we would try to 
have in mind. The only thing I would just add is that 
incentives can be created for private plans that would not 
otherwise do the sorts of preventive services that are 
important to do them. The government could pay for 
vaccinations, flu shots, things of that sort administered 
through private plans or through public plans so there are ways 
to work through the private plans to accomplish some of those 
objectives as well.
    Mr. Pallone. Thank you. I think that concludes our 
questions, so I want to thank you very much. First of all, you 
raised some major new ways of doing things and looking at 
things and all the cost efficiencies. It was very helpful in 
terms of our trying to craft health care reform. So thank you 
very much.
    I will ask the next panel to come forward. Let me welcome 
all of you and introduce everyone. Starting on my left is Jack 
Ebeler, who is vice chair of the Committee on Health Insurance 
Status and Its Consequences of the Institute of Medicine, and 
then is Alan Levine, who is secretary of the Louisiana 
Department of Health and Hospitals, and then we have Dr. Todd 
Williamson who is president of the Medical Association of 
Georgia, and finally Dr. Gawande--I hope I am pronouncing it 
correctly--who is associate professor of surgery at the Harvard 
Medical School and associate professor of the Department of 
Health Policy and Management at the Harvard School of Public 
Health. Again, I want to thank you all and we will have opening 
statements for 5 minutes.
    We will start with Mr. Ebeler.

  STATEMENTS OF JACK EBELER, VICE CHAIR, COMMITTEE ON HEALTH 
INSURANCE STATUS AND ITS CONSEQUENCES, INSTITUTION OF MEDICINE; 
  ALAN LEVINE, SECRETARY, LOUISIANA DEPARTMENT OF HEALTH AND 
    HOSPITALS; M. TODD WILLIAMSON, M.D., PRESIDENT, MEDICAL 
   ASSOCIATION OF GEORGIA; AND ATUL GAWANDE, M.D., ASSOCIATE 
    PROFESSOR OF SURGERY, HARVARD MEDICAL SCHOOL, ASSOCIATE 
PROFESSOR, DEPARTMENT OF HEALTH POLICY AND MANAGEMENT, HARVARD 
                    SCHOOL OF PUBLIC HEALTH

                    STATEMENT OF JACK EBELER

    Mr. Ebeler. Thank you, Chairman Pallone, Ranking Member 
Deal, members of the subcommittee. I am pleased to present 
today the findings and recommendations of the Institute of 
Medicine Committee on Health Insurance Status and Its 
Consequences, which is funded by the Robert Wood Johnson 
Foundation and chaired by Larry Lewin. It is a particular honor 
to appear before this subcommittee which I once had the 
privilege of staffing.
    The IOM presents its findings formally in rigorous and 
occasionally dense academic reports. Looked at another way, we 
present a simple and unfortunately logical three-part story 
about coverage of the uninsured. Coverage is trending down. The 
evidence is better than ever before that health coverage 
matters for access and health, and even the care of the insured 
may be affected by high rates of uninsurance in the community 
and we strongly recommend action. Let me briefly review each 
area.
    First, since 2000, we see an erosion in employment-based 
health benefits coupled with improvements in Medicaid and the 
child health program. The net result is that the portion of 
children who are uninsured has remained relatively stable at 11 
percent while the portion of adults who are uninsured has risen 
from 17 to 20 percent. The principal cause of that eroding 
coverage: rising health care costs and premiums coupled with 
changes in the economy and the labor market. With premiums 
rising about three times faster than wages, employers are less 
able to offer coverage and employees are less able to afford it 
even if offered. Our committee concluded that these trends 
would not reverse without concerted action and the current 
recession will only make the problem worse.
    Second, we find that the evidence is stronger than ever 
before that even with the availability of safety net services, 
uninsured Americans frequently delay or forego doctor visits, 
medications and other effective treatments and those deficits 
in care have consequences for health. We see that in particular 
for those who are sick with serious health care needs, chronic 
and acute, for which medical intervention can be most 
beneficial. Again, there is a simple logic here. Coverage and 
access matter more as our health care gets better. For 
uninsured children, we see shortfalls in immunizations, in 
prescription medications, asthma care and basic dental care, 
missed school days and more preventative hospitalizations. 
Uninsured adults with chronic health conditions are more likely 
to have received no medical attention in the prior year and 
they experience more rapid declines in their health status. 
They are less likely to receive vaccinations or cancer 
screening services, more likely to be diagnosed with late-stage 
cancer and they are more likely to die prematurely.
    Fortunately, we also found good news. When uninsured people 
acquire health insurance, they can experience improvements. 
Previously uninsured children who enroll in CHIP or Medicaid 
are more likely to have their serious health problems 
identified earlier, have fewer avoidable hospital stays, better 
asthma outcomes, fewer missed days of schools and more 
appropriate preventive services. Previously uninsured adults 
who become eligible for Medicare are more likely to receive 
appropriate care that improves their health and prevents costly 
complications. Their risk of death when hospitalized for 
serious conditions is also reduced. We concluded that lacking 
health insurance reduces access to effective health care 
services and is hazardous to the health of children and adults. 
More importantly, we can now validate for you that gaining 
health insurance provider substantial health benefits to the 
previously uninsured.
    Third, we report on a potential spillover effect. When 
community level rates of uninsurance are high, the insured 
population is more likely to report difficulties in accessing 
needed care and less likely to report satisfaction with that 
care. We also found that widespread vulnerabilities in local 
health care delivery including emergency care are sensitive to 
financial pressures that may be exacerbated by high rates of 
uninsurance. The committee concluded that the trends in 
coverage and the evidence of adverse health consequences are 
all too clear, and while we did not advance specific policy 
proposals we called for immediate action to address the 
coverage and cost problems. Stated formally, the Institute of 
Medicine recommends that the President work with Congress and 
other public and private sector leaders on an urgent basis to 
achieve health insurance coverage for everyone, and in order to 
make that coverage sustainable, to reduce the costs of health 
care and the rate of increase in per capita health care 
spending.
    Thank you. I look forward to our discussion.
    [The prepared statement of Mr. Ebeler follows:]

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    Mr. Pallone. Thank you, Mr. Ebeler.
    Mr. Levine.

                    STATEMENT OF ALAN LEVINE

    Mr. Levine. Thank you, Mr. Chairman. I am here today to 
support systemic reform of health care in our country and to 
advocate that every American have access to affordable health 
insurance. However, covering the uninsured by simply expanding 
government programs like Medicaid and Medicare without 
structural reforms that focus on early identification of people 
with chronic disease and prevention is not a solution and may 
in fact make the problem worse, particularly from the 
perspective of the States. Let me explain.
    In Louisiana, we are proud of the fact that 95 percent of 
our children have insurance. Most are covered through Medicaid, 
and while they have coverage, only 39 percent accessed a 
dentist last year. Only 55 percent of our infants zero to 15 
months received their recommended well-child visits. Our infant 
mortality rate is the second highest in the Nation. Our death 
rate among children is the second highest in the Nation. We 
have one of the highest rates of insured children but the real 
question is, does that alone, does the Medicaid one size fee 
for all system provide the access, proper diagnosis and 
coordination of needed services. Structurally, we argue it 
doesn't. Considering that 56 percent of our Medicaid population 
is African-American and nationally 56 percent of the Medicaid 
population is minority, we are literally as a matter of 
practice institutionalizing the very disparities that we all 
want to address.
    Who is accountable for the fact that 30 percent of what we 
are spending does nothing to improve health outcomes, and what 
industry would a purchaser accept paying a 30 percent premium 
for services that don't add value? Medicaid and Medicare were 
originally designed simply to pay claims, a financial process, 
at its worst breeding waste, corruption and fraud, and at its 
best supporting payment policies that incent legal but 
unnecessary and sometimes even harmful care. Many argue the low 
administrative cost of Medicaid and Medicare are reason enough 
to expand a government solution. I argue it doesn't cost 
anything to simply pay claims. The comparison simply isn't a 
fair comparison. The hidden cost of the inefficiencies caused 
by not coordinating care, not managing chronic illness and 
chasing fraud costs tens of billions of dollars each year that 
is not counted toward the administrative costs.
    To quote Dr. Emmanuel, special advisor to the President on 
health care reform, the health care delivery system is a 
fragmented, fee-for-service arrangement emphasizing delivery of 
more services rather than the right services. I couldn't agree 
more. Why is the C-section rate 12\1/2\ percent in Minneapolis 
but 26 percent in south Florida? Why does Louisiana have the 
highest Medicare cost per capita but the worst health outcomes? 
Just last week, three more physicians in south Florida were 
arrested for infusion therapy fraud. In 2005, providers in two 
south Florida counties submitted more than $2.2 billion in 
claims for infusion therapy, 22 times the total filed by the 
rest of the country combined, even though only 8 percent of the 
HIV/AIDS population lives in south Florida. We will never catch 
up with fraud or inefficiency if our system is designed to pay 
claims first and then ask questions later. It is simply 
difficult to manage.
    Even States are forced to resort to gimmicks in Medicaid to 
optimize federal funding, a persistent source of frustration 
for Congress, the executive branch and for the States. We 
believe the solution is a structural reform that provides each 
American with access to health insurance, harnessing the 
resources and infrastructure of the private sector and 
government. Consumers should have a choice with government 
acting in its proper role of ensuring transparency and 
providing the system with proper oversight.
    I again agree with Dr. Emmanuel, the President's advisor, 
who has said the advocates for a single-payer system fail to 
recognize the very organizations with the infrastructure 
necessary to coordinate care and implement the technology to 
develop rational payment models are the very insurance 
organizations they disfavor. Opportunities exist to correct the 
tax code to eliminate the bias against individuals, 
particularly low-income individuals. Rather than segregate the 
poor into government programs like Medicaid where they are 
confined without choice to poor outcomes, low-income Americans 
could be provided with premium assistance and be permitted to 
choose their own certified health plan that meets stringent 
requirements. The premiums should be risk adjusted and align 
the financial incentives with early identification of people 
with chronic conditions so they can be properly managed. Each 
plan should be measured publicly on key performance metrics, 
particularly for children, and we should focus on things like 
management of chronic disease, engaging consumers in their own 
behaviors, and I will tell you, the evidence as I will talk 
about during the Q&A shows that these models work. They have 
worked in California, they have worked in New York, they have 
worked in Arizona, they have worked in States all over the 
country, and we have shown actually that avoidable 
hospitalizations were reduced by 30 percent for minorities in 
California by using this model.
    I look forward to answering your questions, particularly as 
it relates to the medical home model. We think that has to be 
the heart of any reform as well as investment in creating more 
primary care physicians and dealing with the medical liability 
system.
    Mr. Chairman, I appreciate the opportunity.
    [The prepared statement of Mr. Levine follows:]

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    Mr. Pallone. Thank you.
    Dr. Williamson.

                STATEMENT OF M. TODD WILLIAMSON

    Dr. Williamson. Good afternoon, Chairman Pallone and 
Ranking Member Deal and members of the committee. My name is 
Todd Williamson, and I want to thank you for the opportunity to 
speak to you today on an issue that is vitally important to my 
profession and my patients.
    I am particularly pleased that you have included on this 
panel an actively practicing physician who sees patients on a 
daily basis. I am a medical doctor, board certified in 
neurology, and practice in Lawrenceville, Georgia. I also have 
the privilege of serving as the president of the Medical 
Association of Georgia and am testifying on behalf of six State 
medical societies representing more than 35,000 physicians.
    Medical care in America became the best in the world 
because of the patient-physician relationship and the right of 
a patient to select his or her own physicians. Patients have 
the right to privately contract with the physician of their 
choice. Decisions regarding care and the cost of care were made 
as part of this coveted relationship. This relationship and the 
profession it fostered served patients well and attracted 
bright young men and women into a rewarding field of service to 
their community. Clearly now something has changed. The private 
practice of medicine, once the backbone of America's medical 
care system, has become nearly untenable. Many newly trained 
physicians do not have the option of going into private 
practice because of large educational debt and high practice 
startup costs. This is especially true for primary care 
specialties. In many communities, only older, established 
practices are feasible and new physicians are rare. In my home 
county of Gwinnett, the population has nearly doubled during my 
practice tenure but the number of full-time practicing 
neurologists has remained nearly constant. The number of 
primary care physicians has not kept pace with the population 
and the number of general surgeons has actually declined. This 
means that it is more difficult for patients to see the doctor 
of their choice.
    How did this happen? The answer lies in examining how we 
pay for our medical care. Initially, health insurance was a 
mechanism for distributing risk, not a means of paying for all 
medical care services. Soon after, third parties began paying 
for medical care and they began controlling the delivery of 
medical care. Medical decisions have become the business of 
third-party payers causing delays in the delivery of care. Our 
patients have lost the ability to choose where they receive 
care and physicians are faced with take-it-or-leave-it 
contracts offered by large health plans. As the impact of 
third-party payers increased, administrative burdens were 
placed on physicians. When I started practicing nearly 15 years 
ago, my office of four doctors employed one person to submit 
insurance claims. We are now down to three doctors but we have 
three full-time employees just to manage insurance issues. 
These added administrative costs divert funds that could be 
used for patient care. Simultaneously, Medicare and Medicaid 
rates have not kept pace with the cost of providing care, and 
in many instances are below the cost of delivering the care. 
Private payers have reduced payments dramatically using federal 
payment levels as guidelines.
    We all know the payment system is broken. How should it be 
fixed? I believe the way to heal our payment system is to 
restore the patient-physician relationship by ensuring that 
patients have the right to privately contract with the 
physician of their choice without onerous penalties regardless 
of the presence of a private or government third-party payer. 
The importance of this point cannot be overstated. Medical 
decision making would once again be in the hands of patients 
and their physicians. This will enhance patient choice, heal 
the ailing payment system and once again restore the best 
medical care system in the world. We hear a lot about the high 
cost of medical care in our country. Please consider the 
difference between medical care costs versus medical care 
expenditures. While the cost of many specific procedures and 
therapies is actually lower today than in years past, we now 
expend much more for care because more patients have access to 
more tests and therapies that simply were not available in 
years past. We can significantly reduce health care 
expenditures by enacting proven, effective medical liability 
reform measures that will eliminate the need for so-called 
defensive medicine.
    As an early adopter of electronic medical records, I will 
caution you not to overestimate the savings from advances in 
health information technology. We must continue to guarantee 
patient privacy and ensure that medical records are kept 
confidential. However, regardless of whatever reforms are 
enacted, we can preserve patients' access to quality medical 
care only by ensuring the rights of physicians and patients to 
privately contract for care.
    I appreciate this opportunity to present the views of a 
practicing physician to you today, and I am happy to answer any 
questions you may have. Thank you.
    [The prepared statement of Dr. Williamson follows:]

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    Mr. Pallone. Thank you, Dr. Williamson.
    I just want everyone to know, we have three votes. We are 
going to hear from Dr. Gawande and then we will break and come 
back right after the votes for questions, so we will ask the 
panel to stay.
    Dr. Gawande.

                   STATEMENT OF ATUL GAWANDE

    Dr. Gawande. Chairman Pallone, Ranking Member Deal and 
distinguished members of the subcommittee, it is an honor to be 
speaking to you today about repairing our ailing health care 
system. As a clinician and observer, this is what I see. Our 
health system is failing in cost, coverage, safety and value 
because health care itself has become so immensely complex. I 
will try to explain.
    The new edition of the International Classification of 
Diseases identifies more than 68,000 different diagnoses that 
we now know a human being can experience, and science has given 
us beneficial remedies for most of them with more than 4,000 
different procedures and 6,000 different drugs, but the 
remedies are rarely simple. Each involves different steps care, 
risks and uncertainties, often expensive technologies and 
complex coordination. This extreme complexity has produced 
failures of coverage and of execution with large numbers of 
patients experiencing inappropriate treatment, avoidable 
infections and other forms of costly harm. These failures 
reveal that the structure of our health system is not suited to 
what we have learned is required for good care. It has three 
main problems. Human beings need preventive and acute care 
throughout our lives including costly medications, procedures 
and hospitalizations yet most Americans lack coverage for 
significant stretches of time. The system doesn't measure its 
successes or failures. And third, the system has no reliable 
mechanism for deployment of practical knowledge for ensuring, 
in other words, that important discoveries actually reach the 
average American.
    The result is a troubling mismatch. We are an industry of 
highly skilled and extraordinarily hardworking individual 
professionals but we work in a structure where no one is aware 
of, let alone responsible for, the overall effects of what we 
do, whether for our patients or the economy as a whole.
    This reality, I want you to know, comes home to me weekly. 
Recently I helped care for a critically ill woman in her 60s 
with severe abdominal pain. Insurance coverage troubles may 
have played a role. She had not seen a doctor in 15 years and 
had multiple preventable problems. To save her, I operated to 
repair her ruptured colon, a cardiologist treated her 
subsequent heart attack, intensivists managed her pneumonia and 
a vascular surgeon tried to rescue her foot, which had become 
gangrenous and would have to be amputated. She didn't make it. 
It was all too much for her. But there was a moment when we 
thought she would pull through, and as we contemplated it and 
considered that when she went home she would be unable to work, 
unable to eat for months and have a large open wound, someone 
asked, who is going to be her doctor, who is going to take care 
of her. The silence was deafening. The answer, of course, was 
that we all needed to be her doctor. Each of us would see this 
woman in our clinics for one of her problems but we had no real 
mechanism, let alone incentives, to work as a team and ensure 
that nothing fell between the cracks, that we all worked in a 
common direction for her.
    The great satisfaction of medicine is to have skills that 
help people and to be rewarded for using them but there is also 
a constant demoralizing recognition that one is but a white-
coated cog in a broken machine. Our present structure of health 
care with its gaps in coverage and value has set us up for 
failure. A better health system requires a few new 
capabilities. For one, it must provide coverage for people 
without it, a kind of lifeboat for those left out or dropped 
from care, and over the next few months we are going to be 
hearing you argue until we are all blue about whether that 
lifeboat should be a public program, a private program or both, 
but the key is that the coverage must be there and it must be 
adequate. We must simply take that step. Just having an 
insurance program, though, will not make health care better, 
safer or less costly. We must also outfit the system to 
measurably reduce failures and increase success in health care 
delivery and thereby increase the value of our immense 
investment in health care, and that requires doing three new 
things.
    Number one, we have to measure national statistics. We must 
measure in real time the results and value of care nationally, 
how many Americans suffer hospital infections, die from 
surgical complications and other basic indicators. Our current 
data measurement is inadequate, uncoordinated and at least 3 
years out of date. This is one-sixth of our economy, and not 
having these measures is like not knowing our unemployment or 
inflation rate.
    Second, we have to support discovery of practical know- 
how. We spend $30 billion a year seeking new scientific 
discoveries but little to identify how hospitals and doctors' 
offices can put them all into effective use. This is vital, 
lifesaving reach. My team at Harvard and at the World Health 
Organization, for example, devised a 90-second safe surgery 
checklist that was found to reduce surgical complications and 
deaths by more than one-third. We need more solutions like 
these, basic team checklists for everything from heart attacks 
to infectious outbreaks, and we also need investigation of the 
complex solutions you heard about today such as how to organize 
and bundle payments for teams to be more effective for care and 
wellness and measure what is happening with them.
    And third, we need to coordinate deployment. At present, 
new knowledge like that safe surgery checklist, takes more than 
a decade to reach most Americans because no one is responsible 
for ensuring dissemination. A reformed system must therefore 
support active deployment.
    I would like to see this work coordinated in a national 
institute for health care delivery but it can be done through 
existing agencies like the National Center for Health 
Statistics, the Agency for Health Care Research and Quality, 
and insurers like Medicare or a coverage program for the 
uninsured. The debate about how we will do any of these things 
will be fierce but we must do these things if we want a better 
health system and the goals are achievable. By 2013, we can 
virtually eliminate personal bankruptcies due to health care 
debt. We can make health care measurably more effective 
including reducing the number of infections picked up in 
hospitals by 50 percent, by becoming the first country in which 
cardiac disease is no longer the number one cause of death, and 
by reducing major complications and deaths from surgery by at 
least a fourth. We can improve the ability of clinicians to do 
their jobs by reducing the burden of insurance paperwork by at 
least 50 percent, and we can cut overall health inflation by at 
least half by 2013 and ensure no business has to spend more 
than 15 percent of payroll on ordinary health coverage.
    Health reform is not going to produce a utopia but we can 
have transformation, which is to say we can do more than just 
catch up to other countries. If we follow through on this work, 
we will have the most effective health care system in the 
world. I thank you.
    [The prepared statement of Dr. Gawande follows:]

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    Mr. Pallone. Thank you. You went over, but your optimism 
makes me feel good.
    What we are going to do is, we have about half an hour 
approximately for votes and then we will come back, so we ask 
you to stay here and then when we come back we will have 
questions. So we are in recess.
    [Recess.]
    Mr. Pallone. The committee will be called to order. Myself 
and Mr. Deal are the first questioners so we might as well get 
started and then I am sure the others will start coming in. I 
will recognize myself for 5 minutes.
    I wanted to ask Dr. Gawande the first questions. During the 
health summit, and I keep harking back to that, the consensus 
was clearly that we weren't looking to make radical changes 
with the system. You know, we really were just looking to 
improve the current system, and I mean, politically certainly 
that is going to be the easiest way to go, and of course, from 
my perspective, when we talk about the current system, I divide 
it into three parts. One, existing government programs like 
Medicare, Medicaid, SCHIP and how we can improve those, and 
then the second thing would be employer-sponsored care, which I 
think Mr. Ebeler stated has been drastically reduced because of 
rising costs over the last few years, the percentage of 
Americans that get their health care through their employer is 
down, and then finally of course, there is this area of 
creating some kind of a health market or national insurance 
pool that the government would regulate in some way either with 
totally private insurers or possibly with a government option 
for those who now can't get a government program because they 
are not eligible or they don't get it through their employer 
and they have to go on the private market. So when I talk about 
building on the current system, I mean those are the kinds of 
things that I talk about.
    But you say, I think, Dr. Gawande, that we can't simply 
expand coverage and leave it at that. In other words, we hope 
that we can reduce costs and reduce growth and come up maybe 
with a new funding source, as the President has in his budget, 
but that is all part and parcel of the ability to expand 
coverage. In other words, we are going to hopefully expand 
coverage by using some of the cost savings but if all we do is 
expand coverage, that is not going to be good enough.
    And I also wanted to hark back to what Mr. Ebeler said 
because I was thinking of my staff person in my office. You 
said that high levels of uninsurance may undermine health 
coverage for the insured population, and in the previous panel 
I used the example of my staff person in New Jersey who has, I 
think, Blue Cross/Blue Shield, works for me, but he couldn't 
get a primary care physician so he ended up in an emergency 
room. So I guess my fear is, you know, we want to build on the 
current system, we want to expand coverage but at the same time 
we have to make sure that it is done in a way that improves the 
system and creates cost efficiencies. So I guess I would like 
to know from Dr. Gawande, how do we achieve these goals? I 
mean, can you walk me briefly through and show how it is 
achievable to cover everyone and use cost savings to pay for a 
good percentage of it and still have a quality system? I mean, 
you could talk for days but----
    Dr. Gawande. So the short answer is that it is going to 
have to happen on a path that takes a step-by-step process. So 
imagine on January 1, 2011, what can we do. Within weeks we 
could cover an entire population of people. We could start with 
people under 25, for example, and have them in coverage by 
saying that we would enroll them in a plan and it can build on 
the experiences we have. It could be one that is based on 
something like the federal employee benefits plan which offers 
a range of private options. It could be an option that is a 
public option building off of Medicaid or Medicare. But that 
coverage part can be done. The second part of it is whether you 
are able to begin to include the kinds of proposals that people 
proposed earlier in that first panel. Do you begin to include, 
for example, in Medicare and other kinds of programs medical 
home and other models which start to make primary care better, 
just better organized. But we have work to do on our side in 
medicine as part of reform as well, and I think that includes 
being able to now test ways to structure care that make it more 
cost effective but more important better in safety and better 
in quality.
    Mr. Pallone. Let me ask you this, and I am not trying to 
cut you off, but include for me your opinion about whether 
there should be a public option and whether or not we should be 
expanding employer-sponsored care, for example, by providing 
tax credits or, you know, making it more affordable using 
federal dollars for that.
    Dr. Gawande. Well, the debate over the private-public 
option is a bit baffling to me. I think the question people are 
asking is whether the existence of a public choice undermines 
the ability of the private sector to succeed, and we live in a 
world that looks like that as it is. We live in a world where 
we have Medicaid, we have the VA, we have Medicare and we have 
private insurance. We have a kind of flotilla of ships that 
provide our health care system with a big gap because you have 
15 percent dumped off of these ships into the sea without 
coverage and so what we are talking about is what is the makeup 
of this ship that would be a lifeboat for the people who are 
left out. As a clinician, I don't have any strong preference 
about a private plan. Dealing with private insurers is as ugly 
to me as dealing with Medicare. I have, just like Dr. 
Williamson laid out, I have a full-time person who has to 
manage just dealing with insurance rejections and referral 
numbers and everything else and so I think a fundamental part 
of this is that we include research work for the practical 
know-how of cutting that insurance paperwork and that private 
insurance administrative costs for us down. I think there is a 
burden that I see as both a citizen and as a physician where I 
wonder what is the added value of paying more for some of those 
private insurance costs that I am absorbing and I do think 
there is a burden to prove that value in being able to 
coordinate care and improve the value of our end results.
    Mr. Pallone. OK. Thank you.
    Mr. Deal. Well, this is a difficult onion to peel. First of 
all, I would like to ask the two doctors here, both of whom are 
specialists, when we start talking about concepts like medical 
homes, obviously your practices depend on referrals from 
someone below you in the chain of delivery. Do you have 
concerns about medical homes becoming the proverbial 
gatekeepers that maybe absorb more responsibility than perhaps 
we would anticipate? Is that a concern?
    Dr. Williamson. That certainly was a concern I think back 
in the 1990s. I think what we saw is that the gatekeeper model 
really didn't work for anyone. It added delays, it added extra 
costs. I do agree that anything that would serve as a 
gatekeeper function is concerning to specialists and it should 
be concerning to patients. As I understand the medical home 
concept as it has been presented, it is not fundamentally a 
gatekeeper as that term was initially introduced. So yes, I am 
concerned about any gatekeeper scenario but my understanding of 
the medical home scenario as is being put forth now doesn't 
include that as a significant consideration.
    Dr. Gawande. And I would agree. The medical home concept, 
as I understand it, and it does shift a bit but the general 
idea is that the only way the primary care physician is paid is 
if you are physically with the patient in your office, and 
compensating them for all that time they spend on the phone, on 
e-mail, coordinating care with other specialists should be done 
and that is a major part of what primary care physicians do and 
we should make that more attractive and better structured, and 
I think that would make the specialty care better as well. The 
way I think of it is, we should have a medical home but there 
are going to be specialists in the neighborhood.
    Mr. Deal. Well, I agree with the concept as long as it 
plays out the way the both of you have talked about.
    One of the other concerns I have is that we are talking 
about reform but invariably we come back to wanting to use our 
current programs as a model or a basis for expansion, and as 
somebody, several of you actually have pointed out, we 
currently face the crisis of SGR every year. The complaints 
that we get from both Medicare and Medicaid, from the provider 
community continue to grow, and to anticipate we are going to 
dump 47 million people into government programs that already 
have their problems without structurally reforming those 
programs I think is not feasible. Now, we talk in terms of 
being able to save half or whatever of the ultimate cost to pay 
for this expanded coverage from efficiencies within the current 
system but then that means there is another half that comes on 
top of that.
    Mr. Levine, I also have a concern of, for lack of a better 
term, the woodworking effect. We recognize that there is always 
a woodworking effect once you have coverage of expanding the 
utilization. Do you have a concern about that?
    Mr. Levine. Thank you, Mr. Deal. I would think that 
anything that we do to expand government programs can 
potentially have the unintended consequence of allowing people 
the opportunity to leave their private coverage and come into 
the public program, and, you know, the difficulty from the 
States' perspective as it relates to Medicaid is, if that 
starts to occur, if you see Medicaid rolls increase 
dramatically, we can't serve the population we have now. 
Providers, because of the rates paid in Medicaid, it is very 
difficult to get specialists and even primary care. So I would 
be concerned about what we call the crowd-out. So I think 
States really need to be consulted on that before that decision 
is made.
    Mr. Deal. Dr. Williamson, you mentioned the question of 
defensive medicine practices and the necessity for medical 
malpractice reform.
    Dr. Gawande, do you agree that that is an element that 
ought to be addressed in this overall discussion?
    Dr. Gawande. I have actually written a great deal about 
what I consider to be a problematic medical malpractice system. 
It doesn't work for patients, it doesn't work for doctors and 
it is excessively costly. One of the most--from some of the 
research work we have done, though, the most valuable thing we 
can do for malpractice is have universal coverage. Other 
countries that have universal coverage have markedly lower 
malpractice costs, primarily because the payouts for the 
medical costs are no longer in the legal system and that is the 
majority of what is paid out in the costs. So physicians could 
have a markedly reduced premium for their malpractice expenses 
in a universal coverage system simply because that system now 
guarantees the coverage for universal coverage and it doesn't 
end up in that legal expense.
    Mr. Deal. I don't quite follow the logic of that. Let me 
say from the perspective of what I just heard you say, is that 
if we get more people into the public system, that the doctors 
don't need to worry as much about the cost of medical 
malpractice. It would seem to me that they would have even 
exponentially more reason to worry about it.
    Dr. Gawande. So if I get sued and I have to pay $1 million 
for a malpractice suit, most of that money is future medical 
expenses for the patient who was harmed and left disabled. In 
other systems, because that person's disability and their 
medical expenses are covered in a national health system, that 
doesn't enter the court system and so the costs for medical 
malpractice are massively lower, much lower than you would 
achieve with a cap, much lower than other kinds of approaches, 
and a universal coverage system is hugely, hugely beneficial 
for us as physicians in helping decrease that malpractice cost.
    Mr. Deal. That would require some substantial changes of 
State and perhaps federal law as well, I think to be able to 
discount the cost of future medical as a compensable factor in 
medical malpractice.
    Dr. Gawande. It is just that every other country that has a 
universal coverage system is able to do that because they have 
health coverage.
    Mr. Deal. OK. Thank you.
    Mr. Pallone. Ms. Christensen.
    Ms. Christensen. Thank you, Mr. Chairman.
    Mr. Levine, I clearly support Medicaid and like the 
Chairman, you know, consider that building upon Medicaid, SCHIP 
and others as part of extending coverage but I do share some of 
your concerns about the ineffectiveness of the care and the 
poor outcomes but don't you think we can fix Medicaid without 
throwing the baby out with the bathwater? I mean, there are 
other factors like lack of providers, facilities, services in 
poor neighborhoods.
    Mr. Levine. I agree with you. I am not suggesting 
necessarily throwing the system out but what I am saying is 
that expanding it without fixing it will be perilous for us. I 
will tell you, I look at, for instance, in California. When 
California implemented the coordinated care model and they 
allowed consumers to opt out of the fee-for-service system into 
a managed Medicaid model, unique to California, the rate of 
avoidable hospital admissions for African-Americans decreased 
by 36 percent, Hispanics by 37 percent. When we talk about 
proving out prevention--because what went along with that was, 
looking at, for instance, in New York, cervical cancer 
screenings went from 39 percent to 71 percent using a 
coordinated care model, diabetes testing went from 32 percent 
to 76 percent. What you find when you move towards a 
coordinated model is, you will spend more on physicians, 
particular primary care physician services, you will spend more 
on pharmaceuticals for things like diabetes maintenance drugs 
and things like that, but you will spend much less on 
institutional services that cost more. And that data is out 
there. There is compelling data over 20 years to support that 
claim.
    So I think that fundamentally before you look at any 
expansion into public programs, into public fee-for-service 
programs, I would argue that you should fix the structure so it 
does three things. Number one, it is geared towards risk 
adjustment of premiums so if somebody is chronically ill, there 
are more resources that follow them. Number two, it also 
incentivizes people to identify people with chronic conditions 
and it also encourages chronic disease management, and then 
finally engaging the consumer in their own behavior, 
particularly if they have a chronic disease.
    Ms. Christensen. Thank you. I am going to try to get two 
more questions in. Thank you for the clarification.
    Dr. Gawande, you mentioned one of the reasons for having 
the problems within the system is decision making not being as 
consistent or reliable as people deserve. Now, in looking at 
that decision-making problem, have you seen any racial, ethnic, 
economic or gender basis for this or is it across all lines?
    Dr. Gawande. No, and just as Mr. Levine pointed out, the 
ways in which the insurance coverage plays in affects the 
disparities in the care and then also in the decision making 
that occurs and we have seen some very powerful studies that 
show, for example, that people presenting with the same 
complaints about chest pain end up having very different care. 
One of the striking things from being able to implement our 
work in making surgery safer is we have done it from rural 
Tanzania to top hospitals in places like Seattle, and the 
striking thing is that you are taking places that are hugely 
disparate and even with that degree of resource changes, we 
were able to reduce their complication rates and bring them all 
up the bell curve and reduce the disparities considerably, and 
if we can do that from India and Tanzania and Jordan to London 
and Toronto and Seattle, we can do that between, you know, my 
hometown in rural Ohio and a place like here in D.C.
    Ms. Christensen. Thank you.
    Dr. Williamson, could you elaborate on your statement in 
your testimony that you caution us not to overestimate the 
savings from advances in health information technology?
    Dr. Williamson. Yes, I can, and that is made purely from a 
perspective of a practicing physician. I was one of the first 4 
percent of physicians in Georgia to implement an electronic 
health record as well as electronic billing services, and that 
one item was the single largest purchase in my practice in its 
25-year history, and maintaining it is enormously expensive 
every month. Once you buy it, you have got it. Changing it is 
prohibitive. So you are pretty much locked into a certain cost 
of maintenance month by month. It is a fantastic tool and it 
allows you to do things that you simply cannot do otherwise. 
Unfortunately, saving money is not one of the immediate 
advantages that I have found. Now, I know many practicing 
physicians that have bought systems like this and actually 
abandoned them and just called it a loss. I know other 
physicians that feel like it has added to the productivity of 
their office. It is not a slam dunk though, and it shouldn't 
be, I don't feel, viewed as a way to instantly save money 
across the board.
    The other concerns that I have about health information 
technology going forward, although certainly it could make us 
more efficient, is that protecting patient privacy be paramount 
in that because a patient is much less likely to come to the 
doctor if they know that their medical records are instantly 
going to be on the Internet somewhere, and we have got to keep 
that in mind going forward. You are talking about something 
that would keep patients out of the doctor's office. That 
definitely would. So I strongly encourage you to keep that in 
mind as we go forward, protecting patient privacy in health 
information technology.
    Ms. Christensen. Thank you, Mr. Chairman. I would like to 
just ask unanimous consent to enter a statement for the record 
submitted by AARP for this hearing.
    Mr. Pallone. We have seen it, so without objection, so 
ordered.
    Ms. Christensen. Thank you.
    [The information was unavailable at the time of printing.]
    Mr. Pallone. Mr. Burgess.
    Mr. Burgess. Mr. Chairman, before I do questions, may I 
just take a moment for a point of personal privilege? I wanted 
to add to your optimism after Dr. Gawande testified and he gave 
you great hope. I have a young constituent here from Texas, Wen 
Chin, who is a student at the Texas Academy of Math and 
Sciences at the University of North Texas. This is where young 
high school students are taken into a college environment and 
allowed to flourish, and Mr. Chin has done exactly that and he 
has developed a new system called pulse plasma deposition, 
which lays down a layer of plastic, silicone, metal and a 
variety of other substances which inhibits the growth of 
bacteria and therefore could one day reduce our hospital-
acquired infections with a very inexpensive process that he has 
developed. So Mr. Chin, stand up and take a bow. As I 
understand it, he has won a scholarship from Siemens 
Westinghouse for $100,000 and he is a finalist for an Intel 
scholarship, so congratulations. I wanted to add to your sense 
of optimism that there are indeed new breakthroughs on the 
horizon that are not going to break the bank. Thank you, Mr. 
Chin, for your indulgence.
    Now, I am going to ask you a question. This is really mean 
to do it but I am going to do it anyway because I have been 
sitting here all day, and you don't have to answer, but let me 
just go across the board here and if you have health insurance 
today, would you swap that one for one for Medicaid coverage? 
Mr. Ebeler?
    Mr. Ebeler. I am in a policy box here because I am 
representing the IOM committee and we did not speak to that, so 
my only advice to you is that health insurance coverage 
matters, it is important for everybody to have it. We have no 
judgment on that question.
    Mr. Burgess. Very good evasive answer.
    Mr. Levine?
    Mr. Levine. Would I trade my coverage for Medicaid?
    Mr. Burgess. Yes.
    Mr. Levine. No.
    Mr. Burgess. Dr. Williamson?
    Dr. Williamson. No.
    Mr. Burgess. Dr. Gawande?
    Dr. Gawande. No.
    Mr. Burgess. The reason I ask is, I offered an amendment 
during the SCHIP legislation so that members of Congress could 
get a better idea, and Mr. Levine, you have alluded to it, that 
provider rates are different in Medicaid. Of course, it varies 
from State to State. It may be different in different States 
but it is typically hard to find a doctor if you pick up the 
phone and call and say will you take my Medicaid. And then of 
course for the doctors who do, it is very difficult if you need 
a cardiologist or an ear, nose and throat specialist or 
whatever, it is hard to find a specialist to take that care. So 
I offered an amendment to get members of Congress to give up 
the FEHBP, the Federal Employee Health Benefit Plan, and switch 
to Medicaid so we could live that life for a while and see if 
we couldn't be more creative about offering better solutions, 
and I didn't get any votes. So just like you all, you are not 
unique in that. But I didn't poll the IOM and maybe next time I 
need to do that.
    Now, Mr. Levine, you have brought up some very interesting 
concepts about Medicare being simply a bill-paying organization 
and therefore the overhead, when we hear overhead comparisons 
between Medicare and other private sector plans that that is 
perhaps a false comparison, and we also all know that we never 
calculate the cost of capital. Medicare has a huge unfunded 
liability and if any of us were to construct a business plan 
and carry liability we would have to have interest payments on 
that liability going forward. But would you care to speak to 
that just a little bit more?
    Mr. Levine. Well, there are a couple of things, I think two 
things, first, about the administrative costs of Medicare and 
Medicaid and then two, relating to rates. Let me answer the 
second part first. You talked about rates. Let us be clear 
about how Medicaid sets rates. It is different from Medicare. 
Medicaid sets rates based on how much a State can afford 
generally in the aggregate and there is no rationale behind the 
rates. If you are a neurosurgeon in Lake Charles, Louisiana, 
and you are a neurosurgeon in Baton Route, you are getting paid 
90 percent of Medicare, and by the way, I understand that is a 
good pretty rate compared to other States.
    Mr. Burgess. Very good.
    Mr. Levine. So come to Louisiana if you are a doctor. But 
irrespective of the market conditions, we pay the same thing. 
That is not a way to deal with the shortages that we have, and 
in fact, I have a case right now, a woman with a brain tumor 
that literally was told by her primary care doctor who lives in 
Lake Charles, you have a brain tumor, there are no 
neurosurgeons taking new Medicaid patients, drive to 
Shreveport, go to the ER, tell them you have a brain tumor and 
you will get to a neurosurgeon. That is how Medicaid operates, 
and there are stories like that in every single State, so it is 
not a unique anecdote.
    As to the administrative costs, understand, and I am going 
to refer to the American Medical Association. They have done 
their own analyses of administrative costs between public and 
private programs. First of all, when you measure the 
administrative costs of Medicare and Medicaid, fundamentally 
all they are really doing is paying claims and then chasing the 
claims afterwards when they go after fraud and abuse and 
overbilling. But they don't even count administrative costs the 
same. In the Medicare program, and this is according to the 
AMA, premium collections by private payers is counted but not 
by the government when they count their own administrative 
costs. Medicare outreach, customer service, OIG auditing, 
contract negotiations, these things are not added the same, and 
what administrative costs also don't count in the public paying 
systems is, like for instance in Medicaid, people that are very 
sick, very chronic that are in the Medicaid fee-for-service 
program as a percentage if you are measuring the cost as a 
percentage, of course they are going to be lower because the 
per-unit billing, the per-person cost is substantially higher.
    Mr. Burgess. I need to move on to one other thing. GAO did 
a report 2 years ago that suggested within the Medicaid system 
that Medicaid becomes the primary payer when in fact it should 
be the secondary payer and this occurs roughly 15 percent of 
the time, different in different States, as low as 11 percent 
in Texas, 25 percent in Iowa, and I suspect this is a problem 
because of the difficulty with collecting across States lines 
if a patient changes addresses and changes locations. Is there 
a way that we can deal with that problem of Medicaid going from 
a secondary insurance to a primary insurance when a private 
insurance should in fact be covering that patient?
    Mr. Levine. We do have recruitment processes but typically 
again, as I mentioned earlier, we are paying and then chasing 
afterwards. I need to do some more research on that for you.
    Mr. Burgess. I will get you the link to the GAO report and 
I would be interested to get your thoughts on that.
    Thank you, Mr. Chairman. I will yield back.
    Mr. Pallone. Thank you.
    Ms. Capps.
    Ms. Capps. Thank you, Mr. Chairman, and thank you to these 
witnesses and for your perseverance and staying as long as you 
have. I want to turn first to Dr. Gawande and then Mr. Ebeler 
for the last half of my precious 5 minutes.
    Dr. Gawande, I appreciated your testimony very much, as I 
told you, and I am very interested to learn more about your 
idea for a national institute for health care delivery. As we 
develop a strategy to improve our health system overall in that 
big picture, clearly clinicians are the most integral players, 
and I would like to ask how you foresee a national institute 
for health care delivery or something like that working and how 
we could get that information to clinicians, how actually you 
would see that implemented?
    Dr. Gawande. So a good example would be to break down our 
services that we provide into several buckets. We do 3-1/2 
billion prescriptions, we do about a billion office visits, we 
do 120 million ER visits, and if you had a national institute 
of health care delivery, it would focus on asking why do the 
ERs not work, what are the tools they need to get rid of 
diversion, to deal with organizational problems, to stop the 
waiting times in ERs, to divert the group who are getting, you 
know, non-urgent care that should be in other places. They 
would invest in programs that we don't invest in, for example, 
experiments with how do you triage people correctly so they go 
to the right place safely and get quality care and save money. 
NIH does not pay for that work. I spent 3 years trying to say 
that we know how to make surgery have fewer complications but 
there was no funding in the government to get it. I got the 
funding to carry out an American study from the World Health 
Organization. In the end it only took about $100,000. I made 
sure we tested it in eight countries, and I showed here at home 
that we could reduce our complications with a 90-second 
checklist that costs, you know, nothing at all, and so that is 
the kind of work I can imagine coming from a national institute 
for health care delivery service by service, in the ER, in 
dialysis, in operating rooms and in offices and clinics. What 
is it we need to make those places organize all of these drugs 
and technologies we are trying to deliver.
    Ms. Capps. Thank you very much. I would like to follow up 
with that.
    Mr. Ebeler, some of the testimony that has come forward 
today during this hearing argues that we should look at private 
arrangements, that sort of sacred physician-patient 
relationship in the private context or others have argued that 
our health care problems can be solved through a tax code 
alone, in other words, leave those decisions in that other 
sector. Your research seems to indicate another direction and 
maybe you would elaborate on why this might not work according 
to some studies that you have access to.
    Mr. Ebeler. Let me say what we found, and it is not--we are 
not speaking particularly to different options that the 
subcommittee and committee have for reforming system. Our 
message and our research really hones in on the fact that 
people who have no coverage are getting less than they need, 
they are suffering worse outcomes, and that relates a little 
bit to Mr. Deal's question, very good research that when you 
add coverage, whether that be children becoming eligible for 
CHIP or adults becoming eligible for Medicare, for folks who 
were previously uninsured you see very positive results of 
that. So that is the way to go. So the message we have for you 
is the need to proceed, the need to make sure that those 
uninsured patients get coverage so that they can have a 
connection with a physician. The flavor of that approach of the 
different options in front of you, we don't have a view on that 
at this point.
    Ms. Capps. Your basic discovery, if you will, sort of makes 
sense too, that if you don't have a regular path to some 
provider that you use for small things, that when you are 
forced because of the drastic nature of your symptoms to seek 
health care, you are not going to have as good an outcome, and 
you have documentation to show that too, so which kind of care 
it is that we pursue with some kind of goal of everybody 
getting coverage some way, is it less important to you than the 
difference between not having coverage and having coverage?
    Mr. Ebeler. Correct.
    Ms. Capps. Anyone else? I have 16 seconds left if anyone 
has a final thought on that topic. I appreciate that very much. 
I think it gives us a good starting basis from which to--I 
mean, I hope we can all agree as a result of this day that we 
spent with you that it is more important to have some access to 
care than not to have any, even though there is care available 
in the community.
    Mr. Ebeler. That is an important point, because these 
studies--the simple reality is, the uninsured are getting some 
care and there is a safety net out there and there are doctors 
and nurses and hospitals trying to help every day, but the 
simple reality is, when you adjust for all the things you need 
to adjust for, they are not getting the clinically appropriate 
care and they are suffering worse outcomes.
    Ms. Capps. I yield back. Thank you very much.
    Mr. Pallone. Thank you.
    Mr. Gingrey.
    Mr. Gingrey. Mr. Chairman, thank you, and I will direct my 
first question to Dr. Gawande.
    Dr. Gawande, when Ranking Member Deal was talking to you 
about medical malpractice and that sort of you and you were 
saying under universal coverage it would be much less 
expensive. When you referenced universal coverage, were you 
meaning the same thing as this phrase national institute for 
health care delivery? Is that basically the model that you were 
talking about?
    Dr. Gawande. No. So a national institute for health care 
delivery would be more like a research organization like we 
have with the National Institutes of Health, which does new 
discovery of technologies and this looks at the side of how do 
we make sure those----
    Mr. Gingrey. OK. Then I understand that. But basically I 
guess when you said universal coverage, you were referring to 
universal health care, a single-payer system?
    Dr. Gawande. No, that is not true. Any system in which--so, 
for example, in Switzerland, they don't have a single-payer 
system, they have multiple private insurers that provide 
coverage for the entire population. They don't have a public 
insurance----
    Mr. Gingrey. Reclaiming my time. The reason I asked you 
that question, because I really do believe that a lot of people 
get confused about universal coverage and universal health 
care, and I think it is important to understand that members on 
this side of the aisle and even on the other side of the aisle, 
we are in favor of universal coverage without question. I think 
those 47 million people ought to be insured and I think that 
would be good for our country, good for our economy and 
certainly good for them, for the individuals. But universal 
health care when it means a single-payer system or national 
health insurance program, and I think that was the thing that 
seemed to be a little bit confusing when Representative Deal 
was asking you about the cost of malpractice coverage and he 
was a little confused, and clearly I think it would not be 
cheaper just because you had universal coverage. But anyway, I 
am going to move away from that. I wanted to ask the other 
witnesses a couple of questions.
    Real quickly for Mr. Levine, in regard--you run that 
Medicaid system in Louisiana. Do you feel that we should get 
away from the Medicaid system and very likely put everybody in 
a managed care Medicaid sort of program, maybe through a 
connector where you have insurance companies that are going to 
bid on this business?
    Mr. Levine. I am for consumers have a choice of what model 
they want. I think it is very difficult for States--we process 
54 million claims a year. We spent a lot of our time just 
really chasing fires as opposed to trying to put these 
integrated systems together that we need to. There is a variety 
of different models out there. I think philosophically where we 
are at is a coordinated system of care where consumers can 
choose from different networks, which network they want based 
on transparent outcomes, which one has the best patient 
satisfaction, which one has the best provider satisfaction, 
best compliance with well-child checkups, and let a consumer 
choose that plan that works best for them. I think in that 
model the consumers win because fundamentally everyone is going 
to react to the most powerful force out there, which is----
    Mr. Gingrey. Reclaiming my time because I do want to get to 
my colleague from Georgia with the last question but I tend to 
agree with you on that, Mr. Levine.
    Dr. Williamson, I thank you for your testimony, and, you 
know, like every aspect of our economy, health care and its 
costs are also a function of supply and demand. I think you 
brought that out in your testimony, and obviously when we are 
discussing our health care system, demand is the need for 
medical services by the patient and supply is very much 
contingent on the quality and quantity of doctors and other 
medical providers in the market. I am wondering if you can tell 
us from your perspective what obstacles potential medical 
students of the future may face when considering entering the 
field of medicine? I am talking about education costs, years of 
schooling, cost of liability insurance and practice overhead, 
if you could in the few seconds remaining.
    Dr. Williamson. It is a significant endeavor to start down 
that road, and you just listed, I think, all the major items. 
Students, as you know, now face enormous debt when they finish 
medical school. The numbers are way into six figures. I have 
heard a lot of figures thrown around. But that amount of money 
is easily equal to a mortgage, easily, and I remember when I 
first finished residency I felt like I should be looking for a 
retirement community rather than a job, but I had to go out and 
find a job, and that basically is a starting-over point for 
residents that finish their training after a 13-year or so 
depending on what specialty you are in, tenure and you have 
accumulated quite a lot of debt, made very little money and 
spent a decade and a half, and I am concerned that bright young 
men and women like the gentleman that was introduced so 
eloquently earlier aren't going to pursue the profession of 
medicine if they don't see it as a viable way to take care of 
their families and their debts, and that is a very real problem 
that we have now. It is not just attracting bright young men 
and women to the field but it is keeping them.
    Mr. Gingrey. Real quickly, because my time has run out, do 
you feel like if we go to a single-payer system, national 
health insurance and that these bright young men and women 
realize that they indeed will be working not managed by the 
government but for the government that they would 
disincentivize them even further from choosing medicine as a 
profession?
    Dr. Williamson. I believe that is correct, and we have data 
in Georgia that bears that out. We have survey data that 
practicing physicians have said in a majority that they do not 
feel that increased government involvement in financing health 
care is going to be a good thing for the profession, so I think 
you are right. I think larger government involvement in health 
care in general is going to dissuade bright young men and women 
from entering the field of medicine.
    Mr. Gingrey. Thank you, Doctor.
    Mr. Pallone. Thank you.
    Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman. Thank you to the 
panel.
    Dr. Gawande, I have to say your response to the malpractice 
question is kind of like a heat-seeking missile. I thought that 
was very good. I am sure it is going to generate a lot of 
follow-up research and inquiry. But I wanted to ask another 
question because I am so focused on this issue of the physician 
shortage, particularly in the primary care arena, and also how 
it gets linked to new and more innovative delivery models or 
taking some of the existing delivery models that we have and 
expanding them. The term I use for this is sort of place-based 
health care, so for example, school-based health clinics. That 
is where the kids are. That is where they spend most of their 
day. There should be a health center in every school and you 
are going to need pediatricians to staff those. There is a 
concept called naturally occurring retirement communities, 
which are where people are aging in certain neighborhoods so 
you can look at the whole neighborhood like you would like at a 
senior living community so you could argue that a place-based 
clinic with an emphasis on geriatricians in a NORC, a naturally 
occurring retirement community, would make sense. The concept 
of clinics in places of employment, I mean, if you walk down 
the hall there is a health clinic, you know, a health suite 
right down the hall here to make it easy for people who work 
here on the Hill to go get health care. So I don't know how 
much you have thought about that but I would love to get your 
perspective on that in terms of informing the kind of delivery 
model we are trying to move towards and where you would base a 
lot of these new primary care providers like geriatricians and 
pediatricians and others once we get them in the pipeline.
    Dr. Gawande. My immediate reaction is that what are you 
honing in on is that we have had half a century now of lost 
innovation with how primary care is created and delivered 
because we haven't provided the incentives for people to put 
them anywhere else other than in offices that might be from 9 
to 5 with very limited evening hours, very limited weekend 
access and so on. The idea of putting them in places closer to 
where people actually need their care if there was more 
incentive for those physicians to be entrepreneurial, it would 
be--you would see those cropping up and you would see that come 
into place. I think the creation of ideas like medical homes 
starts to give people incentives for organizing their groups in 
places where they can do that work most effectively and get to 
their patients that they are looking for and so I think that is 
an important point.
    The second thing is that on physician shortage, your 
earlier comments and then coming again here to say that we have 
this looming aging population without adequate primary care and 
then a world where if we create universal coverage will provide 
increased demand for basic services. We have seen that in 
Massachusetts where we have coverage now and primary care 
physicians can finally see people but because there weren't 
enough primary care physicians around we still have insured 
people, as the chairman mentioned, going to emergency rooms and 
so I think that work that you are interested in is very 
fundamental.
    Mr. Sarbanes. And of course, that will be the critique, 
right? If you get the coverage and you don't have the providers 
in place, then people are going to have to wait, you know, 
weeks and months to see somebody, and that is the refrain you 
get from those who don't want us to move to coverage----
    Dr. Gawande. It is the chicken and the egg problem. You 
can't create those physicians sitting there with their offices 
open without knowing whether there are going to be people 
coming, and you see it in plenty of places that expand coverage 
that you see a growth in those models. But what you are going 
to have happen over time is that we also have to learn how to 
take care of an enormously growing aging population. We are 
going to double the number of people over 65 in the next 20 
years and our health workforce isn't going to grow much to keep 
up with that no matter what we do. And so our models have to 
evolve. An example is at Intermountain Health Care in Utah. 
Brent James, who leads that program, was able to take care of 
their entire diabetic population with just two endocrinologists 
by being creative and they are getting better quality results 
than almost anywhere in the country.
    Mr. Sarbanes. The concept of medical home is one that we 
typically think of in terms of an individual, but I think what 
we are also discussing here is the potential to think of a 
medical home for a community, and that is what a clinic in a 
school is. It a medical home for that school community. It is 
what a clinic in a naturally occurring retirement community is. 
It has a staff of geriatricians. It is a medical home for that 
community so we can look at it both in terms of the individual 
and in terms of the community.
    Mr. Pallone. Thank you.
    Ms. Schakowsky.
    Ms. Schakowsky. Thank you, Mr. Chairman. I think the need 
in this discussion as we go forward in time to use accurate 
data is going to be very important. I talked about the myth 
that I think Mr. Ebeler has talked about in his studies that 
there is a difference between getting access to care and then 
getting access to care you need. You can go to an emergency 
room but obviously insurance is very important, and this notion 
that somehow we have absolutely the best care system in the 
world and no one in the United States goes without health care 
really begs the question of the negative effects of not having 
insurance. We also need to talk about Canada. If you ask the 
question, would Canadians swap with the United States on their 
health care system, I think we should get that data about what 
is really going on in a country is pretty satisfied with their 
health care. And finally, the issue of students not wanting to 
go into health care if there were a national system. I have 
talked to plenty of doctors who say not having to deal with 
billing and if we had a really good system of public health 
that it would be more satisfying.
    But I wanted to ask Mr. Ebeler, a previous IOM study found 
that the lack of insurance resulted in 18,000 premature deaths 
annually in the United States. I am wondering if you have 
updated that at all or how your new study contradicts the 
notion that we are all accessing the care we need.
    Mr. Ebeler. Thank you. The report I am presenting today is 
sort of an update of a very extensive six-part IOM series that 
was presented between 2001 and 2004. We did not update that 
particular study on 18,000 deaths. We did again look at the 
literature very clearly and the evidence is even better than 
was available to that committee when it met that it absolutely 
does matter to have health insurance, it matters for the access 
of children and adults and it matters for the health outcomes, 
and the likelihood of premature death is higher for those who 
have no health insurance. We didn't follow up and quantify that 
though.
    Ms. Schakowsky. Mr. Chairman, the Institute of Medicine 
study, has that been inserted into the record, or at least the 
report brief? Has the Institute of Medicine study been put into 
the record already? If not, I would like to----
    Mr. Pallone. I am a little concerned about the number of 
pages.
    Ms. Schakowsky. Well, how about the report brief?
    Mr. Pallone. Yes, that is fine. We will put that----
    Ms. Schakowsky. OK. With unanimous consent----
    Mr. Pallone. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Ms. Schakowsky. I also wanted to ask Mr. Levine, I was 
interested in your statement and agree with much of it, but you 
said that Medicare and Medicaid are not innovators in quality 
and you mentioned the importance of medical home model, which I 
support. In Illinois we began the primary care case management 
medical home initiative in the fall of 2006. We have enrolled 
1.6 million Medicaid and SCHIP beneficiaries in 5,300 medical 
homes, and a May 2008 memo from the National Academy for State 
Health Policy mentions medical home models in Pennsylvania, in 
Arizona. I think there were other States, I think including 
Mississippi, that were doing well. And by the way, that memo 
also talks about State Medicaid innovation in health IT. So 
Louisiana could undertake similar initiatives, could it not?
    Mr. Levine. Well, in fact, Louisiana is doing a lot of 
those things. We have a primary care case management program 
where 700,000, 800,000 of our residents that are in Medicaid 
have a--we pay an enhanced fee to the primary care doctor, $3 
per member per month, and frankly, our results haven't been--in 
some instances have been good in terms of reducing ER visits 
but when you compare us with the national measures with other 
States, we perform poorly, and so we are looking to improve 
that system. We have 37, I believe, medical homes that were 
just certified by the NCQA just last week and I think we are 
the second State in the country to have a hospital certified as 
a hospital-based medical home. So, you know, we are embarking 
on that. You know, we are a State that has 23 percent of our 
children in poverty, you know, we are a State that I think is 
still going through rebuilding from two hurricanes in 2005 and 
now again two more in 2008, and so we are engaged and we have 
submitted a waiver request to CMS to allow us to dramatically 
transform our Medicaid program to get to what you are talking 
about, allowing consumers to choose between different 
coordinated care networks, and we are still going through what 
the complexion of those networks will look like, but at the end 
of the day--and I think the doctor said it right. He said we 
shouldn't stop with a discussion about the medical home. You 
really have to consider the neighborhood. You have got to have 
specialists. You have to have institutional support. You have 
to have home-based services. So I think that is the model, and 
I think Medicaid programs all over the country are going to 
have to transform to that model.
    Ms. Schakowsky. Thank you.
    Mr. Pallone. Before I go on to the next member, we have 
entered a number of executive summaries here and I have one 
more. This is the economic impact of private practice physician 
offices in Georgia. I am going to put in the executive summary 
and then reference the Web site for the full document. I am 
going to do that with each of the ones that we have had today. 
And then in addition to that, your article, Dr. Gawande, from 
the New Yorker, ``Getting There from Here: How Should Obama 
Reform Health Care,'' I would ask unanimous consent to put that 
in and the Georgia document. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mr. Pallone. And next is Ms. Castor.
    Ms. Castor. Thank you, Mr. Chairman.
    Thank you, gentlemen, very much for your testimony. Health 
care in America is such a patchwork. You know, you have 
Medicaid for folks in poverty, primarily children and pregnant 
women, then Medicare if you are 65 and over but sometimes 
seniors, sometimes nursing home under Medicaid and Medicare and 
then SCHIP, and private health insurance is the bulk of it, of 
course, but Mr. Ebeler, in your testimony you point out it is 
practically impossible for a hardworking family now to access 
insurance if they don't get it through their employer and they 
are working hard so they are not going to qualify for Medicaid, 
they are too young for Medicare, and I think the latest 
estimates for a family it would cost over $12,000 a year to 
access it and that is if they don't have preexisting 
conditions. If they do, they will meet the hand.
    In my community in Tampa, Florida, in Hillsborough County 
we have a model program that we set up over a decade ago to 
kind of fill those gaps for folks that don't have health 
insurance from any other source, and I think it is one of those 
models that we need to be looking at, and then I am going to 
ask if you all can identify other models from around the 
country. What the Hillsborough health care plan does, it is 
kind of like what Mr. Sarbanes was discussing and Congresswoman 
Capps, a more expansive community clinic system, not just 
community health centers but they are an important piece of it. 
We have developed a neighborhood clinic system in conjunction 
with our hospitals and doctors, private hospitals and private 
doctors that do this, because a decade ago we were having our 
property taxes going to indigent care in the hospitals. So 
instead we said let us get these folks out of the ER and into 
neighborhood clinics. It has worked very well and we are able 
now--we have built in programs like smoking cessation and 
prevention and they have that medical home in their 
neighborhood. It might not be as close as Members of Congress 
have right down the hall but they recognize the doctor, they 
recognize the nurses in their community. They are part of their 
community. They are their neighbors.
    Can you all identify other models like this? Mr. Levine, 
you are familiar with this because of your experience in 
Florida. Is this something that we need to--a model we should 
be looking at and can you identify other models across the 
country where we should focus in and learn some lessons?
    Mr. Levine. I think first of all, I am familiar with the 
Hillsborough Health Plan. As you might know, I used to run 
South Bay Hospital and Sun City Center. And they operate it as 
an insurance plan. Basically once you meet qualifications, you 
effectively have a medical home, and it does operate well for 
the people that fall through the cracks and don't have other 
forms of coverage, whether Medicaid or private coverage. 
Healthy Palm Beaches is another one that operates. They 
actually offer an SCHIP insurance plan, as you know. Almost 
every child in Florida is covered through--every child in SCHIP 
in Florida is covered through private insurance and Healthy 
Palm Beaches is operated as a private insurance plan, even 
though it is a public plan. The North Carolina model is a 
medical home model that seems to be working well in North 
Carolina. Arizona uses models. There are 40 States that are 
using different variations of integration of care all the way 
from straight managed Medicaid all the way to various forms of 
enhanced primary care case management. And I think each State 
related to Medicaid has to do what works for that State and 
really what drives that is the provider community, what does 
your provider network look like, how robust is it, and can your 
model work. But I think there might be other people can answer 
as well.
    Mr. Ebeler. Actually I am familiar with those where I used 
to work at the Robert Wood Johnson Foundation which----
    Ms. Castor. Yes, and the Robert Wood Johnson Foundation 
recognized them.
    Mr. Ebeler. Let me talk about it briefly from the 
perspective again the relatively constrained lane I am from the 
committee. It reminds me a little bit of the lexicon issue that 
Mr. Gingrey raised when people hear everybody covered or 
universal coverage. From the perspective of our report, that is 
an open issue of how one achieves that so, you know, these 
different models of how one gets to everybody getting coverage 
is the key variable that we are here reporting to you.
    The second thing is the models you are describing connect 
to another piece of our recommendation and I think what many 
committee members have been discussing, which is you can't--
everything relates to everything. You can't get to coverage 
without cost, which is why we have recommended action on both. 
You can't get to cost without attention to deliver. You can't 
get to delivery without quality. You can't get to those two 
without primary care. So the idea of looking at models that do 
not just coverage but other approaches to reforming delivery, 
producing the high-performance system that you are talking 
about a very positive direction to go.
    Ms. Castor. Thank you.
    Mr. Pallone. Thank you.
    Mr. Scalise.
    Mr. Scalise. Thank you, Mr. Chairman. I appreciate 
extending the courtesy.
    As we discuss the importance of health care reform, 
obviously there are a lot of different options, a lot of 
different ways we can go, and I am sure on this committee there 
is going to be a whole lot of discussion on what the different 
routes are. I know I have some real concerns about a socialized 
health care model and I think we have heard some of the 
problems with Medicaid specifically and how just spending money 
doesn't necessarily yield better health outcomes, and Secretary 
Levine, if you can touch on the medical home model that 
Louisiana is pursuing and how this provides more options for 
people on Medicaid to maybe use the money smarter in essence to 
yield better health outcomes with the money that is being 
spent.
    Mr. Levine. Louisiana faces a problem not unique. It is 
faced by almost every State, and that is first in 2004 our 
Medicaid budget was 10 percent of our State budget and now it 
is 22 percent of our State budget just 5 years later, and so we 
clearly have to do something to maintain the sustainability of 
Medicaid. And so we started looking at the cost of our program. 
We realized that we need to focus our effort on, number one, 
early identification of people with chronic conditions so that 
we can properly manage the condition before it becomes acute 
and we wind up spending money. Our State has the highest rate 
of avoidable hospitals in the United States, which is one of 
the drivers for why we have such an expensive system with poor 
outcomes. So our proposal, which we have submitted to CMS, 
creates a medical home model. Everybody in Medicaid would have 
a patient-centered, NCQA-certified eventually medical home. We 
actually require the coordinated care networks to share any 
bottom line results if there is a positive bottom line at the 
end of the year related to the coordinated care network, they 
must share the savings with the primary care physicians. That 
is something that I don't know that any other State is doing 
right now. So there are some unique tenets to our proposal we 
would ask people to look at and we certainly are going to try 
to get CMS to approve it.
    Mr. Scalise. How long has it been since the application to 
CMS?
    Mr. Levine. The application was submitted in the end of 
December and there has not been any formal action by CMS yet, I 
anticipate because of the transition. It might speed up one 
there is a secretary and an administrator in place.
    Mr. Ebeler. Just briefly, at the risk of defending 
Medicaid, again, our view of this is no coverage is the wrong 
amount one wants to move to coverage, and we are open about the 
various tools at your disposal to do that, one of which is 
Medicaid, one of which is improving Medicaid, and I guess the 
only thing I would point out is that if we were a random draw 
of five males at this table from the community, it is likely 
that one of us would be uninsured, and the choice of no 
coverage and Medicaid might be viewed differently than sort of 
the currently insured. So it is--again, the IOM report has no 
particular policy option that is preferred. My only message is 
to urge you to keep various options on the table as you 
deliberate and make your choices.
    Mr. Scalise. Right, and I think earlier when everybody was 
asked to go down the table and respond to whether or not you 
would be willing to trade your health policy for Medicaid and 
nobody responded that they wanted to do it, I think that said a 
lot about the problems but I will say, you know, we have 
experienced this in Medicaid populations, not just in 
Louisiana, but you have seen a shrinking number of doctors that 
accept Medicaid patients because of some of those problems, and 
especially with this last SCHIP bill. I think the concern a lot 
of us had was that as you go to a much higher level of bringing 
more people in that otherwise in some cases are on private 
insurance because the lure might sound good, that you are 
paying for private insurance now, you can get on SCHIP and you 
don't have to pay, many of those people are experiencing that 
many doctors don't take Medicaid and so you get a decreased 
list of options as a parent. I would be curious to hear your 
take, Dr. Levine, about the problems with Medicaid as we are 
talking about physicians, we want to attract more physicians 
and a big challenge is in getting enough doctors, people to 
come into the profession. If it looks like we are doing 
something, creating policies that replicate more of a Medicaid 
model, how would that help attract more doctors when in fact 
many doctors don't want to take Medicaid today?
    Mr. Levine. I think any model, particularly in Medicaid, 
historically Medicaid has achieved its financial goals by 
pushing down provider rates. That is pretty much the only 
weapon we have to try to fight the growth in Medicaid. And as 
we have done that, it has been a self-inflicted wound in that 
we wind up with fewer particularly specialists that will take 
new Medicaid patients and then that creates a serious access 
problem and obviously it drives ER utilization and we know what 
the consequences are. And I think the problem is the spiral 
that we are in is if we don't--if we expand Medicaid, if we use 
Medicaid as the vehicle by which we expand access to coverage 
and we call that a victory, we have not solved this problem. We 
have given people a card for a system that may not be able to 
serve their needs.
    Mr. Scalise. And we may in fact have made it worse, and I 
know my time is expired but I appreciate your comments and 
hopefully we can get CMS to approve that application, the 
waiver.
    Thank you, Mr. Chairman.
    Mr. Pallone. Thank you. We are done with our questioning 
but I want to thank all of you. You may get additional 
questions in writing from us over the next few days, so we 
would appreciate your getting back to us about that, but again, 
this was our first hearing today and I appreciate your 
participation. We obviously have a long way to go but we are 
determined to deal with this issue of health care reform.
    So thank you again, and without objection, this meeting of 
the subcommittee is adjourned.
    [Whereupon, at 3:45 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

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