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





 
            COMPREHENSIVE HEALTH CARE REFORM DISCUSSION DRAFT

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               ----------                              

                        JUNE 23, 24, & 25, 2009

                               ----------                              

                           Serial No. 111-54


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov











           COMPREHENSIVE HEALTH CARE REFORM DISCUSSION DRAFT

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                        JUNE 23, 24, & 25, 2009

                               __________

                           Serial No. 111-54








      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov

                                _____

                  U.S. GOVERNMENT PRINTING OFFICE

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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
JANICE D. SCHAKOWSKY, Illinois       SUE WILKINS MYRICK, North Carolina
CHARLES A. GONZALEZ, Texas           JOHN SULLIVAN, Oklahoma
JAY INSLEE, Washington               TIM MURPHY, Pennsylvania
TAMMY BALDWIN, Wisconsin             MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas                  MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York          PHIL GINGREY, Georgia
JIM MATHESON, Utah                   STEVE SCALISE, Louisiana
G.K. BUTTERFIELD, North Carolina
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 S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE 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
JAN 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

                              ----------                              

                             June 23, 2009

                                                                   Page
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     1
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     3
Hon. Diana DeGette, a Representative in Congress from the State 
  of Colorado, opening statement.................................     4
Hon. Phil Gingrey, a Representative in Congress from the State of 
  Georgia, opening statement.....................................     4
Hon. Lois Capps, a Representative in Congress from the State of 
  California, opening statement..................................     5
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................     5
Hon. Jim Matheson, a Representative in Congress from the State of 
  Utah, opening statement........................................     6
Hon. Tim Murphy, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     7
Hon. Donna M. Christensen, a Representative in Congress from the 
  Virgin Islands, opening statement..............................     7
Hon. Zachary T. Space, a Representative in Congress from the 
  State of Ohio, opening statement...............................     8
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................     9
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................     9
Hon. Tammy Baldwin, a Representative in Congress from the State 
  of Wisconsin, opening statement................................    10
Hon. Doris O. Matsui, a Representative in Congress from the State 
  of California, opening statement...............................    10
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, prepared statement................................   269
Hon. Anna G. Eshoo, a Representative in Congress from the State 
  of California, prepared statement..............................   275
Hon. Kathy Castor, a Representative in Congress from the State of 
  Florida, prepared statement....................................   276
Hon. Bruce L. Braley, a Representative in Congress from the State 
  of Iowa, prepared statement....................................   279
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, prepared statement...............   284

                               Witnesses

Ralph G. Neas, Chief Executive Officer, National Coalition on 
  Health Care....................................................    11
    Prepared statement...........................................    14
Richard Kirsch, National Campaign Manager, Health Care for 
  America Now....................................................    30
    Prepared statement...........................................    33
Stephen T. Parente, Ph.D., Director, Medical Industry Leadership 
  Institute......................................................    37
    Prepared statement...........................................    40
Marian Wright Edelman, President, Children's Defense Fund........    98
    Prepared statement...........................................   102
Jennie Chin Hansen, President, AARP..............................   123
    Prepared statement...........................................   125
David L. Shern, Ph.D., President and Chief Executive Officer, 
  Mental Health America..........................................   136
    Prepared statement...........................................   139
Erik Novack, MD., Orthopedic Surgeon, Patients United Now........   146
    Prepared statement...........................................   149
Shona Robertson-Holmes, Patient at Mayo Clinic...................   164
    Prepared statement...........................................   166
Jeffrey Levi, Ph.D., Executive Director, Trust for America's 
  Health.........................................................   197
    Prepared statement...........................................   200
Brian D. Smedley, Ph.D., Vice President and Director, Health 
  Policy Institute, Joint Center for Political and Economic 
  Studies........................................................   213
    Prepared statement...........................................   215
Mark Kestner, M.D., Chief Medical Officer, Alegent Health........   240
    Prepared statement...........................................   243

                             June 24, 2009

Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................   287
    Prepared statement...........................................   290
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................   296
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................   297
Hon. Nathan Deal, a Representative in Congress from the State of 
  Georgia, opening statement.....................................   299

                               Witnesses

Kathleen Sebelius, Secretary, Department of Health and Human 
  Services.......................................................   300
    Prepared statement...........................................   303
    Answers to submitted questions...............................   348
Sidney M. Wolfe, M.D., Director, Health Research Group at Public 
  Citizen........................................................   360
    Prepared statement...........................................   363
Steffie Woolhandler, M.D., Associate Professor of Medicine, 
  Harvard Medical School, and Co-Founder, Physicians for a 
  National Health Program........................................   366
    Prepared statement...........................................   368
John C. Goodman, Ph.D., President and CEO, National Center for 
  Policy Analysis................................................   370
    Prepared statement...........................................   372
Michael O. Leavitt, Former Secretary, U.S. Department of Health 
  and Human Services.............................................   405
    Prepared statement...........................................   407
Joseph Vitale, Chairman, Committee on Health, Human Services, And 
  Senior Citizens, New Jersey State Senate.......................   410
    Prepared statement...........................................   412
W. Ron Allen, Chairman, Jamestown S'klallam Tribe................   419
    Prepared statement...........................................   421
Jay Webber, State Assembly, State of New Jersey..................   440
    Prepared statement...........................................   442
Raymond C. Scheppach, Ph.D., Executive Director, National 
  Governors Association..........................................   446
    Prepared statement...........................................   448
Robert S. Freeman, Deputy Executive Director, Cencal Health, 
  California Association of Health Insuring Organizations........   453
    Prepared statement...........................................   455
Ron Pollack, Executive Director, Families USA....................   461
    Prepared statement...........................................   463
Scott Gottlieb, M.D., Resident Fellow, American Enterprise 
  Institute......................................................   493
    Prepared statement...........................................   497
Thomas Miller, CEO, Workflow and Solutions Division, Siemens 
  Medical Solutions, USA.........................................   499
    Prepared statement...........................................   501
Kathleen Buto, Vice President for Health Policy, Johnson & 
  Johnson........................................................   510
    Prepared statement...........................................   513
William Vaughan, Senior Health Policy Analyst, Consumers Union...   520
    Prepared statement...........................................   522
Paul Kelly, Senior Vice President, Government Affairs and Public 
  Policy, National Association of Chain Drug Stores..............   551
    Prepared statement...........................................   553
    Answers to submitted questions...............................   575

                             June 25, 2009
                               Witnesses

Glenn M. Hackbarth, Chair, Medicare Payment Advisory Commission..   582
    Prepared statement...........................................   584
Daniel R. Levinson, Inspector General, U.S. Department of Health 
  and Human Services.............................................   605
    Prepared statement...........................................   608
Ted D. Epperly, M.D., President, American Academy of Family 
  Physicians.....................................................   658
    Prepared statement...........................................   661
M. Todd Williamson, M.D., President, Medical Association of 
  Georgia........................................................   670
    Prepared statement...........................................   672
Karl J. Ulrich, M.D., Clinic President and Ceo, Marshfield Clinic   715
    Prepared statement...........................................   717
Janet Wright, M.D., Vice President, Science and Quality, American 
  College of Cardiology..........................................   725
    Prepared statement...........................................   727
Kathleen M. White, Ph.D., Chair, Congress on Nursing Practice and 
  Economics, American Nurses Association.........................   730
    Prepared statement...........................................   732
    Answers to submitted questions...............................  1042
Patricia Gabow, M.D., Chief Executive Officer, Denver Health and 
  Hospital Authority, National Association of Public Hospitals...   739
    Prepared statement...........................................   741
Dan Hawkins, Senior Vice President, Public Policy and Research, 
  National Association of Community Health Centers...............   754
    Prepared statement...........................................   756
Bruce T. Roberts, RPH, Executive Vice President and CEO, National 
  Community Pharmacists Association..............................   763
    Prepared statement...........................................   765
Bruce Yarwood, President and Ceo, American Health Care 
  Association....................................................   773
    Prepared statement...........................................   775
Alissa Fox, Senior Vice President, Office of Policy and 
  Representation, Blue Cross Blue Shield Association.............   792
    Prepared statement...........................................   794
Kelly Conklin, Owner, Foley-Waite Custom Woodworking, Main Street 
  Alliance.......................................................   832
    Prepared statement...........................................   835
John Arensmeyer, Founder and CEO, Small Business Majority........   841
    Prepared statement...........................................   843
Gerald M. Shea, Assistant to the President, AFL-CIO..............   849
    Prepared statement...........................................   851
Dennis Rivera, Health Care Chair, SEIU...........................   867
    Prepared statement...........................................   869
John Castellani, President, Business Roundtable..................   873
    Prepared statement...........................................   875
John Sheils, Senior Vice President, The Lewin Group..............   884
    Prepared statement...........................................   886
Martin Reiser, Manager of Government Policy, Xerox Corporation, 
  National Coalition on Benefits.................................   912
    Prepared statement...........................................   914
Howard A. Kahn, Chief Executive Officer, L.A. Care Health Plan...   936
    Prepared statement...........................................   938
Karen L. Pollitz, Project Director, Health Policy Institute, 
  Georgetown Public Policy Institute.............................   943
    Prepared statement...........................................   945
Karen Ignagni, President and CEO, America's Health Insurance 
  Plans..........................................................   956
    Prepared statement...........................................   958
Janet Trautwein, Executive Vice President and CEO, National 
  Association of Health Underwriters.............................   978
    Prepared statement...........................................   980

                           Submitted Material

Chart, Blue Cross Blue Shield, submitted by Mr. Burgess..........  1000
Letter of June 15, 2009, from the County of Los Angeles to Ms. 
  Harman.........................................................  1004
Report by Health Care for America Now, dated May 2009, submitted 
  by Mr. Pallone.................................................  1006
Letter of July 2, 2009, from the Health Care for America Now to 
  the Committee..................................................  1012


        COMPREHENSIVE HEALTH CARE REFORM DISCUSSION DRAFT, DAY 1

                              ----------                              


                         TUESDAY, JUNE 23, 2009

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:39 a.m., in 
Room 2123, Rayburn House Office Building, Hon. Frank Pallone, 
Jr., [chairman of the subcommittee] presiding.
    Present: Representatives Pallone, Dingell, Green, DeGette, 
Capps, Schakowsky, Baldwin, Matheson, Barrow, Matsui, 
Christensen, Castor, Sarbanes, Murphy of Connecticut, Space, 
Sutton, Deal, Whitfield, Murphy of Pennsylvania, Burgess, 
Blackburn, Gingrey, and Barton (ex officio).
    Staff Present: Karen Nelson, Deputy Committee Staff 
Director for Health; Purvee Kempf, Counsel; Sarah, Despres, 
Counsel; Jack Ebeler, Senior Advisor on Health Policy; Robert 
Clark, Policy Advisor; Tim Gronniger, Professional Staff 
Member; Stephen Cha, Professional Staff Member; Allison Corr, 
Special Assistant; Alvin Banks, Special Assistant; Jon 
Donenberg, Fellow; Camille Sealy, Fellow; Karen Lightfoot, 
Communications Director, Senior Policy Advisor; Caren Auchman, 
Communications Associate; Lindsay Vidal, Special Assistant; 
Earley Green, Chief Clerk; Jen Berenholz, Deputy Clerk; Miriam 
Edelman, Special Assistant; Ryan Long, Minority Chief Health 
Counsel; Chad Grant, Minority Health Counsel; Brandon Clark, 
Minority Professional Staff; and Aarti Shah, Minority Health 
Counsel.

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

    Mr. Pallone. The hearing of the Health Subcommittee is 
called to order. And I will start by recognizing myself for an 
opening statement.
    Today we are meeting to examine a discussion draft on 
comprehensive health reform. The subcommittee will also convene 
to receive testimony tomorrow and Thursday.
    In addition, the full committee will meet tomorrow morning 
to hear from the Secretary of Health and Human Services, 
Kathleen Sebelius.
    Comprehensive health reform is a goal that has alluded 
reformers, Democrats and Republican alike, for over a century. 
As a result, the problems that plague our healthcare system 
have continued to grow worse. The ranks of the uninsured 
continue to swell. The cost of insurance and medical care 
continues to skyrocket. The quality of care delivered becomes 
more and more erratic.
    After years of failing to address these problems, we find 
ourselves in a situation where our broken health care system is 
a clear and present danger, in my opinion, to the economic 
health of this nation. Government budgets are being overrun by 
the mounting costs of health care, crowding out funding for 
other key services. American businesses are disadvantaged as 
they try to compete in the global marketplace, and American 
families are being driven into bankruptcy by ballooning medical 
debt or forgoing critical care altogether.
    President Obama understands that these problems require 
urgent action, which is why he has called upon Congress to pass 
comprehensive health reform legislation this year. And health 
reform is an issue that generates great interest and 
controversy. That certainly we know. And while we may not all 
agree on a common solution, I think we also know that we can't 
let this opportunity pass us by.
    Maintaining the status quo and allowing these problems to 
continue to fester is no longer an option. Nor can we simply 
resign ourselves to making marginal improvements as we have 
done in the past. The time has come for comprehensive reform, 
and the discussion draft we are reviewing this week is a 
starting point for that debate.
    The discussion draft envisions a world where every American 
family has access to affordable and quality health coverage. 
Those who are currently unable to access coverage through our 
public programs, employers or the individual market will now be 
able to do so through a reformed insurance marketplace that 
guarantees access, quality and affordability. People who 
already have health coverage will be able to keep their 
coverage and their choice of doctors.
    But health reform isn't just about improving coverage and 
access; it is also about improving the public health. Too many 
people are suffering from preventible illnesses and conditions, 
such as cardiovascular disease, respiratory diseases, and 
obesity-related illnesses. Accordingly, we must change the way 
we think about medical treatment by focusing on preventive 
care, as well as the quality of care being given. And this 
discussion draft aims to do just that.
    There are a lot of other important details about the 
discussion draft that I am not mentioning, which I hope will be 
explored over the course of the next 3 days. I just want to 
speak directly to those who will stand in opposition to our 
efforts. For those who have legitimate concerns with the draft, 
I simply urge you to talk to us about your ideas. We want to 
work with those of you who are truly interested in being 
constructive participants in enacting health reform this year. 
But for those who stand in opposition simply for opposition's 
sake, I urge you to rethink your position. After a century of 
inaction, the American people want to see change. They want to 
see health reform enacted, and we intend to deliver it to them. 
Thank you.
    And now I will yield to our ranking member for the day, the 
gentleman from Texas, Mr. Burgess.

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

    Mr. Burgess. Thank you, Mr. Chairman.
    It seems like I have been waiting my entire career for just 
this time. I gave up a 25-year medical practice to run for 
Congress, and I didn't do so to sit on the sidelines with 
really what could be the biggest change in our system since the 
enactment of Medicare almost 45 years ago.
    And here we are this morning calling up 10 panels to walk 
us through a legislative proposal released late last week, and 
it is pretty skimpy on some of the details. Now, I recognize 
what a draft is, and I understand that a draft means that 
everything is not completed, but for a draft that mentions 
``fee'' 54 times, ``tax'' 58 times and ``penalty'' 98 times, 
isn't it odd that we have nothing as pertains to financing this 
legislation?
    So, Mr. Chairman, will we have a legislative hearing on the 
actual bill that this committee might markup when that bill 
becomes available? I feel like we ought to emphasize the care 
part of health care, and this debate continues to be defined by 
two words, ``cost'' and ``coverage.'' Yet we need to know how 
many people are covered under this proposal, or how much it 
will cost, or how we are going to pay for it.
    Mr. Chairman, will you commit that we will at least have a 
CBO score on the bill that we will mark up, since we do not 
have one on this bill?
    Now, everyone if the CBO were here to testify, which they 
are not, will they be able to tell us how much this bill will 
cost in the outyears? Every change in the Tax Code, every cut 
in spending that achieves savings only gets us out 10 years. 
From there on out, it will mean Congress will be having to find 
tens of billions of dollars a year to keep whatever program we 
enact, to keep that going.
    And most importantly, as I said, coverage does not equal 
access. What does this bill do for patients? What does this 
bill do to ensure that we will have an adequate supply of 
physicians?
    Now, Mr. Chairman, the President said in his break out-- 
after one of the break out sessions last March, that he wanted 
to find out what works. He said it again at the American 
Medical Association last week. I applaud him for having an open 
mind. I wish this committee, I wish this committee had the same 
type of open mind.
    You just said you want to work with people who are willing 
to work with you. Why, then, Mr. Chairman, have we been 
excluded from the drafting of this bill only to receive it, 
again, late last week and in a very incomplete form?
    Now, I was hopeful and I am still hopeful that we can write 
a bipartisan bill. Since no Republican has been consulted thus 
far, the totality of this bill, I think that is a disservices 
to our constituents. I think that is a disservice to Americans.
    Mr. Chairman, we do stand ready to work with you when it is 
possible; and when it is not, we stand ready to try to educate 
you where you are wrong. And that is what this process should 
be about. But it should be done in the arena in the full light 
of day and not behind closed doors in the dark of night. That 
is how our constituents are best served. That is how the 
American people are best served, and certainly for America's 
patients and doctors, we should do no less.
    I would yield back the balance of my time.
    Mr. Pallone. Thank you.
    May I just mention, Dr. Burgess was sitting in as the 
ranking member, so I gave him the 3 minutes or close to it. But 
because we want to hear from the witnesses today and we have so 
many, I am asking members to try to limit their remarks to 1 
minute today.
    Hopefully you got notification of that, because remember, 
not only the Health Subcommittee members are able to 
participate today; any member of the Energy and Commerce 
Committee is able to give an opening statement or participate. 
So that is why we limited it to 1 minute.
    Next is the gentlewoman from Colorado, Ms. DeGette.

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

    Ms. DeGette. Thank you, Mr. Chairman.
    I will just point out to my friend from Texas, here we are 
in the light of day, and we are going to have 3 days of hearing 
on this draft.
    And I want to thank you, Mr. Chairman, for doing that.
    This is a monumental undertaking, and it is going to take 
everybody's wisdom and advice. I want to talk about a couple of 
things that we all care about in this bill. I think we are all 
going to have to do that today because it is such a 
comprehensive bill.
    First of all, automatic enrollment of newborns into 
Medicaid will ensure that all children have access to necessary 
immunizations and well-child visits during the first and most 
important year of life.
    Secondly, primary care workforce incentives and training 
programs, like student loan repayments and higher 
reimbursements for primary care, will help with the workforce 
we need.
    And finally, a strengthened infrastructure for health care 
quality will let us pay--let us identify and track key health 
indicators.
    I want to agree with you for the need for prevention, and I 
just want to close by saying, we are either going to pay now or 
we are going to pay later, and I suggest we focus on Americans' 
health.
    Thank you, Mr. Chairman.
    Mr. Pallone. Thank you.
    The gentleman from Georgia, Mr. Gingrey.

  OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Mr. Gingrey. Thank you, Mr. Chairman.
    Mr. Chairman, I want to ensure that every American has 
quality health care.
    Unfortunately, this legislation will do nothing but ensure 
that millions of Americans lose the coverage they currently 
have. By including a government health plan and a mandate that 
every American purchase health insurance, this bill guarantees 
that the only insurance plans available to Americans and 
businesses are those that are designed and sold by government 
bureaucrats.
    For those that argue that the government plan will merely 
compete, studies have shown that such a plan will drive out 
competition and indeed become a monopoly.
    This, the bill before us argues, is the responsible thing 
to do. By way of government-made products, mandates, taxes and 
partisan politics, this legislation will take quality market-
driven health insurance away from millions of Americans and 
lead inexorably to a single-payer national health care system.
    We can do better, Mr. Chairman. The minority party has some 
well-studied ideas for improving the affordability, the access 
and availability of health care.
    So far, the majority party in the House has turned a deaf 
ear toward working in a bipartisan manner. For the sake of the 
American people and those patients I cared for, for over 30 
years, I urge you to listen carefully to all voices, and I 
yield back.
    Mr. Pallone. Thank you.
    Vice Chair of the subcommittee, the gentlewoman from 
California, Mrs. Capps.

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

    Mrs. Capps. Thank you, Chairman Pallone.
    And thank you, Chairman Waxman and Chairman Emeritus 
Dingell, for your excellent leadership and the hard work that 
you and your staffs have put into this draft legislation.
    As a nurse turned Congresswoman, this debate is one I have 
waited for, for a very long time. We have had many hearings on 
this topic, bipartisan hearings, and I thank you for that 
opportunity, that it really, truly is coming from all the 
people we represent.
    Our Nation's health care system is in shambles, and with 
legislation, we will finally take the most important steps we 
can to fix it. We will put the emphasis on wellness instead of 
just illness. We will give patients greater choice and 
protection in the health insurance market. We will make sure 
that everyone has access to the care they need and deserve.
    It is going to take a long time, some difficult choices, 
and perhaps a few pennies to get it underway. But we must act, 
and we must act now. The price of inaction is simply too high. 
I look forward to this coming week and the discussions we will 
have on how to perfect this legislative proposal.
    I yield back.
    Mr. Pallone. Thank you.
    The gentlewoman from Tennessee, Mrs. Blackburn.

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

    Mrs. Blackburn. Thank you, Mr. Chairman.
    As I have said so many times in this committee, what is on 
the table for us to consider is in essence the Tennessee 
TennCare experience all over again. And for those of you who do 
not know, that was Tennessee's attempt at an executive order 
program of the Governor's Office. This was their attempt at 
Medicaid managed care. The plan, that plan is what our Democrat 
Governor in Tennessee recently called, and I am quoting him, 
``a disaster.''
    Eventually that program consumed every single penny of new 
revenue in our State. I was a State Senator tasked with funding 
that program. That program nearly bankrupted the State of 
Tennessee. It is not a model for future success. It is a model 
for a looming fiscal disaster.
    And I have no clue who the majority thinks is going to pay 
for this thing. I have no idea where they think they are going 
to get the money for this. Let me tell you, go look at the 10 
care records. We cannot afford this program. There is no money 
to pay for it. You cannot borrow enough money to pay for this 
program.
    In Tennessee, we know that this public option always costs 
more than initial projections. Cost overruns were through the 
roof. Patients are always going to choose free rather than out-
of-pocket care. Employers will force their employees onto the 
system. That is why you are going to see more than 120 million 
Americans moving off of private insurance if this goes through. 
Sound the alarm bell. This is not----
    Mr. Pallone. The gentlewoman, I just wanted you to know you 
are a minute over.
    Mrs. Blackburn. Mr. Chairman, I thank you for that, and I 
think this is an incredibly serious situation. And I thank you 
for your patience.
    Mr. Pallone. Thank you.
    I am trying to keep people to a minute. I am not going to 
stop you if you go a little over.
    Mrs. Blackburn. It is fine. I apologize.
    Mr. Pallone. All right.
    The gentleman from Utah, Mr. Matheson.

  OPENING STATEMENT OF HON. JIM MATHESON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF UTAH

    Mr. Matheson. Thank you, Mr. Chairman. I will do my best 
with a minute.
    We use the terms cost, access and quality a lot around 
here, but we really do need to focus on all three. That is what 
we are trying to do here. I think this is the most complex 
piece of legislation we are going to work on in our careers. 
And just maintaining the status quo is not an option. Our 
health care system is driving up costs in a way, both the 
public sector and the private sector. We can't sustain the path 
we are on.
    I fear this discussion has focused so much on access, we 
are not also looking at the unproductive system we have now. 
There is so much money in our health care system today that is 
spent in irrational ways. There are so many perverse incentives 
built into our health care system. And if we want to achieve 
what our President has asked us to do, which is to bend the 
curve, the cost curve, the plots where costs are going, if we 
want to achieve that, that is where we can really accomplish 
something as a group.
    So I encourage this committee, as we look at this 
legislation, to look for ways to make our health care system 
more efficient, get rid of perverse incentives. And if we do 
that, I think we will secure a better future regardless of how 
we structure the plan.
    Thanks, Mr. Chairman. I yield back.
    Mr. Pallone. Thank you.
    The gentleman from Pennsylvania, Mr. Murphy.

   OPENING STATEMENT OF HON. TIM MURPHY, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Murphy of Pennsylvania. Thank you, Mr. Chairman.
    And I am thankful we are finally moving forward on this. 
Certainly there is not a member in this room on either side of 
the aisle, no matter what one's political leanings, who is not 
totally dedicated to reforming our health care system as many 
of our witnesses are, too.
    The question is, which direction? From the time I arrived 
in Congress in 2003 and through my time before as a State 
senator, I focused my energies on trying to reform this system. 
Just on the issue of hospital-borne infections alone since I 
have been in Congress, 350,000 people have died, hundreds of 
thousands more from other errors. And we have spent hundreds of 
billions of dollars in wasted health care.
    Our current system of $2.4 trillion wastes about $700 
billion a year. Our Medicare and Medicaid system are filled 
with problems. We need to address those first. But don't take 
my word for it. Take Members of Congress's word for it. In the 
110th Congress, 452 bills were brought forward by Members of 
Congress to reform Medicare and Medicaid. Members of Congress 
signed up to cosponsor those 452 bills 13,970 times.
    Members of Congress think we have trouble if the Federal 
Government is going to run a health care system. We are not 
there. A bill that looks at who pays for premiums and co-pays 
is not health care reform. A bill that looks for taxes to pay 
for these things is not health care reform. A bill that reduces 
costs by reducing payments to physicians and hospitals is not 
health care reform.
    We have to reform that system. We have the talent and the 
ability to do that. And I hope that as we progress in the 
coming weeks on this health care reform system, we truly can 
look at focusing on outcomes and not quantity and really make 
health care more affordable and accessible for millions of 
Americans who right now can't afford it.
    Thank you. And I yield back.
    Mr. Pallone. Thank you.
    The other gentleman from Georgia, Mr. Barrow.
    Mr. Barrow. I will waive an opening.
    Mr. Pallone. The gentlewoman from the Virgin Islands, Mrs. 
Christensen.

       OPENING STATEMENT OF HON. DONNA M. CHRISTENSEN, A 
       REPRESENTATIVE IN CONGRESS FROM THE VIRGIN ISLANDS

    Mrs. Christensen. Thank you, Mr. Chairman.
    And I want to begin by using this opportunity to recognize 
the fair and open way in which the Chair Emeritus Dingell, 
Chairman Waxman and you, Chairman Pallone, have conducted the 
process of getting us to this point today and to thank you and 
your staff.
    The bill acknowledges that insurance is not enough and 
takes steps to promote prevention and wellness, to expand 
services and to eliminate health disparities. We appreciate and 
applaud your efforts.
    But if we are to truly transform our system, we will 
continue to push the committee to go further. One specific area 
where more progress is needed is in the treatment of the 
territories. Just as we will willingly and proudly fight and 
die in every war and conflict in defense of our Nation, we 
believe that we deserve the same access to health care as every 
other citizen and legal resident of the United States. We 
understand ``universal health care'' to mean universal health 
care.
    And finally, I believe that the health and well-being of 
every person living in this country is important enough and 
vital enough to our Nation's productivity, competitiveness, 
strength and leadership that passing a meaningful and effective 
health care reform bill should not require an immediate offset 
for every provision. Prevention saves. It saves lives first of 
all, and it saves money as well.
    Thank you, and I yield back.
    Mr. Pallone. Thank you.
    The gentleman from Ohio, Mr. Space.

OPENING STATEMENT OF HON. ZACHARY T. SPACE, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Mr. Space. Thank you, Mr. Chairman, for your time and your 
tireless work on behalf of American consumers.
    We stand before a debate so historic and significant that 
it arises but once every several generations, and that stake is 
an issue of no less importance than the health of the American 
citizen, along with the health of the American economy. For, 
even though we boast of the most sophisticated health care, 
technology, and talented health care professionals in the 
world, their services are often out of reach of the average 
working American.
    Today I offer three areas of critical importance where 
improvements must be made. First, we must grow and nurture our 
rural health care workforce to ensure the same quality of care 
is offered to all residents of this country regardless of where 
they reside.
    Second, we must make quality affordable health care a 
reality for every resident of this country by making reforms 
that capture the power of the free market, harnessing what is 
best about market forces.
    And third, we must change how we treat chronic diseases, 
taking more steps to encourage prevention and managing care of 
those that they afflict. An investment on the front end will 
only result in a higher quality of life for those who suffer 
from chronic diseases and cost savings of billions of dollars 
to our health care system.
    Just as history has judged our efforts to battle for 
democracy abroad and put men on the moon, we, too, shall be 
judged for our response to this critical moment in history. We 
truly cannot afford to fail.
    I yield back.
    Mr. Pallone. Thank you.
    The gentlewoman from Illinois, Ms. Schakowsky.

       OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. Thank you, Mr. Chairman, for moving us 
closer to getting where we all want to be, and that is the goal 
of comprehensive reform of our health care system.
    I want to thank Chairman Waxman and Chairman Emeritus 
Dingell who have provided wonderful leadership.
    This is a historic moment. Americans are counting on us for 
guaranteed access to affordable quality health care and we have 
to ask now--act now. People are forgoing care, families are 
falling into bankruptcy, businesses are struggling to make ends 
meet. I want to focus on two provisions.
    First and most important, the public health insurance 
option. Consumers need a real choice, and the insurance market 
needs real competition. A robust public option provides both. 
It is essential to meaningful reform.
    Second is the inclusion of the nursing home quality and 
transparency act no-cost legislation, which as the title says, 
will improve quality and transparency, helping nursing home 
residents and their families. There are so many important 
provisions in this bill and I look forward to moving it and at 
long last creating an American health care solution that meets 
America's health care needs. I yield back.
    Mr. Pallone. Thank you.
    The gentleman from Texas, Mr. Green.

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

    Mr. Green. Thank you, Mr. Chairman.
    I want to thank you for holding this series of hearings on 
the health reform discussion draft. I am pleased we are 
starting the process on addressing the issues facing the 47 
million uninsured individuals in our country. There is a lot of 
good things in the discussion draft that I know we will hear 
about and we will talk about over the next few days.
    One of the issues that I would like to point out is 
something I have been working on with a number of members on 
our committee that the discussion draft doesn't include, the 
elimination or the--over a period of years, the 24-month 
disability waiting period for disabled individuals under 65 for 
Medicare. Unfortunately, once again, we leave these individuals 
out in the cold. Currently 1.8 million individuals are stuck in 
a 24-month waiting period. Of those individuals, 39 percent are 
uninsured, and 13 percent will die before they endure that 2-
year wait.
    Congress deliberately created the waiting period in 1972 to 
keep Medicare costs down. And I believe the 24-month waiting 
period is a shameful example of how we refuse to cover disabled 
individuals whose medical treatment is deemed too costly. I 
sponsored ending the Medicare disability waiting period for 5 
years, and each year, we were unable to move the bill because 
it is too expensive. And again in this draft, we refuse to 
address the issue. So the reform drafts would allow some of the 
individuals to obtain a government subsidy to purchase 
insurance through the exchange. And if they live through the 
24-month waiting period, once they receive their disability 
determination, they can then switch to Medicare.
    Why would we want disabled and chronically ill switching 
insurance coverage and possibly switching physicians? And I am 
not sure the exchange will provide these disabled individuals 
of the complex medical treatment and coverage for equipment 
that they need. And I strongly urge the committee not to push 
aside those who endure that 24-month waiting period, even after 
you wait to get a disability determination from Social Security 
just for monetary concerns. We can eliminate that waiting 
period over a period of years and show that we do recognize the 
problems the disabled have.
    And I yield back my time.
    Mr. Pallone. Thank you.
    The gentlewoman from Wisconsin, Ms. Baldwin.

 OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF WISCONSIN

    Ms. Baldwin. Thank you, Mr. Chairman.
    And thank you to our witnesses for being here today. We 
have before us what is an amazing accomplishment, the work of 
many years of research and analysis and a collaborative effort 
of this diverse committee. It is difficult to overstate the 
importance of our task. We have been in this position before, 
but this time we simply must succeed.
    As President Obama said earlier this year at our Joint 
Session, health care reform must not wait; it cannot wait, and 
it will not wait another year. As we debate the details and the 
intricacies of this draft, I want to be sure that we remember 
the people, the children and the families that are waiting with 
great hopefulness for us to act. Our country is suffering under 
this growing burden, and it is our responsibility to answer 
their call.
    I am very pleased to see that this draft includes a public 
health insurance option. I have been unwavering in my support 
for this aspect of reform, and I believe that this plan will 
lead the way for reforming our delivery system, emphasizing 
prevention and paying for quality.
    I have a few suggestions for improvement to the bill, but I 
look forward to working with my colleagues on moving this 
forward.
    Thank you again, Mr. Chairman. I yield back the remainder 
of my time.
    Mr. Pallone. Thank you.
    The gentlewoman from California, Ms. Matsui.

OPENING STATEMENT OF HON. DORIS O. MATSUI, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Matsui. Thank you, Mr. Chairman. I want to thank you, 
Chairman Waxman, Chairman Emeritus Dingell, on the excellent 
work to get this crucial legislation to where it is today.
    I am particularly pleased with Section 2231 and Section 
2301 of the draft bill. These sections build off legislation I 
wrote to create a public health workforce corps and to 
centralize prevention spending in a wellness trust fund. Public 
health and prevention are critical aspects of a strong health 
care system. They must be part of our national strategy to 
control health care costs, create better health outcomes for 
people, and ensure that the health care system works for all 
Americans.
    Without public health and prevention, we will never drive 
down health costs, nor will we move our society from one 
focused on treating sickness to one that promotes wellness and 
healthy living. I urge my colleagues to support these critical 
components of the draft bill before us today, and I yield back 
the balance of my time.
    Mr. Pallone. Thank you.

STATEMENTS OF RALPH G. NEAS, CHIEF EXECUTIVE OFFICER, NATIONAL 
  COALITION ON HEALTH CARE; RICHARD KIRSCH, NATIONAL CAMPAIGN 
 MANAGER, HEALTH CARE FOR AMERICA NOW; AND STEPHEN T. PARENTE, 
     PH.D., DIRECTOR, MEDICAL INDUSTRY LEADERSHIP INSTITUTE

    Mr. Pallone. The committee will now receive testimony from 
the witnesses. And I will call up our first panel. Let me 
introduce each of them at this time if I could. Starting on my 
left is Ralph G. Neas, who is chief executive officer of the 
National Coalition on Health Care. Next to him is Richard 
Kirsch, who is national campaign manager for Health Care For 
America Now.
    Good to see you.
    And then we have Dr. Stephen T. Parente, who is director of 
the Medical Industry Leadership Institute.
    And this panel is on health reform coalition views. I am 
going to ask each of you to give a 5-minute statement. Of 
course, your full statement becomes a part of the record. And 
then when you are done, we will start having questions for the 
panel.
    And we will start with Mr. Neas. Thank you for being here.

                   STATEMENT OF RALPH G. NEAS

    Mr. Neas. Chairman Pallone and Ranking Member Burgess and 
members of the full committee and subcommittee, thank you so 
much for the opportunity to appear before you on this momentous 
occasion, day one of hearings to discuss the House Tri-
Committee Health Care Reform Discussion Draft.
    I am pleased and proud to be joined by the founder, the 
visionary founder, and president of the National Coalition on 
Health Care, Dr. Henry Simmons, who is sitting right behind me. 
Among many other things, Dr. Simmons was the deputy assistant 
secretary to President Richard Nixon for health in the early 
1970s.
    The National Coalition on Health Care is honored to be here 
and heartened by the progress made by the three committees. We 
hope that this draft bill can serve as the springboard for 
comprehensive and sustainable health care reform. Like you, we 
believe that the time for action is now, this year.
    Reform of our health care system is a vital condition 
precedent for fixing the nation's faltering economy. The fiscal 
crisis facing us cannot be addressed successfully without the 
simultaneous overhaul of our health care system. America is on 
a dangerous path to sharp increases in the cost of health care 
and the numbers of uninsured and underinsured Americans to 
unsustainable burdens on our economy and on Federal and State 
budgets, and to indefensible, avoidable harm to millions of 
patients and massive waste from substandard and uncoordinated 
health care.
    The rigorously nonpartisan National Coalition on Health 
Care is the Nation's oldest, broadest and most diverse alliance 
of organizations working for comprehensive health care reform. 
The coalition's 78-member organization stands for more than 150 
million Americans.
    The Coalition's five basic principles for health care 
reform, coverage for all; cost containment; improved quality 
and safety; simplified administration; and equitable financing, 
are interdependent. We believe reform, to be effective, must 
address all of these issues in a systemic way that recognizes 
their interconnectedness.
    After more than 18 months of deliberations, the Coalition 
developed a set of principles and specific recommendations. I 
would ask that they be included for the record, along with my 
written statement. As the Coalition operates on the basis of 
consensus, we have begun an expedited process of discussing the 
provisions of the draft bill with our members. Only as these 
internal consultations progress will we be able to provide more 
detailed views and consensus recommendations regarding optimal 
formulation of the final bill.
    However, let there be no doubt that the Coalition strongly 
commends the cross-jurisdictional collaborative tri-committee 
effort to address the central challenges facing our Nation in 
health care, specifically how to slow the growth of health care 
costs; how to extend coverage to Americans without health 
insurance; and how to improve the quality of care and the 
efficiency with which it is delivered.
    The draft is appropriately ambitious in its scope and its 
recommendations. We believe that reducing costs while expanding 
coverage not only can be done but must be done. Now is the time 
to be pragmatic and bold, to keep what is good and to fix what 
is broken in our Nation's health care system. We must come 
together to pass systematic reform that sets our Nation on a 
better path toward affordable, high quality care for all 
Americans and solid fiscal responsibility.
    The Coalition members have long believed that securing 
coverage for all Americans should incorporate a range of 
mechanisms, including responsibilities for individuals and 
employers; the expansion of existing public programs, such as 
Medicare and Medicaid; information and framework to improve 
competition among private insurance plans; and the creation of 
an additional and carefully designed public option.
    The Coalition would encourage consideration be given to 
adding detail to the definition of the service to be covered in 
an essential benefits package. Many of our members would want 
us to emphasize the importance of calibrating the revisions 
regarding the public option to make sure that it would function 
as the drafters clearly intend on a level playing field with 
other plans.
    We applaud the inclusion of a wide range of measures to 
improve the efficiency of health care liberally while enhancing 
the quality and safety of care and also providing support for 
evidence-based prevention. Escalating health care costs puts 
health care coverage out of the financial reach of tens of 
millions of Americans and their employers. Thus we suggest 
consideration of the use of short-term regulatory constraints 
to slow the pace of increase in the cost of essential coverage.
    The Coalition applauds the chairman for the leadership. The 
enormous added momentum your joint efforts have given to the 
reform process cannot be overstated. Indeed, this is truly an 
extraordinary moment in history. Too much is at stake for us to 
risk failure due to partisanship. It is only through a 
commitment to shared responsibility and shared sacrifice that 
we can rise to meet this once-in-a-generation opportunity to 
develop an achievable and uniquely American solution. To 
protect the generations to come, let us work together to enact 
health care reform that is at once moral and fiscally sound.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Neas follows:]





    Mr. Pallone. Thank you, Mr. Neas.
    And as I mentioned, all of your written testimony, your 
documents that you gave me, will be included in the record. So 
you don't have to make a special request for that.
    Mr. Kirsch.

                  STATEMENT OF RICHARD KIRSCH

    Mr. Kirsch. Good morning, Chairman Pallone, members of the 
committee. My name is Richard Kirsch. I am the national 
campaign manager of Health Care For America Now, a coalition of 
more than 1,000 organizations in 46 States that are committed 
to a guarantee of quality, affordable health care for all 
according to specific principles.
    Those principles have been endorsed in writing by the 
President of the United States and 196 Members of Congress, 
including 176 Members of this House from both parties.
    And I am so glad to be with you this morning because the 
legislation you have drafted meets those principles. It would 
deliver on the promise of quality, affordable health care for 
all in a system that is retooled to deliver better quality at 
lower costs. You have done so in this unique tri-committee 
process that recognizes the urgency and historic imperative of 
this issue.
    Our current health care system is a huge stumbling block to 
the American dream. No matter how hard we work or make 
responsible choices for ourselves and our families, our health 
care system too often gets in the way. For too many families, 
one serious illness can mean financial disaster. As medical 
costs contributed to more than three out of five personal 
bankruptcies and the great majority of those were people with 
insurance.
    And even if you have good insurance, you find your choices 
limited and your dreams deferred. You want to look for a new 
job, start that new business, retire at age 59; trapped because 
you won't be able to get affordable coverage if you can get 
coverage at all. And, of course, there are too many families 
that can't get coverage at all.
    Neither can many small businesses, that other great engine 
of the American dream, who want to do the right thing for their 
employees but can't as health care premiums skyrocket every 
year.
    The good news is we can fix what is wrong with the system 
with a uniquely American solution. For those who say we can't 
do this, it is too complicated, it is too much to take on, it 
is too much at once, your legislation is proof positive that, 
yes, we can.
    As Americans begin to pay attention to the health care 
debate, they will increasingly ask, what does this mean to me? 
Here is how I would explain how this works to the average 
American and why it will make their lives better. If you have 
good health coverage at work, you can keep it. But there will 
be two important changes. Under your legislation, you no longer 
have to worry about your coverage at work getting skimpier 
every year or your employer taking a bigger chunk each year out 
of your paycheck. Your employer coverage will not be barebones. 
It will cover most of your health care. It won't stop paying if 
you get seriously ill. Your job will pay a good share of 
coverage for you and your family.
    One more thing. Whatever job you take, you will have good 
health care. That is because all employers will either provide 
coverage or help pay for it.
    If you don't get health coverage at work or you work 
several part-time jobs, you are self-employed, retire early or 
simply out of work, you will now be able to get good affordable 
coverage. You won't be turned down because of a pre-existing 
condition or charged more because you have been sick or you are 
a woman of childbearing age. You can still be charged more if 
you are older but only so much.
    And how much will it cost you? The amount you pay will be 
based on your earnings and the size of your family, with 
assistance for low-, moderate-, and middle-income families. To 
get insurance, you go to a new marketplace called an exchange, 
one-stop shopping for health coverage. All plans will have a 
decent level of benefits and play by the same rules. No matter 
which plan you choose, your out-of-pocket costs will be 
limited, no more catastrophic medical bills.
    You will have a choice of the new public health insurance 
plan, too. So you won't be limited to the same private 
insurance companies that have a record of denying or delaying 
care while they raise premiums three or four or five times more 
than wages.
    As the President says, there are two reasons for offering 
the choice of a public health insurance plan. The first is to 
lower costs, a plan that doesn't pay the average CEO $12 
million a year or sky-high administrative costs. The mission of 
the public health insurance plan will be to drive the kind of 
delivery systems changes we need to innovate, provide better 
value, and invest in our community's health. A plan that will 
inject competition into 94 percent of markets that--or into 
competitive under DOJ standards.
    The second reason the President says we need a public 
option is to keep insurance companies honest. The 93 percent of 
Americans who don't trust private insurance companies know that 
no matter how much we regulate them, their first order of 
business, actually their legal fiduciary responsibility to the 
shareholders, is to make a buck. And when they pay for 
someone's costly care, their profits go down.
    An additional reason for the public health insurance plan 
is to ensure they make real progress at eliminating the 
barriers and disparities in access to needed services that are 
too often experienced today.
    Poll after poll shows strong support for the choice of a 
public health insurance plan with strong support on bipartisan 
lines.
    This legislation also answers the crying need for small 
business for affordable coverage by offering tax credits, and 
allowing small businesses to enter the exchange, and gives them 
the advantage of large pools and lower costs.
    The legislation does a great deal more for the poor through 
Medicaid, for seniors on Medicare, to address the lack of 
primary care providers and the disparities and access to health 
care.
    I am almost done.
    Are there ways of improving this draft? Although there are, 
there are not a great number. And I will detail that in my 
written testimony. Let me conclude by asking you to keep one 
question in mind over the coming weeks: As you hear from a 
myriad of interest groups complaining about this and that, it 
is the question that your constituents will ask at the end of 
the day, will I have a guarantee of good coverage that I can 
afford? The draft legislation you presented answers with a 
resounding yes. And if the answer remains yes next fall when 
you send the bill to the President for his signature, you will 
have done your jobs and in doing so made history.
    Thank you.
    [The prepared statement of Mr. Kirsch follows:]





    Mr. Pallone. Thank you.
    Dr. Parente.

             STATEMENT OF STEPHEN T. PARENTE, PH.D.

    Mr. Parente. Thank you, Chairman Pallone and members of 
this committee, for this opportunity.
    We are in the midst of the seventh major attempt of 
national health reform, beginning with the Wilson 
administration. Since that first attempt, there has been 
President Roosevelt's second attempt in 1936; President 
Truman's third attempt in 1948; President Johnson's fourth 
attempt leading to a compromise that created Medicare and 
Medicaid; President Nixon's limited fifth attempt; President 
Clinton's sixth attempt.
    With President Obama's call for reform, will seven be the 
lucky number?
    My name is Steve Parente. I am a health economist from the 
University of Minnesota and a principal of a health care 
consultancy, HSI Network. My areas of expertise are health 
insurance, health information technology, and medical 
technology evaluation.
    At the university, I am a director of an MBA specialization 
in the medical industry and a professor in the Finance 
Department with an adjunct appointment at Johns Hopkins School 
of Public Health.
    Most recently, I and my colleague, Lisa Tomai from HSI, 
have scored health reform proposals as they have emerged in the 
last 4 weeks. We are using ARCOLA, a microsimulation 
methodology initially funded by the Department of Health and 
Human Services and published in the journal, Health Affairs.
    There are two things people most want to know about these 
proposals. One, how many of the uninsured will be covered? Two, 
what will it cost the Nation in 1 year and in 10 years? HSI 
estimates, like CBO's recent results, find there is no free 
lunch to expand health insurance coverage.
    Our early assessment of the Senate Finance Committee 
proposal shows a 74 percent reduction in the uninsured with a 
10-year cost of $2.7 trillion using a public option plan 
modeled after the Massachusetts Connector.
    We also modeled an FEHBP version of that plan and got a 
cost of over $1.3 trillion, but with a 30--only a 30 percent 
reduction in the uninsured because the plan is generally more 
expensive and not enough incentives are given.
    CBO scored the Kennedy bill last week at approximately a 30 
percent reduction for $1 trillion over 10 years. Using the 
ARCOLA model, we found nearly everyone will be covered if all 
elements of the Kennedy bill were enacted at a 10-year cost of 
$4 trillion. That $4 trillion estimate over 10 years assumes a 
public option plan with bronze, silver and gold levels and the 
proposed insurance exchange with a subsidy for premium support 
that is income-adjusted and calibrated at the silver level.
    The silver level is what most Americans would like in 
health insurance today. It is the equivalent to a PPO plan with 
medium levels of generosity, something with a 15 percent co-
insurance, manageable co-pays and good access to physicians and 
hospitals.
    We accounted for the public plan being reimbursed at 10 
percent above Medicare reimbursement, which is also 10 percent 
below commercial insurance plans.
    In the individual market, we assume the public option plans 
would be community rated and the rest of the individual market 
would be as it is today. For those offered insurance, we assume 
the public plan would be--my teleprompter broke. Because the 
public plan can compete with the individual and group market 
offerings, we saw a crowd-out in the public plan of 79 million 
covered lives with the majority of people leaving employer-
sponsored medium-sized PPOs and HMOs.
    At this time, we are the only group yet to score the full 
Kennedy proposal. We released it last Sunday, June 14th, on our 
HSI network.com home page, 2 days before CBO's preliminary 
estimate. This work was completed as a public service without a 
funder from industry or a political sponsor.
    Some proposals we have examined have specific pay-fors 
already scored by CBO that can substantially reduce their cost, 
such as the Coburn-Ryan bill, with a 72 percent reduction and a 
10-year cost of $200 billion with the pay-fors accounted for or 
$1.7 trillion without.
    One conclusion emerges every time we score a plan: None are 
revenue-neutral. Even with Medicare and Medicaid pay-fors, the 
savings in those programs need to deal with the cost pressures 
of those programs. In all likelihood, these proposals, if 
enacted, would escalate the rate of growth of our national 
debt, particularly the Kennedy plan.
    As a Nation, we are on the verge of making a multimillion 
dollar gamble that more per-capita health care deficit spending 
will make us better off as a society. We are wagering with 
starting bids in trillions that have excessive spending in the 
health care system. Hoping that these billions and trillions 
will lead to a breakthrough medical technology that can 
eliminate whole diseases, such as diabetes and Alzheimer's. 
This is actually not a bad path. It happened before with 
tuberculosis, but not quite at this level.
    It is not an unreasonable wager since Federal funding for 
heart disease and cancer either directly through research or 
indirectly through Medicare has yielded state-of-the-art 
medical care, but it is a wager nonetheless. And we find our 
reckoning is not only with the future debt of our children, but 
their security when the economic crisis has brought 
international scrutiny upon the U.S. from the principal 
purchasers of our treasuries.
    Furthermore, saving businesses from paying health care 
costs or a State government with Federal intervention is simply 
an accounting cost shift that only saps our long-term economic 
growth.
    President Obama spoke recently in Wisconsin of the need to 
expand health coverage to bend the cost curve down. I watched 
him say it 3 times in 5 minutes.
    May I respectfully suggest that bending the cost curve down 
starts with active management of Medicare. For 5 months, we 
have been without a CMS administrator while there have been 
over 400 billion in----
    Mr. Pallone. Dr. Parente, I don't mean to interrupt, but 
you are a minute over, so If you could kind of wrap it up.
    Mr. Parente. I will wrap up. Pardon me.
    In summary, there is greater consensus today that health 
care reform must be undertaken. It will not be free. It will, 
as it always was, be a political decision that was more so 
political than economic. So much can be done now with great 
expansion, but it will come at great cost.
    Thank you.
    [The prepared statement of Mr. Parente follows:]





    Mr. Pallone. Thank you.
    We will now have questions from the members of the 
subcommittee.
    I should mention that everyone, again, that members of the 
full committee are going to participate in the same way and 
have 5 minutes each. And if you were here and passed on the 
opening, you will get an extra minute. But if you weren't here, 
then you don't get an extra minute. Just to make the rules 
clear.
    And I am going to start with myself. I am trying to get two 
questions in here, one about the need for comprehensive reform 
and one about the public option. So I will start with the 
comprehensive reform. But if we go too long, I may stop because 
I want to get to the public option, too.
    Mr. Neas, the National Coalition on Health Care has always 
envisioned the need to address health reform in a comprehensive 
manner, as your testimony sets out this morning. And in our 
discussion draft, we address issues ranging from the workforce 
and prevention and wellness to coverage costs and quality 
improvement. Is it possible to address this in a piecemeal 
fashion, or do we need the comprehensive approach to tackle 
this issue?
    Mr. Neas. Mr. Chairman, it is absolutely essential that 
this be done in a comprehensive way, as we point out in our 
testimony and all of our published materials. It is essential 
that we have systemic, systemwide change in this country in our 
health care system. To do it piecemeal, we could end up with a 
system much worse. You could cover everybody, but you don't 
have cost containment or you don't have it paid for in the 
right way or you don't have quality. All of these principles 
are interdependent. They rely on one another. You have to do it 
all at once. You can't do it incrementally, and you can't do it 
piece by piece.
    Mr. Pallone. OK.
    Let me go to Mr. Kirsch, then, about the public option. We 
have a public option in the discussion draft in a manner that 
assures, in my opinion, the levelest possible playing field 
with the multiple private insurers who will also be competing 
with the public option. So I have four questions, and I am just 
going to read them and ask you to try to get through them in 
the next few minutes here.
    First, why do we need a public health insurance option? 
Won't the exchange function better with just the competing 
private insurers?
    Second, what do you think of the alternatives to the public 
option set out in or draft? People have mentioned co-ops or 
State By State options or a public option triggered only if 
certain criteria are met.
    And then, third, you know, outside the Beltway, as I guess 
we don't really care much about the Beltway anymore, is the 
public option a partisan issue?
    And fourth, would a public option help or hurt small 
businesses?
    If you could try to address those in 3 minutes or less.
    Mr. Kirsch. And try to talk not too fast. OK.
    Why a public option? If we don't, we are just rearranging 
the deck chairs on the Titanic, and I guess the regulation is 
maybe giving those chairs a shiny coat of paint.
    The fact is we have had a private insurance industry that 
has been running our health care system for quite a while now. 
We have had premiums go up several times as much wages--in some 
states, multiple, multiple times as much as wages. At the same 
time people have poor quality care, and they are used to denial 
and delays all the time from health insurance companies.
    We need a public option to do the two things the President 
says, to lower costs, to have an actor in the system that is 
mandated to have a kind of lower cost operations it can have, 
and also to keep insurance companies honest because their 
bottom line will always be hurt every time they pay for a 
significant claim.
    Mr. Pallone. What about the alternatives, the co-ops that 
trigger----
    Mr. Kirsch. The alternatives are basically ways to kill the 
public insurance option. The trigger is basically saying, we 
are not going to have it unless things get worse. There is an 
old expression: Fool me once, shame on you; fool me twice, 
shame on me. The insurance industry basically said in 1993, 
1994, leave it to us to fix the system. We have seen what we 
have gotten. We can't wait any longer. We have waited a long 
time for the insurance system to fix this system, and they have 
failed.
    The co-op, an interesting comment from an Oppenheimer & 
Company analyst says, the co-op proposal is a great gift to 
publicly-traded insurance companies. It is doomed to fail. It 
was basically a political invention to try to placate 
Republicans who didn't want a government role in providing an 
option, and it has no policy benefits. We have lots of 
nonprofit insurers in this country that haven't done the 
market-changing factors we need to provide the kind of care.
    Mr. Pallone. Third, would be outside the Beltway, is the 
public option a partisan issue?
    Mr. Kirsch. No. It is extraordinarily popular. The first 
polling question we asked was, public, would you prefer a 
public plan, just a choice of just public insurance, private 
insurance, or public and private insurance? Not only did 73 
percent of Americans say they wanted a choice; that included 63 
percent of Republicans.
    In the case of the New York Times poll just released over 
the weekend, 72 percent of Americans say they wanted a choice 
of the language of a government-administered plan like Medicare 
to compete with private insurance. So using the government 
word, and still 73 percent of Americans wanted it, including 49 
percent of Republicans, which means more than--and many fewer 
than that opposed it.
    Mr. Pallone. What about the impact on small businesses?
    Mr. Kirsch. And small businesses? Small businesses like 
everyone else need lower-priced coverage. And again, there are 
a lot of things in your legislation that make huge advantage of 
small business. We should talk about it. One of those is the 
public option because to the extent the public option is 
offering good quality at a lower cost, small businesses will 
benefit.
    Mr. Pallone. Thank you.
    Mr. Burgess.
    Mr. Burgess. Thank you, Mr. Chairman.
    Dr. Parente, first off, you were--the buzzer or someone 
interrupted you where you were about to make a point about not 
having a CMS director. Would you care to finish that point?
    Mr. Parente. Simply to say that there should be a CMS 
administrator given that there is $400 billion that has already 
been spent by that program. If you want to bend the cost curve 
down, one of the places where the costs are going out the door 
right now is Medicare and Medicaid. That needs active 
management.
    If even people were to put in modernization for some of the 
fraud, things that have been put on the table, some of it 
actually in the bill, that would be useful. But right now, 
because it is essentially a caretaker administration over at 
CMS, none of that can occur.
    Mr. Burgess. Let me ask you a question, and certainly, you 
know, hats off to your group for doing that exhaustive work on 
the Kennedy bill under such a short period of time. Are you 
going to do a similar scoring for the draft discussion that we 
have in front of us this morning?
    Mr. Parente. Yes.
    Mr. Burgess. And when might we expect for that information 
to be publicly available?
    Mr. Parente. I am hoping that it would be on the HSI Web 
site by tomorrow morning at 8:00 a.m.
    Mr. Burgess. Tremendous. Thank you for doing that as well.
    Now, when you were here last fall, I think it was the day 
after Lehman Brothers failed, if I recall correctly, and the 
whole world changed. This $4 trillion figure that you talked 
about for the three tiers of the public option under an FEHBP-
type structure, you also referenced a low end that would be 
essentially Medicaid for all that would be much less expensive. 
And if I recall correctly, that was about $60 billion a year or 
$600 billion over 10 years. Do I recall that correctly?
    Mr. Parente. That is correct.
    Mr. Burgess. Now, assuming that the reality lies somewhere 
in between those two-- well, let me just ask you this. Have you 
looked at--under the proposal before us today, Medicaid is 
offered--a full Federal component of Medicaid is offered for 
everyone at 133 percent of poverty and below, not just the 
existing populations, but for all populations. Do you have an 
idea what the cost for that is?
    Mr. Parente. Not as specifically. Actually, the public 
option plans, with the subsidies that are proposed, at least in 
the Kennedy bill, addresses a fair bit of the population. A 
round guess on that cost would be probably somewhere in the 
vicinity of about--no more than about $30 billion or $40 
billion per year.
    Mr. Burgess. Very well.
    Let me ask you a question. And we hear the President all 
the time, in fact he said at the White House last March, that 
the only thing that was not acceptable was the status quo and, 
if you like what you have, you can keep it. Well, it is kind of 
tough to reconcile those two positions.
    Do you think, under the bill that is under consideration 
today, the draft bill, the tri-caucus bill that is out there, 
do you think it is reasonable to assume that, if you like what 
you have, you can keep it, under the parameters of the bill 
that are before us today?
    Mr. Parente. I think it is really determined by how the 
public plan is ultimately deployed. I mean, as you all know, it 
is a very long road from whatever this legislation is to 
enactment, which could be 3 to 4 years from now.
    The concern, really, is crowd-out. It is hard to say what 
the public plan model would look like, in terms of logistical, 
operational terms. It if it operates like TRICARE, that could 
be a crowd-out potential. If it operates like FEHBP, that would 
definitely be a crowd-out potential because it is more generous 
than the standard market today.
    Mr. Burgess. Mr. Kirsch, let me ask you a question. In 
yesterday's Politico you have an opinion piece, and you talk 
about the three things that are likely to make this legislation 
happen. And the third thing, the organization where it counts 
most outside the Beltway--now, I don't know how far outside the 
Beltway you have gotten. In north Texas, I will tell you that 
65, 68 percent of the people in my district--and it is not a 
wealthy district, it is a working district, a rural district, 
an inner-city district, as well as a suburban district--but 65 
to 68 percent of the people in my district are satisfied or 
very satisfied with the insurance coverage that they have 
today.
    In spite of the fact that so many people are demanding 
change, that seems like a pretty high number that is accepting 
of where they are right now.
    Mr. Kirsch. Well, it always depends, on all these things, 
on how the questions are asked. Basically, if we look at the 
views nationally, according to the New York Times, 85 percent 
of people believe that the health insurance system needs 
fundamental change or it needs to be completely rebuilt; 86 
percent believes it is a somewhat--61 percent believe it is a 
serious threat to the economy.
    What people are dealing with is they may be happy with 
their insurance at the moment, but what they are totally 
terrified of is what happens if they lose their job. And so 
they want a system----
    Mr. Burgess. Correct. And let me just interrupt you there, 
because I think we can address those problems and correct those 
problems without turning the entire system on its head.
    Now, the last New York Times-CBS poll that I guess is the 
one you are referring to, just a curious figure down toward the 
end of it: Of the people polled, 48 percent voted for President 
Obama, 25 percent voted for Senator McCain, and 19 percent 
didn't vote.
    That is a curious sampling, and I wonder if that may not 
have skewed the results that were reported so widely on the 
Sunday shows yesterday.
    Thank you, Mr. Chairman. You have been generous. I will 
yield back my time.
    Mr. Pallone. Thank you.
    The gentlewoman from Colorado, Ms. DeGette.
    Ms. DeGette. Thank you very much, Mr. Chairman.
    Dr. Parente, I read your testimony, and I wanted to talk 
with you a little bit about some of your analysis around the 
public plan and cost savings and so on.
    I certainly agree with you that we need to try to get cost 
savings in Medicare and in other programs. But what we have 
seen, for example, in Massachusetts, since they have put 
together their connector system without a public plan, the good 
news is they got almost everybody enrolled in health care. The 
bad news is they got absolutely no cost savings, and their 
costs are going up as much as everybody's.
    So I am just wondering if you can tell me--and I apologize, 
I didn't read your piece in Politico. But I wonder if you can 
tell me, do you think all potential public plans are a poor 
idea or just ones that would cause this crowd-out?
    Mr. Parente. I don't think all public plans are a bad idea. 
I think, as I understand as an economist what you are trying to 
do----
    Ms. DeGette. Or, at least, what you have done is you have 
analyzed the Senate bill.
    Mr. Parente. Right.
    Ms. DeGette. And I understand that was the bill that was 
out there. But we, as you know, are a little sensitive over 
here about having our own bill and having it be a work in 
progress. So you can give your opinion on the Senate bill, 
recognizing that is not our bill.
    Mr. Parente. I understand. And there are similarities, so--
--
    Ms. DeGette. Yes.
    Mr. Parente. --a lot of the structure is very similar. Like 
I said, I applaud some of the things that are put in for 
Medicare that are related to cost savings and such.
    A public plan is designed to inject competition into the 
system. What concerns me is that there already is quite a lot 
of competition in the private insurance market space. A few 
things----
    Ms. DeGette. Well----
    Mr. Parente. A few issues--just one clarifying comment. If 
you look at what Massachusetts did very well, it simplified the 
benefits so that most people can get a sense of what was 
available.
    Ms. DeGette. Right.
    Mr. Parente. But if you look at what actually did the deed 
to get everybody covered, it was mostly through high-deductible 
health insurance plans.
    Ms. DeGette. Well, you know, I am sorry, I have a limited 
amount of time and we have two other witnesses. But there was a 
study that was just released by Health Care for America that 
found that 94 percent of the communities in the country do not 
have a competitive health insurance market. For example, in 
Pueblo, Colorado, they have one provider, WellPoint, that has 
76 percent of the market share. And so, in fact, we don't have 
robust competition in 94 percent of the country.
    So I am wondering, don't you think that a public plan might 
be able to help with competition in communities like that?
    Mr. Parente. Not if it doesn't have active price 
competition. So my concern is what if the----
    Ms. DeGette. Right. Well, let's say it does have active 
price competition, then your objection is that everybody leaves 
the private plans because it is cheaper. But isn't that a noble 
goal?
    Mr. Parente. To have everybody leave the private plans?
    Ms. DeGette. No, that people be able to buy cheaper health 
insurance.
    Mr. Parente. Yes, that is a noble goal. But if you are 
going to regulate the public plan to basically go into price 
competition with the private insurance industry, you have to 
ask with your question, how are you going to be able to price-
fix those public plans to be able to do that?
    Ms. DeGette. Oh, you know, just so you know, at least from 
the view of--at least from my view, I don't think that we 
should price-fix the public plan and give them an artificially 
low price. I think most of us on this committee would think, if 
we have a public plan, they should be able to compete with the 
private insurance companies.
    Mr. Kirsch, I am wondering if you can comment on that study 
by Health Care for America and why that necessitates the need 
for a public plan.
    Mr. Kirsch. Right, yes, Congresswoman, as you said, 94 
percent of the market--this is actually AMA data that we use in 
our study--are highly concentrated by Department of Justice 
standards, which means people don't really have choices in 
State after State, like in Pueblo, Colorado, and municipalities 
or areas around the country.
    It is also the question of the right kind of competition. 
It is having competition; it is also having competition for an 
insurance company that cares about people's health care more 
than a healthy bottom line. So it is both factors we are 
looking at.
    Ms. DeGette. Yes. And it would seem to me, for all the 
panelists, Mr. Neas and everybody, that one way that we could 
improve our health care system is to get the competition, but 
also to try to get cost savings through Medicare. And I don't 
think those things are mutually exclusive, do you, Mr. Neas?
    Mr. Neas. Absolutely not. And I think we can applaud the 
work of some of the States, like Massachusetts or Tennessee. 
However, they were not systemic, systemwide reform that 
addressed cost containment, that addressed simplified 
administration and other issues. You have to do it as a 
comprehensive package.
    This could be done. And I think the committee has done a 
good job, a good start, on the public plan, trying to make sure 
that it would be on an equal playing field, not giving an 
advantage, be fair and competitive.
    Ms. DeGette. And I won't vote for a public plan that has an 
unfair advantage over the private plans. But I do think we need 
to find some place for competition, to keep everybody trying to 
find their best price points.
    Thank you very much, Mr. Chairman.
    Mr. Pallone. Thank you.
    The gentleman from Georgia, Mr. Gingrey.
    Mr. Gingrey. Mr. Chairman, thank you.
    I want to address my first question to you, Mr. Kirsch. You 
made a statement in response to one of my colleagues, I think 
the question of why the public option plan. And you said, well, 
the insurance company--the health insurance companies are so 
egregious in what they have failed to do. I think you said, 
fool me once, shame on me; fool me twice--or just the 
opposite--fool me once, shame on you; fool me twice, shame on 
me.
    Why do you feel that, based on that, that we should give 
the, as I think this will do, this bill, the death penalty, 
essentially, to the private market? Why not give them 30 years 
in prison rather than the death penalty? Why is it you want to 
come down so hard?
    Why not let an exchange function, at least for a period of 
time, to see how that competition works to bring down prices, 
as it has indeed done by the prescription drug plans in Part D 
of Medicare?
    Mr. Kirsch. So, let me just say that single-payer would be 
the death sentence. This option is, in effect, saying, ``You 
get a chance, but you don't get to have the field to 
yourself.'' I want to address----
    Mr. Gingrey. But let me interrupt you just for a second. 
You understand I feel like that a public option is a step, a 
giant step, toward a single-payer.
    Mr. Kirsch. So I was just going to address, if I could--and 
this level playing field thing drives me crazy.
    Private insurance companies have 158 million to 170 million 
customers. There are networks in place, they have years of 
brand loyalty, they have contracts with businesses, they have a 
well-established place in American society. They are going to 
continue, as they have done in Medicare, to try to do 
everything possible to cherry-pick and avoid people who have 
high health care risks even in a regulatory scheme.
    In terms of a level playing field, the public health 
insurance option is going to start at an enormous disadvantage 
because it doesn't have all those things in place. And when the 
private insurance companies whine that can't compete with the 
government, I have to begin to wonder, do they really believe 
the polls that say that 93 percent of Americans don't trust 
them, and that is why they can't compete?
    Mr. Gingrey. Well, let me ask you this question. You say on 
page 2 of your testimony, and I quote, ``The good news is that 
we can fix what is wrong with the system with a uniquely 
American solution''--a uniquely American solution similar to 
what we did with AIG, uniquely American solution similar to 
what we did with General Motors?
    What is uniquely American about interfering with the free-
market system in this country?
    Mr. Kirsch. Well, first of all, we are not talking about 
bailing out the insurance industry like we bailed out General 
Motors and AIG. We are talking about giving the insurance 
industry some competition.
    And what is uniquely American about this is saying, we are 
not going to have a system that is just private, we are not 
going to have a system that is just public; we are going to 
build on what works in America.
    What works, in some ways is private insurance, has got 
problems, has worked for our parents and grandparents, is 
Medicare. We are going to use two systems you are familiar with 
and combine them, and that is the uniquely American part of the 
solution.
    Mr. Gingrey. Let me switch to Mr. Parente.
    Mr. Parente is an economist. I would like to get your 
opinion on what impact will the employer responsibility 
policies in this draft have on employers' ability to create 
jobs and put more people back to work? I want you to answer 
that.
    And I also want to know if you have seen anything in this 
draft legislation in regard to the reserve funds that the 
public plan would have to come up with. And where would they 
get that money to be on a level playing field with the private 
health insurance plans that also would be competing in the 
exchange?
    Mr. Parente. The employer question, first of all, it really 
depends on the size of the employer. There is--I have to look 
at this more carefully, will before 8:00 a.m. Tomorrow morning. 
But there is the provision that there has to be some pay or 
play option that is in this. That will always impact employers 
in a way depending upon the size of those particular employers 
that are in place.
    And your second question?
    Mr. Gingrey. Well, let me switch it over to Mr. Neas on the 
second question.
    Mr. Neas, do you see anything in this draft that calls for 
the public plan providing a reserve fund before they can do 
business, just like any other health insurance company doing 
business? Any State in this country would have to have a 
certain amount of money available before they could start 
offering a product so that they could cover these claims that 
occur. They would have to have that reserve.
    Where would it come from in the Federal Government plan, 
and how much money are we taking about?
    Mr. Neas. Mr. Gingrey, I must confess not to knowing every 
single phrase or sentence in the bill. My recollection from 
going over the materials over the weekend was that the 
committees plan to have this public insurance option compete on 
an equal level, be competitive.
    And, as I understand it, also that there would be an 
initial investment with respect to the reserve at the 
beginning, and then the public insurance option would be self-
sufficient after the second or third year.
    I defer to counsel and others up there, the members, but I 
think that is my recollection.
    Mr. Gingrey. Mr. Neas, thank you.
    And, Mr. Chairman, thank you for your indulgence.
    I assume that money would come from the general fund and 
from John Q. Taxpayer.
    Thank you, and I yield back.
    Mr. Pallone. Our vice chair, Mrs. Capps.
    Mrs. Capps. Thank you, Mr. Chairman.
    And thank you for your testimony, to each of you.
    Mr. Kirsch, your organization, Health Care for America Now, 
has good representation in my district, so I will be addressing 
my conversation with you, because it comes right from some of 
the people who have been talking with me.
    But I did want to mention in this discussion of 
competition, which I am happy we can get in to, agriculture is 
the basis of my congressional district in California, and large 
parts of it are rural, therefore. And, in those areas, there is 
only one private option. I don't call that competition. Maybe 
that is why there is such enthusiasm among many of my 
constituents for change, because they see a monopoly in health 
care delivery. If you make too much money so that you can't be 
on Medicaid, then you have to buy this plan that they keep 
raising and they do. Plus, we have a provider issue because it 
is a locality problem with our low reimbursement rate.
    So that combination is really--in so much of America we 
didn't bring those points together. It is a part of our reform 
legislation, as well. So I am pleased that we have this 
opportunity to really get into what competition means.
    And I want to get to that in a minute, but would you just 
expand for maybe a minute on so on why we cannot wait any 
longer?
    There are a lot of people here in Washington, D.C., and 
some who are overwhelmed with our financial burdens, our 
economic situation, plus our debt, they are saying, ``Why would 
you want to bring this up now?'' to our President. And some of 
us, maybe, are wondering, too, because our agenda is really 
full.
    Now, as I said in my opening, as a public health nurse, 
this is why I came to Congress, in large part because we have a 
system that isn't working, that is already so costly. I mean, 
we are talking about the huge costs of health care. We are 
already paying more than any other country in the world for 
health care.
    So why must we seize on this very crowded moment in our 
agenda to do this?
    Mr. Kirsch. Well, I think you have answered the question 
yourself. I mean, you know, the fundamental point that to fix 
the economy in the long run we have to fix health care is just 
true. It is a point that the President has made, that Peter 
Orszag has made.
    Our failure to do that, our failure to have a system which 
provides good coverage to everyone and systemic ways of 
controlling costs, is why we continue to have a system where 
health care inflation is larger than greater inflation, why we 
continue to outpace the rest of the world in how much we spend 
and yet get poor results.
    What is true about the rest of the world is they understand 
that health care is not a private good, it is a public good. 
And there are two things you do with a public good: You 
regulate it or you provide it directly.
    Mrs. Capps. Let me interrupt you. Do you think that feeling 
is shared in this country, that that is what it ought to be?
    Mr. Kirsch. Absolutely. And, again, the New York Times 
poll, great data from this about the public's feeling--I will 
pull it out--but that the government can do a better job of 
controlling health care costs than private insurance.
    What the public actually understands is really interesting 
in this. They understand that nobody other than the government 
is strong enough to stand up to private insurance and the role 
they have in their life, the kind of thing your constituents 
see all the time. They want a strong, public government role 
for regulating the private insurance industry and providing a 
choice, so the only choice isn't private insurance.
    And, you know, if you look at why so many larger employers 
now are saying they want reforms, it is because they understand 
the current system is unattainable, and small business--
unsustainable.
    Mrs. Capps. Let me ask you to use--and I wish I had time to 
ask all three of you. I think there is a huge lack of 
understanding. And I hope that these hearings and our 
President's press conference today and all the other things are 
going to really help explain to the American people what a 
public option is, that it is a level playing field, that the 
public option isn't a government-subsidized program any more 
than any of the other options will be. If we have health 
reform, we are going to give an opportunity for everyone to be 
participating. And most people, so many people, up to 400 
percent of poverty, are going to need help.
    Mr. Kirsch. Right. And I think what I am finding as I talk 
to constituents, and you may find the same thing, is there is a 
huge confusion between the exchange and the public insurance 
option. This is a new concept for people.
    So people ask me questions like, I was on the phone 
yesterday and they said, ``Well, will the public option cover 
the following things?'' I said, ``This is the wrong question.''
    Mrs. Capps. Yes.
    Mr. Kirsch. We are going to have a system--and what your 
bill does, which is great, is it says that every plan in the 
exchange will have to meet these benefits. And, actually, after 
5 years, every employer will have to meet these benefits. So we 
are establishing a standard across the country.
    And so much of what your legislation does, which is 
important in terms of a level playing field, is it says we are 
going to create a basic standard of health care in the employer 
system, which is one reason that we won't have the crowd-out, 
as well as in the exchange, and the public option will be one 
more option in that.
    But that gives everybody the question of, again, will I be 
guaranteed good, affordable health coverage? Well, you know it 
will be good if it meets those standards.
    Mrs. Capps. Uh-huh. And I think you are absolutely right 
that what the public is asking for is certainty. The great fear 
that people have with the health plan that they may even like 
is that there is no guarantee that next year the premiums will 
go up.
    We did this Managed Care Modernization Act, and seniors 
welcomed the opportunity for a chance at lower costs, but then 
they found out that, at any moment, those companies--the 
insurance companies have had nobody overseeing the way they 
were able to manipulate the markets.
    I will yield back for now, but thank you very much, all of 
you, for helping us have this conversation.
    Mr. Pallone. Thank you.
    The gentlewoman from Tennessee, Ms. Blackburn.
    Mrs. Blackburn. Thank you, Mr. Chairman.
    And I want to thank all of you for being here. And I have a 
list of questions that I would love to go through with you all.
    Mr. Neas, I think I will start with you. You know, you make 
a pretty bold statement on page 1 your testimony. ``The 
economic crisis facing us cannot,'' which you underline, ``be 
addressed successfully without the simultaneous adoption of a 
comprehensive, sustainable overhaul of America's health care.''
    Do you have specific research that you are citing in that, 
and would you like to submit that for the record?
    Mr. Neas. Yes, I do----
    Mrs. Blackburn. Great. I would love to have----
    Mr. Neas. --Congresswoman. I would love to depend on the 
chairman of the Federal Reserve----
    Mrs. Blackburn. OK. And let me ask you also----
    Mr. Neas. May I finish that question?
    Mrs. Blackburn. Do you have any program that was a public-
private option, competition, that you can point to that has 
been successful or successfully implemented?
    Mr. Neas. I think there are many examples of where there 
has been a public-private----
    Mrs. Blackburn. Can you cite one for me for the record?
    Mr. Neas. I would certainly say that the Medicare and 
Medicaid and Veterans, all the so-called public programs have 
much interaction with the private----
    Mrs. Blackburn. Can you look at the States and give us one? 
Because we know in Tennessee and Massachusetts they have both 
been shown as being examples that do not work.
    And, you know, there was a question, in our question 
period, someone mentioned price-fixing with the public plan. 
What we found in Tennessee is that you cap what is going to be 
paid through that public plan and everything gets cost-shifted 
over to the private plans. And then you limit your access, and 
your private insurance becomes unaffordable. And rural areas 
like mine lose out.
    So it just really--it doesn't have a great track record. So 
I appreciate your willingness.
    Second question for you: Do you think this can only be 
addressed by the Federal Government? Can the States not help 
address this? Can the private sector not address this?
    Mr. Neas. The States have to be part of this. The private 
sector has to be part of this. But we also need a national plan 
that is systemic and systemwide----
    Mrs. Blackburn. And you think everybody has to be in the 
plan?
    Mr. Neas. Absolutely.
    Mrs. Blackburn. OK. Then do you agree with the premise over 
in the Senate where they are wanting to exempt the unions and 
the union workers would not have to pay? Let's see, those that 
are covered under collective bargaining agreements would not be 
subjected to the tax. The tax is on the health care benefits.
    Mr. Kirsch, I see you weighing in on that. Do you want to 
speak on that one?
    Mr. Kirsch. Sure. I mean, first of all, you are talking 
about a question of whether or not we should be taxing people 
who have good health care benefits. And I think that is the 
wrong direction.
    Mrs. Blackburn. So tax everybody but not the union.
    Mr. Kirsch. No, no, no. We don't think you should tax----
    Mrs. Blackburn. OK.
    Do you, Mr. Neas, think the unions ought to be exempted, or 
should union workers have to pay on this also?
    Mr. Neas. I don't think there is any provision in the 
Senate that is trying to treat union members differently than 
any member of society.
    May I answer a couple of your questions just for 20 seconds 
or so?
    I do want to go back to the private-public blending, the 
partnership. But, most importantly, you just can't, as in 
Tennessee or Massachusetts, address coverage for all or one 
these principles. You have to look at the cost, you have to 
look at the financing and the administration. $2.5 trillion a 
year in health care spending, approximately a trillion of that, 
according to dozens of studies, is waste and inefficiency. The 
money is there----
    Mrs. Blackburn. OK. Let me interrupt you. Reclaiming my 
time, I appreciate that. And I would like--I am so limited on 
time, and I have so many things.
    But Mr. Kirsch has just said that he is opposed to a 
single-payer system. And then your group sponsored a rally last 
year, and here is a comment that was made by a Member of 
Congress, said, ``I know many people here today are single-
payer advocates, and so am I. Those of us that are pushing for 
a public insurance option don't disagree with the goal. It is 
not a principled fight. This is a fight about strategy, about 
getting there, and I believe we will.''
    So, you know----
    Mr. Neas. Congresswoman----
    Mrs. Blackburn. --we have to look at this. If we have those 
that say, ``I am not in favor of a single-payer system; we 
really don't want to go there,'' and then others that say, 
``Well, this is a step along that way,'' as others members, in 
their questioning, have asked you today, I think that that 
causes us tremendous, tremendous concern.
    And, Mr. Kirsch, I think it is fair to say that maybe you 
don't like the insurance companies, but, nevertheless, would 
you--your wanting to get to good, affordable coverage for all, 
that is a goal that I have. Going through what we have done, 
access to affordable health care for all of my constituents I 
think is an imperative. And everyone should be able to have 
access to that.
    Now, are you completely opposed to a private-sector 
solution? Are you open to that? Or do you feel like it has to 
be done through government control?
    Mr. Kirsch. Well, let me just quickly--if you are saying we 
are going to continue to have this solved through the private 
market that got us into this mess, yes, I am opposed to that.
    Mrs. Blackburn. OK.
    Mr. Neas. Fifteen seconds, Congresswoman? We did not have a 
rally last year. No one said anything like that at one our 
rallies. I think your facts are incorrect.
    Mrs. Blackburn. OK, I appreciate the clarification.
    Mr. Chairman, I will yield back. And I have some questions 
I didn't get to that I would love to submit for the record.
    Mr. Pallone. Every member can submit questions for the 
record. I will mention it at the end, but I can mention now, 
within 10 days we usually ask members to submit their written 
questions and then we ask you to get back.
    The gentleman from Georgia, Mr. Barrow.
    Mr. Barrow. I thank the Chair.
    We have heard a lot about how beneficiaries are going to 
benefit under various proposals in the tri-committee draft. I 
want to hear a little bit about how providers are going to 
benefit.
    Where I come from, people are mighty concerned about being 
able to keep their choice of doctor and their choice of 
hospital, but it would probably be more accurate, where I come 
from, to talk about getting that choice back, because a lot of 
folks don't have a choice in the current system as to where 
they can go to get the treatment.
    And you talk to doctors, and they have this problem writ 
large. The consolidation of business in the health insurance 
sector has allowed fewer and fewer insurers to exert and abuse 
what is essentially a monopoly power to decide what folks are 
going to get reimbursed.
    So when I hear folks talking about how participating in a 
public plan is going to get you at least what you get with 
Medicare plus 5, or something on that order, you are talking 
about a system that is already so bad it broke, where they were 
ignoring what is going on in the private sector, where the 
private insurers say, ``If you are not in our network, you 
don't get to treat anybody, because we are the only insurer in 
town.''
    So what I want to know is, how are the rights of doctors 
and hospitals going to be strengthened here? I read a lot in 
the summaries about how the interests are going to be served 
pie-in-the-sky-wise, you know, down the road--we are going to 
grow the universe of providers, we are going to provide 
incentives to get more folks into the game.
    Well, that stuff sounds good, but what about the rights? 
What can folks expect, as a matter of law, if this draft were 
to be enacted, in terms of what doctors get to participate in 
what plans, how insurers can discriminate against doctors of 
good standing in their community? How is this going to change 
in terms of how the world looks to doctors?
    Who can go first on that? Mr. Kirsch, do you want to take a 
stab at that?
    Mr. Kirsch. Well, I think the first thing to note is that, 
while there are some access problems in Medicare, 97 percent of 
doctors accept Medicare. And, you know, seniors find that they 
get covered with a large variety of doctors in their community 
through Medicare, and you don't have the kind of network 
problems you have in private insurance, where you have 
restricted networks and, you know, you may change insurance 
plans and you lose your choice of doctor.
    Mr. Barrow. The range of the benefits package is good, or 
at least it is standardized. Folks have a pretty good idea of 
what to expect in terms of what is covered. Doctors don't like, 
though, the way we have abused the system with the constant--
you know, the sustainable growth rate issues have sort of 
abused that system so much that it is no longer the gold 
standard, in terms of what doctors look for and what they 
expect to get. They need to be reimbursed for the reasonable 
cost of what they are doing.
    Mr. Kirsch. Right. And I know that, you know, one of the 
things about the STR fix will hopefully mean that we are on a 
long-term path to make that more comfortable for physicians. At 
the same time, from a point of view of physicians 
participating, they participate in Medicare, and one of the 
things about a public option, having a stable--stability--and 
we would expect physicians participating the same way they do 
in Medicare, particularly in your legislation, paying 5 percent 
more than Medicare. You would then solve a lot of this problem 
of choice and stability for individuals, and then doctors would 
have a system that they can enter in at an enhanced rate for 
Medicare, particularly with that STR fix.
    Mr. Barrow. So, basically, what you are saying is, if the 
doctors are being pushed around by the one or two dwindling 
providers--payers in the market, they have a place to go----
    Mr. Kirsch. Absolutely.
    Mr. Barrow. --that they don't have right now? It is 
guaranteed to be open to them.
    Mr. Kirsch. Yep.
    Mr. Barrow. OK. How about hospitals? How will hospitals 
come out of this, especially rural hospitals? How are their 
interests going to be strengthened or served by the draft?
    Mr. Kirsch. Well, you know, a huge burden for hospitals is 
uncompensated care. It is an enormous, enormous burden. And, 
you know, hospitals are always faced with, what do you do when 
someone comes to the emergency room who needs medical care and 
isn't covered? Let's provide coverage for those folks. And that 
is a revenue source for the hospitals, as opposed to having to 
collect--you know, not have the revenues, hurt their bottom 
lines, cost-shift to other payers.
    So, you know, the estimates are that, actually, insurance 
policies--the average family insurance policy includes $1,100 
for uncompensated care. Most of that is in hospital settings. 
And it is one way that, over time, as we get everybody in the 
system, we can reduce other premiums and also have a revenue 
source for hospitals that they don't have now.
    Mr. Barrow. Mr. Neas, do you want to chime in?
    Mr. Neas. I just wanted to add, regarding the doctors, this 
is a very important point. I said in my testimony that we have 
78 organizations that stand for 150 million Americans. One the 
best things is we have about 10 medical societies in the 
National Coalition on Health Care. That was not the case in 
1993 and 1994.
    And I know, sitting down with the doctors and nurses and 
others, with Henry Simmons and others on the staff, I said, 
``Why are you doing it this time?'' And they said, ``This time 
is different. We see an attempt to have comprehensive, 
systemwide, systemic reform. We don't mind making some 
sacrifice, as long as it is a shared sacrifice, a shared 
responsibility. We can give up something if everyone is going 
to be giving up something.''
    They want predictability. They want to make sure they are 
getting reimbursed. But they want a system that works, that is 
sustainable. And I think ``sustainability'' might be the most 
important word that I am going to state today before this 
committee. But I think that is why you are getting so much 
participation from all the stakeholders. This is such a 
different environment than 15 years ago, and I think that is 
the reason why.
    Mr. Barrow. Well, we are addressing the interests and the 
rights of the existing universe of health care providers. Let's 
go back to the subject I passed over for a second, and that is 
the long-term problem of supply and demand, the fact that we 
don't have enough primary health care providers, for example.
    Mr. Neas. That is a big----
    Mr. Barrow. Do you think the incentives and the proposals 
that are in this bill are adequate enough or robust enough or 
are muscular enough in order to be able to provide us the 
growth in the sector of the health care community that is being 
underserved right now, not by area, but by area of practice?
    Mr. Neas. We have been meeting with the medical societies 
and one of our newest members, the American Association of 
Medical Colleges and Teaching Hospitals, and they have been 
pointing out to us this extraordinary workforce issue.
    And, as you know all too well, primary doctors now only 
account for about a third of all the doctors in the country, 
sort of the reverse of what it was just 20, 25 years ago. We 
need more nurses, we need more doctors, we need more training, 
we need more money. We have to invest in our providers and our 
doctors and our nurses.
    Mr. Kirsch. And there are several measures in this 
legislation that do that. There are increases to the National 
Health Service Corps----
    Mr. Barrow. My question was, though, are they adequate 
enough? Do you think they are strong enough to actually make a 
difference, to bend the curve in the areas that are being 
served by----
    Mr. Kirsch. Well, there are significant investments in 
doing this, which is really neat, in a whole variety of 
measures that the bill includes.
    Mr. Barrow. All right.
    Thank you, Mr. Chairman.
    Mr. Pallone. Thank you.
    Ms. Christensen.
    Mrs. Christensen. Thank you, Mr. Chairman.
    Let me begin with Mr. Neas. And I thank all of you for 
being here this morning.
    Mr. Neas, I agree with your statement in your testimony 
that this is not the time for halfway measures, but I also take 
the position that coverage alone doesn't reform the system. 
None of the principles in the national coalition address the 
huge gaps that exist in the health of people of color, in rural 
areas, or the poor.
    Where and how does the elimination of these disparities 
that drain the system and our communities fit in your agenda, 
or is it included inherently in those five principles?
    Mr. Neas. You raise such an important issue. I was just 
meeting last week with many of the groups who are working on 
the disparity issues.
    The question has been asked about how urgent this issue of 
enacting this bill is, and what is the crisis. It is an 
extraordinary crisis; we cannot afford to wait.
    And I am addressing your issues. It is not just the Federal 
Government's fiscal crisis and economic crisis or the State and 
local governments', but it is the people who are being 
affected. 400,000 Americans die every year because of 
preventable medical errors, infections that they get in 
hospitals, just by mistakes. Millions more are harmed.
    Those who are uninsured or those were are underinsured--
many disproportionately are minority people without wealth--are 
the most affected by this. But it affects all of society. It 
affects our productivity. It affects the bottom line of 
businesses and the State and local governments. This is a 
crisis of enormous proportions that cannot wait. The costs of 
inaction are unbelievable.
    Mrs. Christensen. Oh, I am not suggesting that we should 
wait. I am suggesting that all of it ought to be included.
    Mr. Neas. That is our position. That is why we say 
systemic, systemwide, which would address the issues that you 
are raising, which are very important. And without systemic, 
systemwide reform, you can't get to that.
    And we have to make special efforts to make sure every 
American, including those who do not now have access or do not 
now have the affordability issue or the quality issues 
addressed, get those issues addressed.
    Mrs. Christensen. Thank you.
    Mr. Kirsch, I know that eliminating disparities is one of 
your principles. But to be able to answer the question, as you 
say, at the end of the day, ``Will I have a guarantee of good 
coverage I can afford?'', if to be able to answer that 
affirmatively we have to fund this bill without a complete 
offset, should we cut back on being able to answer that 
question fully just to meet the $1 trillion limit? Or do you 
see us maybe budgeting for prevention, knowing that it will 
save money in the long run?
    Mr. Kirsch. Let me say that there are eight specific--by 
our count, there are eight specific measures to deal with 
inequities in health care for communities and people of color 
in your draft legislation. So that is really encouraging, and 
we are glad to see that.
    But to this question of should an artificial, a trillion-
dollar figure be used for this? Absolutely not.
    You know, I understand that the Bush tax cut was $1.9 
trillion over 10 years, and $1.3 trillion of that was for the 
20 percent of people in the upper-income brackets. You all made 
the right decision, I think the right decision, to spend about 
$800 billion just for 2 years on the economic situation. We are 
going to be spending around $42 trillion on health care in the 
next 10 years. That is assuming a 5 percent inflation rate for 
health care, which is actually probably an optimistic rate.
    So if we are talking about, at $42 trillion, adding $1 
trillion or $2 trillion, it is really important to realize that 
if we believe what we do believe, which is that we have to 
create the kind of systemic reforms along with lower costs, we 
need to make the investment to realize those goals.
    And these figures that sound so large, when we are talking 
about 10 years and the size of the health care system, are 
really not that large. So this should be driven on doing it 
right and coming with the resources to do it.
    Mrs. Christensen. Thank you.
    Dr. Parente, much of the savings and reduction in health 
care costs, although they may be realized outside of the 10-
year window, will come from community public health measures 
and broader policies implemented across all agencies, as well 
as for a more efficient system and the elimination of fraud and 
abuse.
    Did you have any models that took into account community 
public health measures that would be implemented, or addressing 
the social determinants of health, and did that affect the 
costs?
    Mr. Parente. The models just aren't precise enough to do 
that.
    I mean, I personally recognize those are very good things. 
I actually brought along a book from 1932 that states that all 
of the same objectives that we want to achieve here today with 
this bill pretty much were there. This is a longstanding goal, 
what we are trying to do. This is from the Committee of the 
Cost of Medical Care from University of Chicago.
    But they can't be accounted for. And, actually, a lot of 
things cannot be accounted for. Health IT savings cannot be 
accounted for easily. Prevention can't be accounted for quite 
easily, as well. And a 1 percentage point difference, in terms 
of the cost increases in health care, vastly change what these 
projections will look like, as well.
    Mr. Pallone. Thank you.
    The gentlewoman from Illinois, Ms. Schakowsky.
    Ms. Schakowsky. I want to talk about cost for a minute, 
because the cost numbers--and let me ask you, Mr. Neas. Dr. 
Parente's study looks at the funding for the Federal Government 
as if that is the only factor that we ought to consider. And I 
don't know, the $4 trillion or whatever, I have some 
disagreements over the--or at least my staff suggest that, 
having looked at that, some problems with the methodology. But 
that is not the central question.
    When do we consider total costs spent by Americans--
businesses, individuals, out-of-pocket, premiums, co-payments, 
all those things? When we talk about costs, don't we have to 
think about the aggregate and not just the Federal spending?
    Can you answer that, Mr. Neas?
    Mr. Neas. Absolutely.
    Some people were upset last week by CBO, by Congressional 
Budget Office. And I am not saying I agree with how they scored 
everything, but we are going to look back and thank the 
Congressional Budget Office, because they put on the table the 
cost issue. And I think, for this to be sustainable, we have 
to, as the President has said, make this budget-neutral.
    But you asked the right question. It is not just an issue 
of pay-fors or the issue of the Federal Government; it is 
looking at the entire system. The best phrase that I heard so 
far in the last 6 months, again, out of the President, is 
shared responsibility, shared sacrifice.
    Let's take the pharmaceuticals, let's take the insurance 
industry. They are obviously very happy about where this is 
going in terms of 10, 20, 30, 40 million new customers. They 
are going to the table, they are participating, and I applaud 
them. And I know they want predictability. I know they are 
scared, like we all are, by the economic conditions. But they 
have to come to the table and give up something too.
    There is a lot of money that has to be saved by the 
pharmaceuticals, by the providers, by all of us, by the 
insurance companies. I said before about that, $2.5 trillion. 
The money is in the system; we just have to spend it well. We 
have to look at the cost containment----
    Ms. Schakowsky. OK. Let me see if anyone else wants to 
comment.
    Dr. Parente.
    Mr. Parente. Well, the cost issue is, I think, the dominant 
concern that you really need to address here. Because of the 
situation we were in, actually the day that I testified last--
--
    Ms. Schakowsky. See, I don't even agree with that. I mean, 
I don't even agree with that. I mean, I think that the polling 
showed, too, that the American people, a majority, said they 
would even be willing to pay somewhat more to have universal 
health care.
    So your--but go ahead.
    Mr. Parente. Let me put it back to you as a question.
    Ms. Schakowsky. Yes, go ahead, sure.
    Mr. Parente. Are the American people willing to take 
hyperinflation that could come if this thing basically capsizes 
treasuries? Because if that happens, it will come because of 
this bill.
    Ms. Schakowsky. Mr. Kirsch?
    Mr. Kirsch. Well, you know, I would say what Mr. Orszag 
says, which is that the current biggest threat to the Federal 
Treasury right now is the current health care system. And if we 
don't get our hands on that, we are really in a huge economic 
problem in the long run.
    Mr. Parente. And the only way you can bring those costs 
down is a statist solution that would control costs, which--
let's be honest--that is what you are advocating, a statist 
solution.
    I am sorry, I was out of order.
    Mr. Kirsch. We are actually advocating a system that has 
systemwide cost containment in a way that focuses on better 
delivery.
    And, you know, there has been a lot of discussion of this 
trip from Dr. Gawande to McAllen, Texas, and looking at the 
perverse incentives there that lead to such high Medicare 
spending versus the, kind of, right systems that you have in a 
place like Mayo or others.
    So we have to focus on good delivery, on prevention, all 
those things. And what I do think is important about your first 
question is that we have to look at this as a whole system. For 
instance, if we don't provide coverage for someone with a 
benefit package, it doesn't mean, like, their health need 
disappears.
    Ms. Schakowsky. Right.
    Mr. Kirsch. If you don't, for instance--I mean, I think you 
generally have a good benefit package. I would criticize one 
thing: You have left out dental. Now, you get that as part of 
your basic package in Congress.
    Ms. Schakowsky. Very poorly.
    Mr. Kirsch. Very poorly, but there is none in this. And it 
means that, you know, how many members of the committee may 
have been to a periodontist, and what would happen if you 
couldn't have it?
    So, understand that leaving it out may save the Federal 
Government money, but it shifts tremendous cost onto that 
family, it makes their health more expensive, it makes them 
harder to be in the workforce. It is a whole system we have to 
look at.
    Ms. Schakowsky. I wanted to just make a comment. I may have 
time for that.
    This issue of competition, I think, is also bogus, because 
right now the insurance industry and Major League Baseball are 
the only businesses exempt from antitrust laws, from McCarran-
Ferguson. And so, 94 percent of markets are noncompetitive 
right now. So this argument that somehow, you know, we ought to 
leave it to the private sector and competition is just 
absolutely false.
    The insurance industry has tried all its time to avoid 
competition, and it seems to me that the injection of a private 
health insurance option--and, frankly, I cannot think of a 
public interest reason why that is not an advantageous thing to 
do. To have a choice would actually inject competition.
    And I yield back.
    Mr. Pallone. Thank you.
    The gentleman from Texas, Mr. Green.
    Mr. Green. Thank you, Mr. Chairman, for our first full 
hearing on the draft.
    And I appreciate our first panel of witnesses for being 
here.
    I have a district in Houston, Texas, and Texas has the 
highest percentage of uninsured in the country and also the 
highest number of uninsured. And I will give you an example of 
why we need, I think, a public plan to compete. If the private 
sector could have dealt with the 45 million estimated number of 
people, they would have already done it, because they would be 
making money on them.
    I have huge refineries in my district, chemical facilities. 
About 3 years ago, the CEO of Shell Western Hemisphere sat in 
our office and said he was transferring some production jobs 
from their chemical facility in our district in Deer Park, 
Texas, to the Netherlands. Two reasons: The natural gas at that 
time from the North Sea was cheaper, and the cost for health 
care in the Netherlands was cheaper than the cost in Deer Park, 
Texas.
    Now, it is a union-organized plant, but that was the 
business decision they made. And for a number of years, sitting 
on this committee, I have been wanting to hear from the 
business community, saying, ``Look, this is a cost issue that 
we have. We can't compete in Deer Park, Texas, because of our 
high cost of health care in our Nation.''
    So I know there are a lot of businesses who are part of the 
coalitions, various coalitions, on this. And I wish if could 
just address that. And I know it came up in the last 
questioning.
    You know, we have polls all over the board, but I think the 
one that I saw over the weekend and talked about, 70 percent of 
the American people want some type of government-run insurance. 
Now, a public plan is not government-run insurance, by any 
means. But a public plan that will give the insurer hopefully 
not last resort because otherwise it will be so costly, but an 
insurance product that people can go to have a medical home 
instead of showing up at emergency rooms.
    And I will start with you, Dr. Parente.
    Mr. Parente. Yes, I appreciate the concern about jobs. I 
mean, there has been research that shows that it is ambiguous 
just how much job loss is associated with essentially the 
provision of health insurance, or that cost that is associated 
there.
    That said, let me tell you what I think could work. It 
starts with understanding, what is insurance? Insurance 
technically is a provision of a policy, therefore fairly high-
cost with low-probability event. That is not health insurance, 
nor is it health care. We throw those terms around quite a bit. 
If we were to offer insurance for all and call it really health 
insurance, that is a catastrophic plan, probably with a $5,000 
or $6,000 or $7,000 deductible.
    And to answer the previous question about what we can do 
better to do with $2.5 trillion a year, if you distributed that 
with an individual mandate to the entire country, you would 
have money left over. But that is not what we do. And because 
of that, we have, over a period of time, basically thrown in 
prevention, other services.
    If you think about what the medical home originated from, 
it originated from the HMO Act of 1974, more or less saying 
let's move to a capitation model. It seems like it is back to 
the future. What was missing was health IT and actually some 
sort of cost accounting to make performance metrics come in. 
Maybe now with the stimulus bill that will happen, but that is 
still a long time coming.
    The concern is that that design tried to emphasize 
prevention financially by having extremely low co-pays. The 
unintended consequences of that was that when pharmaceuticals 
went from basically nontrivial expenses to suddenly being 
covered by generous health insurance plans, those $5 or $10 co-
pays got translated beyond just an office visit practice with a 
gatekeeper that was mandatory to everyone. That is what has 
driven up our costs. We are the enemy of ourselves here.
    So the way to fix it, if you want to fix it and have it be 
budget-neutral, individual mandate, catastrophic plans, let the 
rest buy up by State preference, however you want to do it, 
that is budget-neutral. And it would actually preserve the most 
important thing that I think Americans want, and I think it is 
in your surveys----
    Mr. Green. Well, let me respond to that, because I only 
have, actually, 25 seconds last.
    Again, coming from the State of Texas where we have 
individual State options, we have 900,000 children in Texas 
right now who are qualified for SCHIP or Medicaid who are not 
on it because the State won't pass the match.
    The one thing that I asked the Chair: to have a national 
plan. And don't come up with something that will say the States 
will make this option, because we know what will happen in 
certain States. And, again, I was a legislator for 20 years in 
Texas, and so I bring that as experience to you.
    I know I am out of time, Mr. Chairman. Thank you.
    Mr. Pallone. Thank you.
    The gentlewoman from Wisconsin, Ms. Baldwin.
    Ms. Baldwin. Thank you, Mr. Chairman.
    I wanted to just comment. I am going to sound a little bit 
like a broken record on this, because my fellow committee 
members have heard me talk about the public option we have 
available in Wisconsin in our Medicare Part D program. And I 
don't know if any of the witnesses today have had a chance to 
study that, but, to me, it is ample evidence that a public 
option can be available and can compete favorably.
    Let me just quickly comment on it. For perhaps a series of 
coincidences, we had a pharmacy waiver before the Medicare Part 
D program was implemented. We had a program available to 
seniors in Wisconsin called SeniorCare. Our congressional 
delegation fought on a bipartisan basis to keep that program 
when Medicare Part D was implemented and make it a choice 
available to seniors and other eligible folks in Wisconsin.
    And it has operated at about a third of the cost per 
enrollee compared with the private-sector options. But for 
those who think that having such a public option would drive 
away the private-sector competition, I can also tell you that 
Wisconsin has among the most vibrant array of private options 
for its citizens, I think I have heard more than any other 
State in the union.
    So I just want to draw that to people's attention and 
perhaps, when grilled about is there an example that you can 
point to anywhere in the country of an exchange that has been 
set up with a public option competing with private options, you 
can study this, and I think it is a great example.
    I want to move from that to a related issue of State 
innovation as we move forward with this.
    Mr. Kirsch, you are committed to a strong and robust public 
health insurance option, and I am interested in your 
perspective on the role of States. Do you think that the 
ability of States to play a role in running these exchanges 
will enhance a national exchange? And do you think that this 
ability will empower them to build upon the reforms that we 
pass at the national level?
    Mr. Kirsch. Well, the legislation, as I read it, says 
States or groups of States can set up exchanges. And, you know, 
we think that that is an important option. It doesn't have to 
be just an individual State. I mean, you want these exchanges--
every time you create an exchange, you have to set up another 
entity. And so, if groups of States can do it, it may be more 
efficient than having individual States do it.
    And, you know, if you have a national public health 
insurance option, such as we have posed, then it is going to 
deal with each exchange. And so it becomes one more way of--
less administrative hassle if it is dealing with fewer 
exchanges.
    So it is fine to say States can do this, but we think 
groups of States doing it, looking at more efficient ways to 
set up exchanges, manage them, makes sense too. There is no 
reason, just because we have 50 States in the country, that we 
have to have 50 separate exchanges.
    Ms. Baldwin. I don't know if Dr. Parente or Mr. Neas have 
any comments on the State role in this.
    Mr. Parente. I think States are a tremendous place for 
innovation. Actually, what I would welcome to see, how an 
exchange would go forward, is it actually would be something 
that would repeal McCarran-Ferguson and allow plans to compete 
across State lines. Because that would allow the innovations of 
those private players in Wisconsin that have demonstrated such 
innovation to actually compete in Santa Fe. I think that would 
be a nice solution.
    Ms. Baldwin. Mr. Neas?
    Mr. Neas. Congresswoman, I think this is an excellent 
question to ask, and it reminds me of a conversation I just had 
with my boss, Dr. Henry Simmons, a few days ago. We are 
talking, obviously, about having a comprehensive, systemwide, 
national health care plan.
    However, this is only the first half of what we have to do. 
Once this is enacted this year, then we are going to have to 
implement it, oversee it, and enforce it. And I think the 
States are going to play an incredibly important role in that 
and be partnering with the Federal Government.
    I think it does reinforce what this committee's role is 
going to be in overseeing whatever does get done at that level, 
as well as organizations like ourselves. The implementation and 
enforcement of this law, which will hopefully be done in 
conjunction with the States, is a question that should be 
addressed now and forevermore.
    Ms. Baldwin. Thank you.
    Mr. Pallone. Thank you.
    The gentleman from Kentucky, Mr. Whitfield.
    Mr. Whitfield. Thank you, Mr. Chairman.
    Dr. Parente, you mentioned the staggering national debt. 
And we are on the verge of making a multi-trillion-dollar 
decision relating to health care.
    In your mind, are there more cost-effective alternatives to 
expanding health insurance coverage than the Kennedy bill or 
the bill before us today?
    Mr. Parente. As I said in the testimony, it is hard to, 
sort of, have a silver bullet for this at all. I think if you 
have a mandate on some very basic coverage, with some 
provisions for prevention, that will lower the price tag 
considerably, perhaps by half.
    It still may not make it free; you are going to need to 
find some way to have this be paid for. But what it does is it 
actually, sort of, says to the American people, ``You have a 
right so that if something happens and you face a catastrophic 
illness, you will be covered, and you will have choice of 
physician, and that is what we will guarantee.''
    But to actually go beyond that and to put it into ``you 
have a right to a public option plan, which is based on sort of 
an FEHBP model of a BlueCross BlueShield plan that has been 
morphing for the last 60 years'' adds a little too much extra 
cost, approximately probably 70 percent extra cost than you 
need to have, and probably reinforces the same behaviors you 
have in the inefficient system we have today.
    Mr. Whitfield. Well, you know, of course, all of us are 
concerned about cost, and that is particularly important today 
with the economy being what it is and the amount of money that 
we are spending. But, in addition to that, of course, the 
American people want a quality health care system that they all 
have access to. They want health insurance that they can 
afford. And we want models that can be adopted, that we do not 
have the spiraling costs in health care.
    And I have been reading recently, and I know he has 
testified over on the Senate side quite a bit, the CEO of 
Safeway. And I know that when the Medicare program started in 
1965, CBO estimated that by 1990 the cost would be somewhere 
around $9 billion. As it turned out, in 1990 the cost was 
around $100 billion or so.
    The thing that I like about this Safeway model, it appears 
from the evidence that the CEO is providing that they have 
actually been able to control health care, the cost, but, more 
important, they have given their employees the right to make 
decisions on who they want to see. And they also have developed 
a system of transparency so that employees can shop around and 
determine the costs that various providers charge, and there is 
a real disparity in that.
    So I would like to get your comments, those of you familiar 
with the Safeway program. And, Mr. Neas, I know you would like 
to make a comment on that, so go ahead.
    Mr. Neas. I do want to salute Steven Burd, I believe is the 
CEO of Safeway, and all those who make voluntary efforts with 
respect to well-being and prevention. I don't think there are 
any independent studies that corroborate what Mr. Burd has put 
before the committees of the House and the Senate.
    And you are talking about cost, I do think that much of 
what is in the bill, whether it is the Kennedy bill or this 
bill or things that the President has brought up, there are 
good, long-range, cost-savings measures. I don't think anyone 
really has yet addressed the short term. And I think we are 
going to need some short-term regulatory constraints on the 
increase in the expenses systemwide.
    As Congresswoman Schakowsky was saying, it is everyone's 
responsibility, but we need some short-term cost control in the 
bills that come out of the House and Senate, not just the long-
term cost-saving measures. And I would hope that would be 
something that this committee and others would address.
    Mr. Whitfield. Yes.
    Mr. Kirsch. I think what is good about what Steve Burd has 
done at Safeway and people have done at Pitney Bowes and a lot 
of other companies in the country is they have actually looked 
at ways to control costs. And, as you said, the key has been to 
not have financial barriers to preventive care, to get people 
in the system early.
    One of the reasons we want a hybrid system is to encourage 
that kind of innovation and encourage it more in Medicare. If 
you look at Senator Baucus's options paper, it is all these 
things that Medicare has done to be innovative. So let's have 
the private sector innovate, let's have the public sector 
innovate, let's look for better delivery systems. That is what 
we have to do if we are going to move toward a solution that 
makes this affordable for everybody.
    Mr. Parente. Just a quick comment. I studied consumer-
driven health plans, and actually there is a report I have that 
was published by HHS last year that looks in design very 
similar to Safeway and found that it actually saved costs, at 
least bent down the curve, and prevention wasn't touched.
    That is why I am advocating that as a model, because I 
think that could be a very cost-effective solution if the 
financial incentives are structured that way.
    Mr. Whitfield. Thank you. I guess my time has expired.
    Mr. Pallone. Thanks.
    The gentlewoman from Florida, Ms. Castor.
    Ms. Castor. Thank you, Mr. Chairman.
    And thank you all for your advocacy efforts.
    Briefly, could you all, in 20 seconds, take a turn and 
characterize CEO profits of HMOs and CEO salaries, HMO CEO 
salaries and HMO profits over the past 10 years?
    Mr. Neas. I would have to give you my personal anecdotal 
response to that, that it seems excessively high over the last 
10 years. There seem to have been numerous press stories that 
underscore the extravagance of some of those salaries and some 
of those profits.
    Mr. Kirsch. I think we are looking at average CEO salaries 
of $12 million for the top 10 insurance companies in 2007; 
average profits of about $12 billion, $13 billion.
    Ms. Castor. Did you say billion?
    Mr. Kirsch. Billion for the profits. Top 10 CEO salaries of 
$12 million. And I believe there was a 400 percent increase in 
profitability from around 2000-2007. I am doing this from, sort 
of, my visual memory, but it gives you a scale of the kind of 
increase in profits we have seen in the industry over the last 
years.
    And I want to conclude with a quote from Angela Braly, the 
CEO of WellPoint, We are talking a financial analyst, about 
what kind of decisions they are making. She says--this is a 
whole sentence--``We will not sacrifice membership for 
profitability.'' In other words, we are not insuring more 
people if we are going to lose money on them because they cost 
us too much.
    Mr. Parente. They have been going up; we all know that. The 
question is whether or not they are returning value.
    I spent 2 or 3 years working at a nonprofit BlueCross 
BlueShield plan. I liked the people, I liked the management. I 
was sort of disturbed by how inefficient everything could be. 
That is what drove me to become an academic, I suppose. And no 
comments there.
    But what I found in terms of some of the good plans that 
are publicly traded is they introduced innovations that I was 
dying to see done in those nonprofit BlueCross BlueShields. And 
if there is anything that I think is of virtue to this public 
option plan, it is to put some competition into those plans for 
better business practices.
    But keep in mind, those better business practices I see are 
coming mostly out of the for-profit plans that are being 
demonized. So I am of mixed mind when talking about what the 
return on investment of those salaries tend to be.
    Ms. Castor. Well, let's just--I think we can all agree the 
American people are concerned, to put it mildly. I would say 
that they are angry.
    In my home State of Florida, there is a recent example of 
the largest managed care provider, private HMO, whose offices 
were raided some time ago by the FBI, charged by the Justice 
Department, and just settled the case because Florida had 
embarked on a pilot project to privatize Medicaid.
    So this private HMO came in and won the bid, and it turned 
out that they were paid money to provide health care services 
for children under Medicaid and under the State children's 
health insurance company. And rather than provide the medical 
services, they pocketed the money, and have just settled the 
case for $80 million that they are going to pay back to the 
State of Florida.
    Meanwhile, the CEO was receiving multi-million-dollar 
salaries. They were posting the highest profit margins in the 
history of managed care in our State.
    So when we talk about cost, isn't there enough cost--isn't 
there enough money in the health care system now? In fact, the 
CEO of a Florida HMO paid a visit last week, and that is 
exactly what he said to me: ``There is enough money in the 
system. If you adopt a public option and a comprehensive health 
care reform bill, we can get this done.''
    In contrast to all that, what is happening to the average 
American family? Health care costs are driving Americans into 
financial ruin. A recent Harvard University study said that 62 
percent of bankruptcy cases now are caused or influenced by 
medical bills--62 percent. In 2001 it was 50 percent, and in 
1981 it was 8 percent.
    And now with the rising numbers of uninsured, they are 
often completely hammered because they have to pay the entire 
bill, whereas if you actually have health insurance, you 
benefit from the negotiated lower prices.
    Many people, in this day and age, really have nothing left 
because they took out a mortgage on their home; now their home 
is worth thousands and thousands of dollars less.
    Isn't the real crowd-out issue the fact that Americans do 
not have access to affordable health care? Health care costs 
have skyrocketed, and their paychecks haven't kept up. Isn't 
that the real crowd-out issue we are going to tackle in this 
health care reform?
    Mr. Kirsch. Absolutely.
    Mr. Neas. Absolutely.
    Mr. Parente. Just very--I know I only have a second here. 
The reason why costs go up is that we like medical care and it 
works really well. And, societally, that is a decision we are 
taking.
    Individually, everyone has their hardship concerns, and I 
do not belittle at all what you are saying. But understand why 
this is occurring. Health care is a good, and we all want it. 
And we are not willing, necessarily, collectively, or have 
found the right mechanism to distribute that desire to meet our 
economic challenges.
    Mr. Kirsch. I would just say, if you look around the world, 
you see there is higher utilization in a lot of countries and 
they spend a lot less and get good quality. So I would disagree 
with Dr. Parente.
    Mr. Parente. And let me make one personal comment back to 
that.
    I worked for the British National Health Services, my first 
job, because I believed in single payer when I was 21 years 
old. When I worked for the British National Health Service, I 
was in southwest London in a teaching hospital.
    Here is how they saved money, because they still do it the 
same way. Would you like to guess here, anyone, how many long-
term beds, skilled nursing beds, they had available to a 
quarter-million people in that space? Anyone? How about 31. 
That is how you save money and how they did it.
    That is why U.K. has the most advanced hospice program in 
the world, because, in order to save those resources, with a 
soft, velvet touch, you basically were able to say to someone 
who was 80, ``You have CHF. I am sorry. This is the end of the 
road. Let's make you comfortable.'' Here, we don't do that as 
much.
    Mr. Neas. Congresswoman, you are really getting to the 
heart of the matter here as to why we have the kind of polling 
that we have. People are starting to find out about these 
outrages. And we do have some of the finest, if not the finest, 
health care in the world, but, as Mrs. Christensen said, if you 
can afford it. But there are tremendous disparities.
    And I said a little while ago, 400,000 preventable deaths 
per year in our system--400,000--costing $700 billion, $800 
billion a year. These are all costs that could be addressed by 
systemic, systemwide care. This is a scandal that this is 
happening, absolutely a scandal. And you were talking about the 
cost for individuals and the bankruptcies, four times as much 
for health care costs as the increase in wages.
    When people find out about this, as good as the polls are 
now, they are going to be even better. There is going to be a 
popular uprising on behalf of this kind of bill and for 
comprehensive health care reform this year. It is absolutely 
necessary.
    Mr. Pallone. I let them go because I didn't want them not 
to have the opportunity to answer your question, but we have to 
move on. Thank you.
    The gentlewoman from Ohio, Ms. Sutton.
    Ms. Sutton. Thank you, Mr. Chairman.
    Mr. Kirsch, I want to thank you for being here. I want to 
thank you all for being here. And, Mr. Neas, thank you for your 
leadership of your very diverse coalition. We appreciate it.
    But, Mr. Kirsch, the coalition's five basic principles for 
health care reform: coverage for all, cost containment, 
improved quality and safety, simplified administration, and 
equitable financing.
    That is how you--or is that Mr. Neas? I am sorry, Mr. Neas. 
I apologize.
    Mr. Neas. That is all right.
    Ms. Sutton. I bet you agree with those.
    Mr. Kirsch. Sure.
    Ms. Sutton. Mr. Neas, those are the broad principles that 
your coalition is fighting for in health care reform; is that 
correct?
    Mr. Neas. Those five principles, buttressed by many, many 
specifications that are part of our pamphlet. I bring this 
everywhere. Just like Senator Robert Byrd brings his copy of 
the Constitution, I bring this blueprint for reform, which has 
specifications that 80 organizations spent 18 months putting 
together to implement those five principles.
    Ms. Sutton. And I appreciate that and I appreciate that 
commitment, much the way I appreciate the commitment to the 
Constitution.
    Dr. Parente, do you agree with those five basic principles 
for health care reform?
    Mr. Parente. Yes.
    Ms. Sutton. OK.
    And I just have a question, Dr. Parente, about--I apologize 
that I didn't get to hear your testimony, but I did get to read 
it. And so, based on that, you discuss at some length the parts 
of health care reform that can create costs without any regard 
for the many cost savers that will be included.
    So, in particular, I am interested in your score of the 
public health plan option. You don't seem to consider that with 
a public health plan comes increased competition. You sort of 
almost scoff at that in your testimony, that it will increase 
access and drive down premiums for beneficiaries.
    Why do you choose to disregard that?
    Mr. Parente. Because there is not a study to show that it 
would work.
    Ms. Sutton. OK. So, until somebody shows you a study--and I 
heard Ms. Baldwin talking about what is true in her State. Are 
you saying that there is no demonstrable evidence based on what 
is happening there to support this kind of conclusion?
    Mr. Parente. Not on a national scale.
    I am from the upper Midwest, as well. We in the upper 
Midwest, as was in the New Yorker article, just do things 
differently. We are more cooperative, maybe because it is cold. 
But to generalize this out to the Nation is not easy to do.
    I mean, just take the examples from Florida. I guarantee 
you, Wisconsin and Iowa and Minnesota are really low on fraud. 
Florida, on the other hand, is the capital for the world.
    To find a one-size-fits-all solution is going to be 
difficult. That is why I propose, if you are going to do 
something like an exchange, let insurance companies buy in each 
other's markets or compete in each other's markets and not be 
constricted to the same State-specific things that McCarran-
Ferguson does today.
    Ms. Sutton. You know, a couple of things. You will concede 
then, though, that there is some, on a State-wide basis, 
evidence to support that a public plan can drive down costs and 
increase competition?
    Mr. Parente. No, I--not at a national scale.
    Ms. Sutton. I know. I said at a State level.
    Mr. Parente. There is evidence of State innovation that is 
successful.
    Ms. Sutton. OK.
    Mr. Kirsch, would you like to comment?
    Mr. Kirsch. Well, Medicare has less than 5 percent annual 
inflation. Private insurance is about 7.5 percent inflation. 
Commonwealth Fund thinks the premiums--if we use Medicare 
rates, you guys are talking about Medicare plus 5 percent, 
would have 20, 30 percent savings.
    So there are studies. Urban Institute says it will save 
money. Jacob Hacker at Cal-Berkeley thinks it will save money. 
So there are a bunch of studies that say it will actually save 
significant money. And we have seen that Medicare has lower 
inflation than private insurance. So I would beg to differ.
    Ms. Sutton. OK, thank you.
    Dr. Parente, can you tell me, do you think that the 
majority of the millions of uninsured Americans, do you think 
that they are just simply waiting for the right plan to come 
along?
    Mr. Parente. No, I--no. I think that there is a real 
problem. You know, most people would refer to this as a market 
failure, to have this level of folks be uninsured.
    I think the question people have to ask is, when people 
hear that 45 million or probably now 50 million number by the 
time this year shakes out, you know, it is--the question I 
think people think about is, is that the number of people that 
started the year uninsured and ended the year uninsured and 
found nothing in between? Because that number is quite 
different. That number is a fraction of 50 million.
    Ms. Sutton. With all due respect, I think people, when they 
hear that number, think that is totally unacceptable in a 
country as great as this, that we would have millions of people 
uninsured with access to care when they need it.
    But I am going to move on. I just have----
    Mr. Parente. I just--I would agree. What I am saying is 
focus on the folks that start and finish the year uninsured. 
That is a priority.
    Ms. Sutton. Do you think that the American people who have 
insurance through the private insurance industry are very 
pleased with their care?
    Mr. Parente. I have seen surveys that suggest that they are 
not. But it is heterogeneous mix, and they are upset for 
different reasons.
    Ms. Sutton. Do you think that it is appropriate that the 
pre-existing condition exclusions that exist in the private 
market should continue?
    Mr. Parente. It all depends upon whether those pre-existing 
conditions actually really get premium to a point where 
insurance is unaffordable, which, actually, in several States 
it has done.
    Ms. Sutton. OK.
    I know that my time is up. Thank you.
    Mr. Pallone. Thank you.
    The gentlewoman from California, Ms. Matsui.
    Ms. Matsui. Thank you, Mr. Chairman.
    I would like to focus in on one area. I would really like 
to ask a lot of questions, but this is one area I am really 
focusing in on, and this is prevention as an overall part of 
the health care reform.
    And we can't forget it, because we understand that we need 
to prevent people from getting chronic diseases like heart 
disease, diabetes, and asthma. And unless we do, the costs of 
our health care system will just go up, no matter how well an 
insurance exchange is structured.
    More than 75 percent of the health spending in this country 
today is attributable to chronic illness, but only about 3 
percent of our health care spending is for preventive services 
and disease promotion.
    Mr. Kirsch, your organization platform states that health 
care reform will emphasize quality care, including coverage for 
prevention and primary care, and good management of chronic 
conditions. And, as you know, our draft bill requires insurance 
companies to cover preventive services and waives our co-
payments for these services.
    Is your organization's vision for preventive care fulfilled 
in this legislative draft before us today?
    Mr. Kirsch. Well, yes, in terms of the benefit package, 
absolutely. Because what you have done is, as you have said, 
you have made prevention a standard part of the benefit package 
and, eventually, employer-based coverage, as well as the 
exchange, and you have done it without financial barriers to 
care. And you have also made a significant investment in the 
legislation into increasing the number of primary care 
providers, because we are going to need that to be sure this 
preventive care is delivered.
    Ms. Matsui. But do you think the bill could be strengthened 
to place an even greater emphasis on preventive care?
    Mr. Kirsch. Well, the benefit package in terms of 
prevention is good. Now, some of the details of the benefit 
package are going to be left, under your bill, to a board to 
set that. The question is how much is put in law now versus 
not.
    But the point is, you have said prevention, you have said 
financial barriers, and you have made the investment in a 
primary care infrastructure. So we think these are really, 
really good.
    Ms. Matsui. OK. Given that the draft bill requires a 
certain level of coverage for preventive care services already, 
do you see any role for the public option in driving private 
insurance toward a model that focuses more on services that 
will help people avoid getting sick in the first place?
    Mr. Kirsch. Well, we hope so.
    You know, I had an interesting conversation years ago with 
the CEO of an insurance company who said, ``It doesn't pay for 
us to invest in prevention, because we are only going to have 
these folks for a year or 2, so any savings won't accrue to our 
benefit.'' That is the kind of calculation you make if you run 
an insurance company. Or you just do your marketing to people 
who don't need a lot of health care in the first place.
    A public option whose mandate is the public good, who is 
looking at the long term, will have a different set of 
incentives to look at: how do we promote the public health, how 
do we keep people in, how do we avoid them getting sick, having 
good chronic care management and innovate in that.
    And it is very important that one of the goals you 
specifically laid out in this legislation for the public option 
is innovating delivery system options that do that. And so not 
being simply--you know, Medicare has done some of that, 
Medicare needs to do better. But the fact that you all made 
that a specific mandate for the public option is incredibly 
important.
    Ms. Matsui. So you think this is a real opportunity here on 
the public option aspect of it?
    Mr. Kirsch. The public option, actually, specifically is 
charged by the legislation with doing that kind of innovation 
delivery system to focus on better chronic care management, to 
do the kind of things you are asking about.
    Ms. Matsui. Mr. Neas.
    Mr. Neas. I just want to add to that.
    There are some excellent provisions in the bill, and I 
think there is more and more discussion with respect to best 
practices and looking at Intermountain and Cleveland and Mayo 
and other places.
    But I think it is very important to make sure that your 
deliberations and your eventual decisions and how it is 
implemented is evidence-based. And I think that is so essential 
for making this all work.
    Ms. Matsui. I believe that, too, and I think that there is 
evidence available. It is trying to get the evidence in the 
manner in which we can actually compare. And prevention and 
wellness, for many people, seem to be more something that is a 
fluffier side. But, for me, I would rather not get sick. And I 
think if we don't get sick, we will probably lower the health 
care costs anyway.
    But I was also considering, too, what--Mr. Neas, you did a 
lot of work on health care costs and how they hurt small 
businesses. And can we use the same model here that Safeway has 
used, as far as what they have done as far as prevention and 
wellness, as far as having small businesses do the same things 
too?
    Mr. Neas. I had an opportunity to respond to another member 
regarding Steven Burd and Safeway and saluted him for his 
innovations and his well-being and prevention efforts. I also 
did hasten to add that there hadn't been any independent study 
to corroborate some of the claims that have been made.
    But, certainly, we want to welcome efforts by the private 
sector, by everyone, to try to keep people well, to prevent 
things from happening. That is an important part of the 
equation.
    Ms. Matsui. I think I have run out of time. Just quickly.
    Mr. Kirsch. Just quickly, though, I think the key and one 
of the reasons to have a strong public option is, how are we 
going to take--it is great that Safeway or Pitney Bowes or IBM 
can do it; how are we going to translate that into small 
businesses?
    If we have a public option that drives those things and 
then small business, in exchange, can benefit for their 
employees, we can make it more than just the innovators in the 
private sector.
    Ms. Matsui. That is great. Thank you.
    Mr. Pallone. Thank you.
    The gentleman from Utah, Mr. Matheson.
    Mr. Matheson. I waive.
    Mr. Pallone. The gentleman from Massachusetts, Mr. Markey.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    This is an historic time, and we are very proud in 
Massachusetts that we adopted a new law that puts us in the 
same role, as revolutionaries, that our State has historically 
played in many other areas, except we are not any longer 
talking about Minutemen but MinuteClinics up in Massachusetts, 
and not Red Coats but the white coats of doctors, in terms of 
this revolution that we are trying to create.
    What I would ask is, if we could, get your opinion as to 
this Massachusetts plan, and what lessons you draw from it, and 
what you would try to emulate or avoid in moving forward.
    And we have moved now to 97.4 percent of our citizens with 
coverage, which is something that obviously we had as our goal. 
It has only been in place for a couple of years, but it 
obviously has been successful to that extent.
    But, Mr. Neas, could we begin with you? And welcome back to 
this committee, for the many times you have been here. And 
whatever observations you have I would very much appreciate.
    Mr. Neas. Mr. Chairman, it is an honor and a pleasure to be 
back here. And, as you know, as a product of Massachusetts, as 
the former chief counsel of Republican Senator Edward W. 
Brooke, I am very proud of what Massachusetts has done--Senator 
Kennedy, yourself, the legislature, Mitt Romney, and others--
especially with respect to, I believe, including about 95 
percent so far of the population of Massachusetts.
    Having said that, I know Massachusetts made a political 
decision several years ago that it was not going to address the 
cost management issues at that time. So we have my very good 
friend, Governor Deval Patrick, going to the legislature right 
now and going around the State to make sure there is additional 
legislation that would address the skyrocketing costs and 
increase in costs that affects Massachusetts and every other 
State in the Union and is such a national emergency.
    So there are wonderful lessons to be learned from 
Massachusetts. There are also lessons that you expected, that 
it was not a sustainable plan unless the money was going to be 
raised and/or the cost-containment issues were going to be 
addressed. I think Massachusetts is starting to do that.
    And I believe, with a national plan that addresses health 
care reform in a systemic, systemwide way and works in 
partnership with Massachusetts, the Paul Revere work that has 
been done will be completed over the next few years, the next 
number of years.
    Mr. Markey. Thank you, Mr. Neas.
    Mr. Kirsch.
    Mr. Kirsch. Sir, I have a daughter who is a nurse at 
Children's Hospital in Boston.
    Mr. Markey. Beautiful.
    Mr. Kirsch. But, in terms of your question, more 
importantly, I have a daughter who just moved to Boston, 
Somerville, has taken not a very well-paying job between 
college and graduate school, but has good health insurance 
because of what you have done.
    And when she was between jobs, we had to pay more than $300 
for a medication she is on for a chronic condition. That was a 
lot of money for us to pay. What would have happened if she 
weren't able to have that--now be able to get that coverage 
through the plan?
    The plan has been successful by expanding coverage to low-
income and moderate-income people in Massachusetts. It is 
extraordinarily important.
    Where are the things that we think can be improved?
    One is, unfortunately--and this is a fiscal problem because 
the State is just doing it--the subsidies don't go more than 
300 percent of poverty level, which means there are a set of 
people who have been exempt from the program because it is not 
affordable. What is good about your legislation is it goes up 
to 400 percent of poverty level. It also allows you to look at 
regional differences in costs, which is very important.
    Second of all, it doesn't have a public option in 
Massachusetts. And by injecting that kind of role in 
controlling costs, that is an important factor.
    Third, you don't really have employer responsibility 
because of the ERISA challenges and also because Governor 
Romney wasn't crazy about it. Employer responsibility is very 
important in terms of finding a lot more revenues. You are able 
to get away in Massachusetts because you are one of the highest 
employer-sponsored insurance penetrations in the country. You 
can't do that in other places.
    So a lot of good things in the Massachusetts model were 
shown, but some things that we think can strengthen it. And, as 
Mr. Neas said, you are all starting to deal with the cost-
control issues, which are being built into the Federal reforms.
    Mr. Markey. OK. Thank you, sir.
    Dr. Parente.
    Mr. Parente. I think you should be applauded for doing it. 
I think it is a landmark initiative.
    Costs are the big issue, as are being discussed and have 
been previously mentioned. I think also there could be longer-
term issues in terms of competition.
    One thing that was learned that actually some of our work 
showed previously was that some of the higher-deductible plans 
or the low-option PPOs would be the magic price point to get 
many people to get the right incentives to come in. And we just 
have to be sure that if this happens, what we are discussing 
here, that those options are on the table as well.
    One thing that--I will make this very brief comment--was 
that you really need to have as many private insurers to 
compete as you can. And I remember that that wasn't an initial 
concern, but that looks like it is being addressed.
    Mr. Markey. Thank you, Dr. Parente.
    But there are a lot of things in common, Mr. Chairman. You 
know, it includes expanding Medicaid, creating a connector to 
help patients select a plan, and helping to subsidize the low-
income citizens so that they can have access to health care.
    So I think the general principles are very similar. And we 
can learn, actually, from what went well and what needs to be 
reformed in the future.
    And I thank you for your leadership.
    Mr. Pallone. Thank you.
    And I think we are done--Mr. Dingell? Chairman Dingell.
    Mr. Dingell. Thank you, Mr. Chairman.
    Your study of the costs was just limited to the Kennedy 
bill; is that correct?
    Mr. Parente. It was also done, one on Coburn-Ryan and also 
one on the Senate Finance Committee, as well.
    Mr. Dingell. I see. You have not done one on the bill that 
is right now, the draft?
    Mr. Parente. No. As I mentioned earlier, I hope to have 
estimates on that done by tomorrow morning at 8:00 a.m.
    Mr. Dingell. OK.
    Now, I am curious, you have mentioned the English health 
system. Is there any significant similarity between the English 
health system, of which you appear to be critical, and the 
discussion draft that is before the committee?
    Mr. Parente. Actually, I am not critical of the English 
system. I am just bringing it up as a comment. I think both 
systems grew out of, if you will, the socioeconomic history of 
each country.
    Mr. Dingell. But there is no similarity between the two, is 
there?
    Mr. Parente. Well, there will be increasing similarities if 
we have to ration care.
    Mr. Dingell. Why do you make that statement?
    Mr. Parente. Because the only way you can actually hold the 
cost curve down effectively with Medicare is effectively to 
limit patients.
    Mr. Dingell. This is your assumption; is that correct?
    Mr. Parente. It is an assumption----
    Mr. Dingell. And, as in all other studies, the study is 
only as good as the assumption, isn't that right? Garbage in, 
garbage out.
    Mr. Parente. Not necessarily. But if it is garbage in, 
garbage out, then all the Commonwealth stuff has to be thrown 
out, too, Congressman Dingell.
    Mr. Dingell. Now, this is not a single-payer system that we 
are talking about here, is it? The European system is a single-
payer system to which you are referring; isn't that right?
    Mr. Parente. The European system is made up of many 
countries----
    Mr. Dingell. Let's talk about the British.
    Mr. Parente. They are not all single-payer systems.
    Mr. Dingell. The British system is a single-payer system, 
is it not?
    Mr. Parente. It is a single-employer system, yes.
    Mr. Dingell. Now, your assumption that there will be 
rationing, there is rationing right now, isn't there?
    Mr. Parente. Yes, there is.
    Mr. Dingell. We have 47 million Americans who don't have 
any health care. And, during the course of a year, we have as 
many as 86 million who have no health care. Obviously, those 
people without health care are being rationed, are they not?
    Mr. Parente. Yes, they are.
    Mr. Dingell. OK.
    I guess that is all the questions I wanted to ask. Thank 
you, Mr. Chairman.
    Thank you, gentlemen.
    Mr. Pallone. Thank you, Chairman Dingell.
    And I think we are done with questions, so I want to thank 
you all. It was very helpful. Appreciate it. And, you know, as 
we move along, we are going to certainly keep your ideas in 
mind. Thank you.
    And I would ask the next panel to come forward.
    And let me remind members that we are not taking a lunch 
break. And the reason for that is because I think, as the day 
goes on, we will get more members of the full committee, who, 
as I mentioned, can participate. So if you want to take lunch, 
maybe go while another member questions.
    We are going to get right to it, so if the second panel 
would be seated, I would appreciate it. If you could take your 
seats.
    Are we missing Dr. Shern? I think we will start, at least 
with the introductions. Is that Dr. Shern? OK, thank you.
    Let me introduce the panel. Again, this is the panel on 
consumers' views. And from my left is Dr.--I shouldn't say 
``doctor.'' You may, in fact, be a doctor, but she is certainly 
well-known in any case--Marian Wright Edelman, who is president 
of the Children's Defense Fund.
    Thank you for being here.
    Next is Jennie Chin Hansen, who is president of AARP. And 
then we have Dr. David H. Shern, who is president and chief 
executive officer of Mental Health America; Dr. Eric Novack, 
who is an orthopedic surgeon with Patients United Now; and, 
finally, Shona Robertson-Holmes, who is a patient at the Mayo 
Clinic.
    I assume in Rochester right?
    Ms. Robertson-Holmes. Actually, no, Arizona.
    Mr. Pallone. Arizona, OK.
    Again, you know we have 5-minute statements. Your full 
statement will be submitted for the record, and whatever else 
you would like to put forward. And then we will have questions 
after. And we will get written questions, you know, in the next 
few days to be submitted to you in writing.
    And I will start with Ms. Wright Edelman. Thank you for 
being here. You have been here so many times.

  STATEMENTS OF MARIAN WRIGHT EDELMAN, PRESIDENT, CHILDREN'S 
  DEFENSE FUND; JENNIE CHIN HANSEN, PRESIDENT, AARP; DAVID L. 
  SHERN, PH.D., PRESIDENT AND CHIEF EXECUTIVE OFFICER, MENTAL 
 HEALTH AMERICA; ERIK NOVACK, MD, ORTHOPEDIC SURGEON, PATIENTS 
   UNITED NOW; SHONA ROBERTSON-HOLMES, PATIENT AT MAYO CLINIC

               STATEMENT OF MARIAN WRIGHT EDELMAN

    Ms. Edelman. Well, thank you so much for the opportunity to 
testify on behalf of the 9 million uninsured children and the 
millions more underinsured children, which we have a chance to 
correct this year.
    And we have said many good things about your proposals. 
They are in the written testimony. And I want to just limit 
myself to my hopes for true health reform for all children and 
pregnant mothers within any health insurance plan. So, whatever 
you adopt as a health insurance plan for all Americans, I want 
to just make sure that all children, all pregnant women are 
treated equitably and get affordable, comprehensive coverage.
    And what a great opportunity this is. I am so pleased. And 
thank you for the CHIP bill that you enacted and the President 
signed, and that was a significant step, but we now have a 
chance to finish the job. That was not true health care reform 
for all children, and it is not the child health mandate that 
the President promised. But here we can do it now.
    The need for health care reform that expands coverage for 
all children, cure benefit inequities between CHIP and Medicaid 
children, and establish a national floor of eligibility of 300 
percent to end the lottery of geography across 50 States and to 
simplify enrollment and retention, particularly in Medicaid and 
CHIP, are the key things that I would hope that you will 
address in your final health proposal.
    In these particularly devastating economic times, when the 
number of poor children could rise by 1.5 million to 2 million 
more, the need for a guaranteed, strong health care safety net 
to ensure their continuous access to coverage and every 
opportunity for a healthy start in life is absolutely urgent.
    I want to just address these four points for a brief moment 
each.
    One is I hope you will ensure health care coverage is 
affordable for all children and pregnant women and with a floor 
of 300 percent of the Federal poverty level, which is about 
$66,000 for a family of four.
    Just as all children in the United States are entitled to a 
free public education, all children should be entitled to 
affordable health care. The high number of uninsured children 
exacts a high health, economic, and social toll on these 
children, the families, and our Nation. Uninsured children are 
at high risk of living sicker and dying earlier than their 
insured peers and are almost 10 times as likely as insured 
children to have an untreated medical need. These consequences 
of untreated medical needs can carry on into adulthood, and we 
must prevent them.
    The consequences of being uninsured fall disproportionately 
on children of color, who represent almost two-thirds of all 
uninsured children. Children of color are at higher risk than 
white children of having unmet health and mental health and 
dental health needs. And they are at greater risk of being 
sucked--because of the absence of this preventive health and 
mental health coverage--of being sucked into something the 
Children's Defense Fund is very concerned about that we call 
the cradle-to-prison pipeline.
    Many children without mental health services are having to 
be locked up in order to get mental health care in their 
community, at an enormous cost of $100,000 and $200,000 a year. 
Children should not have to go to jail in order to get mental 
health coverage. You can cure that this year.
    The need for health care begins with maternity coverage. We 
have 800,000 pregnant women who are uninsured and having babies 
every year. They receive less prenatal care than their insured 
counterparts. They face greater risk for expensive and tragic 
outcomes, including complications, low birth weight, 
preventable illness, and even infant and maternal death.
    We have about 350,000 low birth weight babies in the most 
recent data. The cost is 25 times greater than normal birth 
weight babies. We are the only industrialized country that does 
not provide prenatal care to all of its mothers. You can cure 
that. I hope your health reform act will do that.
    All of our children need to be able to get what they need 
regardless of the State they live in. Today, each State sets 
its own income eligibility level for CHIP and Medicaid, which 
results in a profoundly inequitable patchwork of eligibility 
across the United States.
    Imagine being a low-income parent or grandparent raising 
several children. One is eligible for Medicaid, the other is 
eligible for CHIP, with different income eligibility standards 
and benefit packages for each program. Why should a child in 
North Dakota be eligible for CHIP if their parents earn more 
than 150 percent of the Federal poverty level, while in 12 
States and the District of Columbia families can earn twice 
that amount and children are still covered?
    Children's ability to survive and thrive and learn must not 
depend on the lottery of geography of birth. A child is a child 
wherever they live. They should have the comprehensive 
benefits. We must end this inequitable system.
    Ten States have no children eligible for Medicaid above 133 
percent, but half of our States offer Medicaid to children of 
all ages with families with incomes above 133 percent of the 
Federal poverty line. Almost half cover children at 200 
percent. Thirty-nine States offer CHIP to children of families 
between 185 and 400 percent of the Federal poverty line.
    We urge a national eligibility floor of 300 percent for all 
children and pregnant women wherever they live. And we should 
not force parents to have to choose between paying for child 
care, paying for health care, paying their rent. And so this is 
our chance to, sort of, give them the kind of national health 
safety net that I, as a grandma, have. I think I am important, 
but I think my grandchildren are even more important, and we 
should treat them fairly.
    Secondly, we hope that all children will have the same 
comprehensive benefit packages, which include health and mental 
health coverage. We like the EPSDT program. It was designed and 
is appropriate for children. Children are not little adults. It 
has health and mental health coverage.
    We believe and if you believe that every child's life is of 
equal value and that children don't come in pieces and they 
should get what they have to have their conditions diagnosed 
and treated early and prevent later costs, I hope you will make 
sure that every CHIP child and every child in the exchange will 
get the same benefits that the Medicaid children get.
    Mr. Pallone. I hate to slow you down, but you are a minute 
over.
    Ms. Edelman. I am a minute over already? Good gracious.
    Two last quick things, and I will just end, Mr. Chair.
    Thirdly, all of our eligible children should have 
simplified ways of getting and keeping enrolled. The 
bureaucratic barriers that keep 6 million of the 9 million 
uninsured children now unenrolled need to be addressed. The 
package, as I see it, does not do that. We think that--and we 
lay out in our testimony, our written testimony, and we lay out 
in specific legislative language in the All Healthy Children's 
Act the steps that you can take to make Medicaid work.
    I am glad you have moved to 133 percent of the Federal 
poverty level for adults, but children are already eligible for 
133 percent but they are not getting it because of the 
bureaucratic barriers which you must address through the 
simplification measures we lay out.
    And lastly, I just want to say, I know people are saying 
cost and we can't afford it. Well, you know, we can afford 
whatever we want to afford. We do not have a money problem in 
our Nation with a $14 trillion GDP. You found the money to bail 
out the banks, you found the money to bail out the insurance 
companies, you found the money to do the alternative minimum 
tax. We can find the money if we believe in it to make sure 
that we give our children a chance to survive and to thrive. 
That is cost-effectiveness.
    And while CBO may not score prevention, we know that 
dollars invested in immunizations save States millions 
annually. And we know that if you give a child an office visit 
in a primary health care setting, which is about $100 in Harris 
County, Texas, it is going to cost you $7,300 if they go to the 
emergency room and have to be hospitalized.
    If you want to contain costs, children is where you do it. 
All of them should be covered. All should get the same 
benefits. It should be simple and easy. And you have a great 
opportunity to do it right this year.
    Thank you.
    [The prepared statement of Ms. Edelman follows:]





    
    Mr. Pallone. Thank you.
    Ms. Jennie Chin Hansen?

                STATEMENT OF JENNIE CHIN HANSEN

    Ms. Hansen. Thank you.
    Chairman Pallone, Ranking Member Deal, and distinguished 
other subcommittee members, I am Jennie Chin Hansen, president 
of AARP. Thank you very much for inviting me to be here today 
and for your leadership on leading comprehensive health care 
reform.
    Enacting legislation to give all Americans quality, 
affordable health coverage options is AARP's top priority this 
year. The draft tri-committee legislation marked substantial 
progress toward this goal.
    Today, I am really proud to represent nearly 40 million 
members of AARP, half over the age of 65 and half below 65. 
Both age groups face serious problems in today's health care 
system, especially the 7 million people aged 50 to 64 who are 
uninsured.
    The draft includes critical reform priorities for AARP 
members for all ages. For our younger members, it would curtail 
discriminatory insurance market practices that use age and 
health status to block access to affordable coverage. Reforms 
must include strict limits of no more than 2:1 on how much more 
insurers can charge to people who are in this age bracket of 50 
to 64.
    Reform must also provide sliding-scale subsidies for those 
who need help to make coverage affordable, as well as provide 
some strict limits on cost-sharing. The draft legislation 
achieves our goals on these vital points in health care reform.
    For our older members, the draft closes Medicare's 
prescription drug donut hole so that they will be able to 
afford the medications that they need. This drop in coverage 
has been a major reason why one in five people who get drug 
coverage through Medicare delayed or didn't even fill the 
prescription because of that cost. Under current law, the hole 
keeps getting larger every year. The draft begins to close the 
donut hole and includes other steps to lower drug costs.
    And for people with limited incomes, the draft closes the 
gap right away by strengthening the Part D low-income subsidy 
and eliminating its asset test that penalizes people who really 
did the right thing in saving for a small nest egg in 
retirement.
    The draft also fixes Medicare's broken system for paying 
doctors and puts Medicare on a path to fiscal stability by 
revising payment systems to reward quality instead of quantity 
of care. It includes incentives to reduce costly and 
preventable re-hospitalizations. It strengthens our health care 
workforce that we know is actually, at this point, short 
already, let alone what will happen in the future. And it takes 
important steps to address racial and ethnic disparities in 
care.
    Many challenges remain on the road to really full, 
comprehensive health reform. But AARP and many other 
stakeholders share a broad and growing consensus that any 
differences that we may have cannot stop us from finding common 
ground and enacting comprehensive health care reform this year. 
We know--and it has been said time and time again--the status 
quo is just unsustainable, and we cannot afford to fail.
    Thank you all for your leadership, and we continue to 
looking forward to work with all of you in Congress to enact 
this comprehensive reform this year.
    Thank you.
    [The prepared statement of Ms. Hansen follows:]





    
    Mr. Pallone. Thank you.
    Dr. Shern.

                  STATEMENT OF DAVID L. SHERN

    Mr. Shern. Mr. Chairman, members of the committee, Mental 
Health America is honored to participate in today's hearing on 
ways to reform our health care system.
    I want to start by expressing our appreciation for the many 
important proposals included in the tri-committee bill released 
last week that recognize how integral mental health is to 
overall health.
    You know, this is our centennial year; our organization is 
100 years old this year. And for the last 100 years, we have 
advocated for people with mental health. And from the 
beginnings of our organization, we had kind of a dual vision. 
On the one hand, we were concerned with people who had severe 
and disabling illnesses, who would have traditionally been 
treated in State hospitals. But, on the other hand, from our 
very beginning we have had a commitment to a public health 
perspective and to prevention as the only real way to drive 
down the prevalence of illness.
    So we are very heartened by this bill, because we see it as 
including many of the issues that need to be addressed in order 
to become the healthiest nation. We think that it addresses 
historical patterns of discrimination by including parity for 
mental health and substance use services. And, importantly, it 
addresses the prevention and management of chronic diseases as 
the real strategy to control costs and improve overall health 
care status. We think these are very important.
    You know, mental health and substance use conditions are 
really paradigm cases for what goes wrong when we discriminate 
against a class of illnesses and fail to prevent and 
appropriately treat them. And this resonates very much to what 
Ms. Wright Edelman was talking about, in terms of not 
addressing issues of mental health services in children.
    Increasingly, our science is telling us that mental health 
and substance use conditions--we used to think they were 
diseases of early adulthood. We now know that they are diseases 
of adolescence. They are developmental disorders that occur 
early in life. For all people who are going to develop a mental 
health diagnosis during the course of their life, 50 percent of 
those people will have that diagnosis by the time they are 14 
years old. However, they will not receive services until, on 
average, they are 24 years old.
    So, during that 10-year period, substantial disability 
begins to develop. Academic achievement starts to drop off; 
these are very strong predictors of academic achievement. 
Ultimately, occupational achievement is compromised. We need to 
do a much better job at early identification and addressing 
issues of mental health and substance use disorders if we are 
going to develop the healthiest nation.
    The reason that WHO estimates that mental health and 
substance use conditions are, in fact, the most burdensome of 
all health conditions, causing twice as much burden of disease 
as cardiac illnesses, is in part because they are diseases of 
early adolescence that we do not effectively address.
    So, clearly, this bill, from our perspective, includes all 
the key components that are necessary to start to address this 
problem, at least structurally.
    First of all, it clearly addresses the importance of 
preventative services. You know, I think in some contradiction 
to some of the things that were said earlier, we have a brand-
new report from the Institute of Medicine that was released in 
March that is a comprehensive summary of what we know about the 
effectiveness of preventative services for emotional and 
behavioral disorders in children and young adults.
    And we know a lot. Our science base is strong. We know that 
community-based interventions work, and we applaud the 
committee for emphasizing the importance of community-based 
interventions. We know that early identification when coupled 
with treatment works, as the Preventive Services Task Force has 
indicated. And we applaud the committee for including those 
services, as well.
    It is also clear, if you look at what is required to manage 
chronic disease, it is very clear that in order to do that you 
need to address the entire person, not the person in segments 
or subspecialties. The notion of the medical home that is 
included in the bill I think is extraordinarily important, and 
the inclusion of behavioral health services in that medical 
home is absolutely critical.
    Not only are mental health and substance use conditions the 
most chronic illnesses, they are the most common co-occurring 
illnesses with other chronic disorders. And when they co-occur, 
they drive costs way up, drive outcomes way down. So the 
medical home and comprehensive integrated care is clearly an 
important part of what we need to accomplish here.
    You know, we have a tragedy in this country in that people 
with chronic mental illnesses who are served in our public 
system die 25 years early--25 years early. They are dying on 
average in their 50s. And they are dying from a broad range of 
the same disorders that will kill all of us in our 70s or 80s 
or 90s.
    So it is a critical imperative that we address 
comprehensively the needs of that population as well as persons 
with other chronic conditions who are likely to have mental 
health and substance use conditions.
    Finally, I would just like to say that closing the donut 
hole is very important for people who rely on psychiatric 
medications, which can be very expensive.
    The committee's attention to workforce provisions is 
critically important. As several people have noted, we have a 
very predictable workforce crisis coming up on us quickly.
    And then, finally, a word about comparative effectiveness 
research. You know, I left academia 3 years ago at the 
University of South Florida, where I used to work for Ms. 
Castor's mother, to join an advocacy organization because of my 
frustration with our inability to get our incredible science 
base to people who need those services.
    Comparative effectiveness research provides a framework for 
us to better codify and understand what works and to translate 
it into information that can be supportive of individuals and 
their clinicians, their caregivers, in making better decisions.
    So I applaud the committee for all the components of the 
bill, which seem to nicely round out both improving the quality 
of care, emphasizing preventative services, and bringing better 
science to bear in terms of our decision-making processes.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Shern follows:]





    
    Mr. Pallone. Thank you, Dr. Shern.
    Dr. Novack.

                    STATEMENT OF ERIK NOVACK

    Dr. Novack. Good afternoon. I want to thank Chairman 
Pallone and the rest of the committee for having me here today. 
My name is Eric Novack, and I am a medical doctor who has 
actually spent the last 23 years training and working in health 
care.
    Make no mistake: The variability for everyone in this room 
and your families to seek out the kind of health care you 
believe is best is under direct assault. And the risk you will 
lose control over your health and health care has never been 
greater. Unbelievably, nowhere in the U.S. Constitution or in 
the Constitution of any of the 50 States do any of us have any 
right to be in control of our own health.
    In November 2008, Arizona's Proposition 101 sought to place 
two basic rights into the State Constitution: first, to 
preserve the right of Arizonans to always be able to spend 
their own money for lawful health care services; and second, to 
prevent the government from forcing us to join a government-
sanctioned health care system.
    Because once we are forced into a plan, our health care 
options will be restricted by the rules of the plan, whether it 
be public or private. It was a true grassroots campaign, and an 
idea went from concept to well over a million votes in less 
than 18 months and failed by less than one-half of 1 percent.
    Fortunately, the Arizona legislature has courageously 
recognized the critical issues raised by the initiatives and, 
just yesterday, referred the Arizona Health Care Freedom Act to 
the ballot in 2010.
    Unfortunately, the reforms that have recently passed 
Congress and the bulk of those that are being considered do not 
appear to have much respect for the basic freedoms that the 
Arizona initiative seek to protect.
    The stimulus bill was used as a tool to vastly expand the 
Federal health care bureaucracy. By the end of 2014, every 
American will be forced to have an accessible electronic health 
record that can be viewed by government officials without 
consent, permission, or notification.
    The stimulus bill created the Federal Coordinating Council 
for Comparative Effectiveness Research, whose ultimate function 
will be to become a Federal health care rationing board for all 
Americans, starting with seniors. As Health and Human Services 
Secretary Kathleen Sebelius said during her confirmation 
testimony, quote, ``Congress did not impose any limits on it,'' 
referring to the council.
    And now MedPAC may be empowered to make the full slate of 
recommendations for every condition and treatment. Congress 
will only be able to make an up-or-down vote on the entire 
package.
    The President recently spoke to the American Medical 
Association, touting the importance of using evidence-based 
medicine to figure out what works and what does not. When it 
comes to the best treatments for our ailing health care system, 
we have some compelling evidence.
    Leaders in Congress regularly cite Massachusetts as the 
model for reform. But what really is going on in Massachusetts, 
and do we want to repeat it on a grand scale?
    Costs are even more out of control than in the country as a 
whole. Use of the emergency room for care has not diminished 
despite the higher percentage of people with insurance. And 
there is exactly zero evidence--there is exactly zero 
evidence--that forcing people to have insurance has made any 
difference on slowing health care spending.
    Medicare has tried several disease management and 
prevention projects. The idea that spending money upfront to 
prevent Medicare patients from needing expensive 
hospitalizations and disease complications will save money in 
the long run.
    Unfortunately, the results do not bear that out. Among the 
conclusions in the June 2007 report to Congress on the trials, 
quote, ``Fees paid to date far exceed any savings produced.'' 
In other words, the cost of administering the plan made the 
prevention plan more expensive.
    Real research also suggests that obesity and smoking 
prevention, while admirable, do nothing to reduce health care 
spending.
    Supporters of the President have also reviewed the 
literature on the impact of electronic health records on 
spending and concluded, quote, ``We need the President to apply 
real scientific rigor to fix our health care system rather than 
rely on elegant exercises in wishful thinking.''
    And research has been done demonstrating geographical 
variations in health care spending, but there is no evidence 
that having Washington forcibly taking money being spent in 
Massachusetts, New York, or California and sending it to lower-
spending States will improve anyone's health.
    We cannot afford to make mistakes that will mean our 
grandchildren will, in the words of the President, suffer from, 
quote, ``spiraling costs that we did not stem or sickness that 
we did not cure.''
    Congress should fix Medicare first before radically 
changing the health care of every American. Congress should 
demonstrate that the government can prevent the disturbing 
failures even more exposed this week of the VA system before 
radically changing the health care for all Americans. And 
Congress should work very hard to increase the options and 
availability for the 3 percent of Americans who are truly, 
quote, ``chronically uninsurable'' before radically changing 
the health care for the other 97 percent.
    Health care reforms are critically needed. Our path is 
unsustainable. But jamming through a piece of legislation that 
few will have read and the American public will not have had 
time to fully review makes no sense.
    The cynics who shout that we cannot have health care reform 
without sacrificing our personal freedoms are false prophets 
offering a false choice. I urge the members of this committee 
to consider health care legislation that protects individual 
liberty, preserves privacy, limits government power, and has 
reforms that have actually been shown to work--in other words, 
reforms that protect patients first.
    Thank you very much for the opportunity to present my views 
today.
    [The prepared statement of Dr. Novack follows:]





    Mr. Pallone. Thank you, Dr. Novack. Ms. Robertson-Holmes, 
thank you for being here.

              STATEMENT OF SHONA ROBERTSON-HOLMES

    Ms. Robertson-Holmes. Thank you. Thank you, Chairman and 
members of the committee. Four years ago sitting in my doctor's 
office, never did I believe I would be here in Washington 
talking about this situation. But I am here because I was 
fortunate enough to be able to in amongst my nightmare come to 
this country and get treatment.
    I actually am the face of public insurance. We have--I am 
from Canada and we do have public insurance, a mandatory 
monopoly on our insurance. And I am here to say when it doesn't 
work, it doesn't work. Unfortunately, in Canada we have 33 
million people, which is approximately the size of the State of 
California, and we currently have 5 million people without 
family doctors.
    What started many years ago as a seemingly compassionate 
move in our government to treat all equally and fairly by 
providing the same medical coverage has in fact turned into a 
nightmare of everyone suffering equally. Now we have limited 
resources and funds that offer timely treatment to our 
citizens.
    A system like this starts to crack under pressure and 
special treatment is ultimately given to those who have 
contacts and resources to jump the line for treatment, and for 
someone like myself, the average Canadian citizen, forced to go 
to another country for care.
    I will never get the time, money or life back that I have 
dedicated to the fight to basic treatment that I was promised 
by my government; but not only promised, it was ordered. I will 
never forget the experience of the treatment in a facility 
suffering so bad from government funding and shortages of staff 
and resources.
    I know that the American health care system is not perfect, 
but I do credit the system for saving my life. It is because of 
the choices available here in this country that I was able to 
receive immediate care. We as Canadians have one insurance 
company, the government. We have no options. We can't choose 
another country, we can't supplement with after-tax dollars to 
purchase extra care.
    We can purchase health insurance for our pets, but not our 
children. I have very few rights as a patient. Patients there 
have to fight for every basic service and care, much less any 
kind of specialized care.
    Another thing that I would really like to point out is that 
our health care is not free. In fact, I would argue that the 
cost is much greater than the tax we pay each and every citizen 
towards this care. The costs are loss of quality of life while 
living with pain, discomfort, or just the fear of the unknown 
and also for waiting long term for diagnostic testing, the cost 
of employers and self-employed people waiting for employees to 
be treated and be well enough to return to work.
    Medications are also something that Canadians are 
struggling like Americans to pay for. We are not covered for 
our medications under our health care plans. We pay the cost of 
local ERs closing, losing a wealth of talented doctors that 
leave the country because they just don't have the resources to 
do their job properly at home. We have rationed services and 
treatments and a fear of living without a safety net.
    The one thing that I wanted to sort of point out when I was 
making my testimony today was if I have gotten any criticism 
from anybody that I have done for what I have done is that I 
must have had the resources in order to be here today. I am 
here to say that I didn't. I am so average, and in order to get 
what I had to do, my husband took a second job, he put a second 
mortgage on our house. We owe every single person we know 
money. And I will never forget all of that that has happened, 
but I also want to wake up grateful for what happened to me in 
America. And I want to have those same options in Canada.
    And I just felt from the very beginning of my experience 
that it was my job to point out to both Canadians and Americans 
what we can do together and what we need to learn from each 
other's situation.
    Thank you.
    [The prepared statement of Ms. Robertson-Holmes follows:]





    Mr. Pallone. Thank you. And now we have questions, 5 
minutes from the panel. And I am going to start with myself. 
And let me just say I am not looking for a response. But I 
really appreciate, Ms. Robertson-Holmes, that you came today. I 
am not being critical in any way because I know you took your 
time. But I really have to stress that this draft is not meant 
in any way to put together a single payor system or emulate 
Canada. Canada is a nice place, but I am not really looking to 
create a Canadian system or even praise the Canadian system 
because I really believe that the draft implements a uniquely 
American system that in no way replicates Canada. But I 
appreciate your being here. I am not trying to denigrate it in 
any way.
    Ms. Robertson-Holmes. The problem is it is a very slippery 
slope. Once you start on that sort of road--and unfortunately a 
lot of the Americans that I am talking to have said to me, 
well, we are going to get free health care too, we are going to 
get Canadian style health care.
    Mr. Pallone. Well, I think you are right, that there are 
some people who think that somehow this is single-payer, but I 
just want to stress I don't think it is and I don't see how it 
becomes a single-payer. But whatever, I appreciate your being 
here. And I don't want to take away in any way the fact that 
you came here and how difficult I am sure it was to be here.
    Let me ask the question of Ms. Wright Edelman about 
Medicaid. I am very proud of the fact that in this discussion 
draft we really discuss Medicaid in a major way in the sense 
that we are trying to cover and fill in the gaps with 100 
percent Federal dollars for those who are not covered by the 
States now up to 130 percent, that we are increasing the 
reimbursement rates so that it is more like Medicare. A big 
part of this is Medicaid, And I think in many ways it hasn't 
really gotten attention, unfortunately.
    But what I wanted to ask you is, there have been those who 
say that once we--if we set up what is in the discussion draft, 
that Medicaid would no longer be needed and that those people 
who are in Medicaid should be put into the Exchange, be able to 
get their insurance with the Exchange. The draft doesn't do 
that and--because we are concerned that that might be harmful, 
at least initially to Medicaid.
    So I just wanted you to discuss the types of benefit and 
cost sharing protections available in Medicaid that are 
generally not found in private health insurance products. And 
if you could talk about the need to keep and improve the 
Medicare safety net undisturbed for years to come in response 
to those critics. We are not putting Medicaid in the health 
Exchange.
    Ms. Edelman. I hope you will not. Do not put Medicaid into 
the Exchange. Nobody should end up worse off than they are 
currently. Medicaid is a crucial safety net. I applaud in my 
written testimony your extension of 133 percent for all. And 
the adults that need that help, I applaud you for it. I am glad 
that you are reaffirming it for children, but all children are 
currently covered at that level. So it will not result in an 
increase.
    But what we do hope you will do in protecting Medicaid--in 
fact, I would like it if you want to take it up to 300 percent. 
That would be wonderful, too. I don't care how you do it, as 
long as you can kind of try to get all those folk who are 
uncovered, but I think that Medicaid is essential, it is 
comprehensive benefits. As I go for children, it is essential. 
The fact that it is an entitlement is absolutely crucial, and I 
think it is one of the strongest pieces of what you have done.
    On the children's front, I hope that you will make sure 
that Medicaid's benefit protections are extended to CHIP 
children and children in the Exchange because we think it is 
the most appropriate benefit package. So we hope you will do 
that. But it also raises another important point because many 
of the children now at 133 percent of poverty under Medicaid 
are eligible but are not getting it because the bureaucratic 
systems are impeding that. So one of the things that is 
essential if the children under 133 percent of Federal poverty 
level are going to get their Medicaid coverage, we are going to 
have to simplify. And we have laid out a number of 
simplification steps.
    One of the good things you have in your provisions is 
automatic enrollment of any child that is uninsured at birth. I 
think that is fantastic. We would like to see automatic 
enrollment for any child that is in any means-tested program. 
We would like to have 12 months continuous eligibility. We have 
laid out a number of steps that can be taken to ensure that 
those children currently eligible for Medicaid will in fact get 
it. But you are going to have to do the systems reform to make 
it effective.
    Mr. Pallone. I appreciate it. And I am sorry to stop you, 
but I want to ask another question of Ms. Hansen. Yesterday the 
PhRMA and the President announced some kind of a deal to cut 
costs for seniors with incomes up to $85,000 in the doughnut 
hole by 50 percent; in other words, to fill in the doughnut 
hole in part, the people whose incomes are up to $85,000, that 
they would only pay 50 percent for brand name drugs once they 
fall in the doughnut hole.
    Now, I am not taking away from that. I appreciate the fact 
that the pharmaceuticals are doing that. But in the discussion 
draft, we fill about $500 of this cost for the doughnut hole 
immediately and then phase out the doughnut hole for all 
Medicare beneficiaries over time. And we also reinstate the 
ability of the Federal Government to get the best price for 
prescription drugs for the most vulnerable low income Medicare 
beneficiaries. Those are rebates again to fill the doughnut 
hole.
    How do you see this provision in the draft, the discussion 
draft as working together with the commitment by the 
pharmaceutical manufacturers yesterday? I don't see them as 
mutually exclusive. I think they are both positive. But I just 
wanted you to comment on that.
    Ms. Edelman. Well, I have actually----
    Mr. Pallone. Well, I was going to ask Ms. Hansen 
originally. Go ahead. I am sorry. We are just out of time. Go 
ahead.
    Ms. Hansen. Thank you. Mr. Chairman, we agree with you. 
This does not preclude the continuance of it because it is 
actually only 50 percent of the doughnut hole and for people 
who are at that income level. It doesn't cover every Medicare 
beneficiary. But it is--part of what it does do for the people 
who are on drug coverage, as I stated briefly, that people who 
are falling in that hole are not oftentimes continuing with 
their medications.
    So part of our job as an organization is to really get the 
most relief in the quickest time on behalf of people who are 
already in that conundrum. I mean, that even relates to people 
who are becoming bankrupt as well. So that cost element is real 
important.
    I think what the draft does is importantly to continue to 
build on that so that we have a more whole, seamless coverage 
on behalf of people. So I do think that they can work--and we 
are continuing to work with you on making sure that coverage 
continues.
    Mr. Pallone. And I appreciate that. I know you were part of 
this deal. I don't know if that is the right word, or agreement 
yesterday. But I also appreciate your working with us to try to 
completely fill the doughnut hole.
    Ms. Hansen. I just wanted it to be really clear, I think it 
was Senator Baucus that really took the leadership role with 
PhRMA. And I know that the President supported it. And we again 
appreciated it because it makes such a big real difference in 
people's pocketbooks.
    Mr. Pallone. We try not to talk about the Senate here, but 
there are occasions we have to acknowledge their existence.
    The gentleman from Georgia, Mr. Gingrey.
    Mr. Gingrey. Mr. Chairman, thank you. I want to ask Ms. 
Shona Holmes. First of all, thank you for your testimony. We 
really appreciate that. And I as a medical doctor, I mean, I 
understand, I think, what you were describing to us. I guess a 
benign pituitary tumor, the pituitary gland is about the size 
of your little thumbnail in the normal circumstance. But when 
it is growing so rapidly as in your case, it is right in front 
of the optic nerve where it crosses over and as it compresses 
on that optic nerve, as it gets larger, that is what would lead 
to the blindness and I am assuming the doctors at the Mayo 
Clinic in Arizona informed you of that and said that you really 
need to get this surgery done within about 6 weeks.
    Now you went back to Canada and I understand from your 
testimony they said that there was no way they could do it in 
the 6 weeks. Did they say why? Did they have a reason for that?
    Ms. Robertson-Holmes. The biggest problem in Canada is that 
the wait times even just to get in to specialists in order to 
get diagnostic testing done. So when I returned to--in fact, I 
had this false sense of security when I was in Arizona because 
2 of my doctors were, in fact, Canadian. I have never 
questioned the talent that comes out of the medical system in 
Canada. They just don't have the resources. And so when I saw 
these doctors, they said go home, you can get this done at home 
and you have insurance, this is what you should do. Here is 
your----
    Mr. Gingrey. And you said it would probably have cost you 
$100,000 to have it done in the United States.
    Ms. Robertson-Holmes. In total, with all my expenses and 
everything being away, and I had to return--I took 3 solid runs 
at this particular situation. So this is not just that I fell 
through a crack. And I had to go--I had to go originally for 
diagnostic testing. I had to go back for surgery and I had to 
return for follow-up because I couldn't get any of those things 
done in Canada.
    Mr. Gingrey. So there was a real problem with the rationing 
basically, a long queue, and getting----
    Ms. Robertson-Holmes. And at the time I was also diagnosed 
with a potential tumor in my adrenal and it was recommended at 
the Mayo Clinic at that time that I have that surgery and, you 
know----
    Mr. Gingrey. That additional surgery. And also that was 
going to be delayed in Canada as well?
    Ms. Robertson-Holmes. Three years to the date.
    Mr. Gingrey. Time is running out. I want to ask you one 
other thing. In your testimony you credit the United States 
health care system for saving your life. You just said that. 
You also mention your lack of rights as a patient in Canada. 
Tell me, as someone who has seen health care from both sides of 
the Canadian border, what advice can you give to American 
patients who may be following this debate in Congress?
    Now, keeping in mind what our chairman and I know in all 
sincerity he mentioned that this is in his opinion not nor is 
it designed to lead to a single-payer, U.K. or Canadian type 
system. That is what Chairman Pallone said. You have some 
concerns about that. I have some concerns about that with this 
public option.
    What would you say to the American people in regard to 
this?
    Ms. Robertson-Holmes. It is my understanding from--actually 
all my family is in Great Britain and it actually is a 2-tiered 
system. They actually have public and private, and they are 
almost in worse condition than we are. What I am saying is I am 
insured. I have insurance. But the money isn't there. It is 
expensive. Health care is expensive anywhere. And I was 
promised that I had insurance. But when it came to using the 
services that I was supposed to be covered for, they weren't 
there.
    Mr. Gingrey. Yes. So having an insurance, a plastic card 
doesn't guarantee you access, affordability, availability if 
there are no physicians there to provide that care.
    Great point. Thank you very much for your testimony and for 
your response. I want to go now to Dr. Novack, Dr. Novack, 
thank you. I know you practiced orthopedic surgery--is it in 
Arizona, I think you mentioned to us. And you reference in your 
testimony the study published I think May of 2009, the Journal 
of Health Affairs, one in five Massachusetts adults were told 
in this last year that a desired physician was not taking new 
patients. Here again, they had insurance, they had coverage, 
they just couldn't find a doctor. Do you know if the type of 
insurance a person carried influenced their ability to see 
their desired physician, whether it was the public plan option 
or a private plan option? There was a delta in regard to who 
can get----
    Dr. Novack. I don't have an answer for you on that. What it 
is illustrative of is the regular attempts to conflate health 
insurance with health care. So here the 47 million number, 
which is a bit inaccurate in and of itself, that don't have 
health care, those are people who don't have health insurance. 
And since 20 million of these people change every year because 
of job changes, et cetera, about 10 million are in the country 
illegally, about 10 million are between 18 and 30 and don't 
think they will ever get sick. You are left with about, as I 
mentioned, about 3 percent of the country that is chronically 
uninsured. So just giving people health insurance, what we see 
in the Massachusetts example, is no guarantee that you have 
access to health care.
    Mr. Gingrey. Mr. Chairman, if I might ask Dr. Novack to 
submit a written answer to my question in regard to the 
different discrepancies between or among the plans where there 
were no doctor available, I would appreciate that. My time has 
expired and I yield back.
    Mrs. Capps [presiding]. Yes.
    It is a pleasure now to yield 5 minutes to our chairman of 
the full committee, former chairman, John Dingell.
    Mr. Dingell. Thank you, Madam Chairman. I would like to 
begin by welcoming our old friend and my very dear personal 
friend, Marian Wright Edelman, to the committee. I am delighted 
to see you here, Marian.
    Ms. Edelman. Nice to see you.
    Mr. Dingell. I want to get right down to the business at 
hand here and to say to you, Ms. Holmes, welcome. Your comments 
I found to be most interesting. Tell me, you are referring to a 
single-payer system you have in Canada; is that right?
    Ms. Robertson-Holmes. I am, yes.
    Mr. Dingell. You are aware that the draft that is before us 
is not a single-payer bill?
    Ms. Robertson-Holmes. All I am aware of is I needed to tell 
what my story was.
    Mr. Dingell. So then help me. How would your concerns with 
a single-payer system apply to the draft of the legislation we 
are working on today?
    Ms. Robertson-Holmes. My concerns are basically in order to 
open up the communications so that people know the questions to 
ask when a bill is passed so that they know what is safe to get 
into----
    Mr. Dingell. In other words, your comment is a warning 
rather than a criticism?
    Ms. Robertson-Holmes. Just my experience.
    Mr. Dingell. Well, I think it is a very good criticism, and 
I thank you for it, or rather a very good warning as opposed to 
a criticism.
    Now, Dr. Novack, I found your--you made a very frightening 
comment here that I would like to address with you because if 
your fears are correct, this is a very bad situation. And in 
this--and I can tell you that I am going to stay up night and 
day to get it out if there is anything like that in here. You 
made this statement. You said no matter what name the 
bureaucrats and politicians want to use, the plan being put 
forth by the committee will mean Washington bureaucrats will 
have the power to deny you care.
    That is a very frightening statement, and I would 
appreciate it if you can tell me where in this draft that there 
is language that would authorize that so that I can get this 
out? I will work with you to get it out. Tell me where it is.
    Dr. Novack. I think the issue here is when you--what has 
been very vague of course is exactly how the cost control is 
going to happen.
    Mr. Dingell. No, no, no, no. Where is the language? You 
made a bold, flat statement, and frankly I am scared to death. 
Now, I want you to tell me where it is in there so I can get it 
out.
    Dr. Novack. I don't have the exact line for you, sir. But I 
can----
    Mr. Dingell. But where is it, Doctor? I would probably be 
unfair to you because you are a doctor and I am a lawyer, and I 
would never presume to tell somebody how to take out an 
appendix or to replace a knee, but I do know a little bit about 
drafting law. I have been doing it for about 50 years and you 
made a statement that scares the bejabers out of me, and I want 
you to tell me where it is.
    Dr. Novack. Again, I don't have the exact line numbers for 
you, but I will get it for you.
    Mr. Dingell. So you made the bold statement, though, which 
you are not able at this time to tell us where the language is 
in the bill that has caused you to make this statement, and I 
will repeat it again because quite frankly it is a very serious 
charge: No matter what name the bureaucrats or politicians want 
to use, the plan being put forth by the committee will mean 
Washington bureaucrats will have the power to deny you care. 
And you capitalized ``deny you care.''
    Dr. Novack. Again, the answer here is that we know that 
care is going to be denied because you have to come up with a 
package--the plan is to come up with a standard benefit package 
and then to give some authority the ability to determine which 
benefits are going to be accessible to--it will start with 
seniors, I imagine, if we start applying this to patients in 
Medicare first. If those benefits are different than the 
benefits that people currently enjoy today, that will 
potentially be care that will be either delayed or denied for 
what they are getting right now.
    Mr. Dingell. That is the basis for your statement, is it?
    Dr. Novack. Yes.
    Mr. Dingell. I find that to be interesting. It is kind of 
like building a house of cards here or maybe setting up a straw 
man. And that is a good thing to do because then you can knock 
them down fairly easy. But I still want to hear you tell me 
what is the precise thing.
    Let us go to something. You have got Blue Cross and Blue 
Shield. You have got Aetna. You have got all kinds of insurance 
companies in this country. Do you remember when we had the big 
fight over patient's bill of rights? Do you remember that?
    Dr. Novack. Not entirely.
    Mr. Dingell. The AMA was very, very interested in it, and 
they were very helpful to me in my efforts to try to get that 
legislation through. That was to stop a bunch of health 
insurance bureaucrats, green eyeshade actuaries from telling 
you as a doctor what you could do and telling me as a patient 
what treatment I could get. And I find your same apprehensions 
were joined in by my friends at AMA when we tried to correct 
this iniquitous situation which we have now. And I am trying to 
find out where the abuses that we complained about are to be 
found in the legislation.
    Dr. Novack. Sir, I think----
    Mr. Dingell. And how this situation, even if it is as you 
say, is true, would be worse than that which we have now where 
we have 47 million Americans who haven't gotten any health care 
and who haven't got anybody to tell them what they can have or 
not have. The only thing they can say is you can't have 
treatment because you can't pay your bill.
    Dr. Novack. Well, I think the question is what kind of 
tradeoff are we looking to make. It is true and I can tell you 
both as a provider and as a patient and as a patient advocate 
that there is often times no love loss between me and the bulk 
of the private health insurance industry. The tradeoff that the 
legislation appears to be making is to be moving away from 
green eyeshade private health insurers towards green eyeshade 
Washington bureaucrats. And I think at the end of the day when 
we look at examples where there have been abuses in the private 
health insurance industry, there is resource. When Blue Cross 
did recisions in California and other companies did recisions 
in California, there has been significant--but my concern is, 
for example, in the VA system--there is no resource to the 
10,000 people that are exposed to HIV----
    Mr. Dingell. My time has expired. Thank you.
    Mrs. Capps. Thank you, Mr. Dingell. And I yield now 5 
minutes for questions to Mr. Whitfield.
    Mr. Whitfield. Thank you, Madam Chairwoman. Let me ask you, 
have any of you read this bill? Ms. Edelman, have you read this 
legislation?
    Ms. Edelman. I have read or my staff has read it multiple 
times and we have struggled to make sure that I read the key 
portions of this bill that relate to children.
    Mr. Whitfield. When did you all receive it?
    Ms. Edelman. We got it on Friday and it is over 800 pages 
long, but we have done the best we could.
    Mr. Whitfield. Well, I don't think any of you have read it. 
Certainly I have not read it. Not many members up here have 
read it. And one of the things we are concerned about, when you 
have this sort of dramatic change in health care--and evidently 
this bill, they are going to try to bring it to full committee 
the first week of July or the second week of July. We don't 
really have a lot of time here.
    But let me just talk philosophically about a couple of 
things and then I will get into some specific questions. I 
would ask all of you, does the American taxpayer have the 
responsibility to pay for nonemergency health care for illegal 
immigrants? Ms. Edelman, what do you think?
    Ms. Edelman. I think all children should be covered because 
as a public issue if there are any children that are in our 
country or in our schools--all children go to schools.
    Mr. Whitfield. What about adults?
    Ms. Edelman. I am here to talk about children. Our bill is 
about all children being covered.
    Mr. Whitfield. What about you, Ms. Hansen?
    Ms. Hansen. We don't have a policy on immigration because 
that is not part of our public policy covering our----
    Mr. Whitfield. So you don't have a position? OK. Dr. Shern, 
what about it.
    Mr. Shern. Similarly we don't have a position on----
    Mr. Whitfield. Dr. Novack.
    Dr. Novack. I would just say currently as a provider--and I 
take about 14 days of emergency room call every month, I take 
care in the Phoenix area of a whole lot of people who are not 
in the country legally and they get the same care, whether----
    Mr. Whitfield. But I said nonemergency room care.
    Dr. Novack. I think that given the tens of trillions of 
dollars of unfunded liabilities, that we ought to be directing 
the resources to people in the country legally first.
    Mr. Whitfield. There has been a lot of discussion here 
about there is not going to be any government payor plan or 
government plan. And yet in section 203 of the bill, which very 
few of us have read, it says the Commissioner that will be 
established under this legislation shall specify the benefits 
to be made available under Exchange, participating health 
benefit plans during each plan year. And I have been told that 
that applies not only under the government option but also the 
private plans.
    So do you think it is right that some government officer 
will be dictating what benefits will be available under private 
as well as the public option plan? Dr. Shern.
    Mr. Shern. Well, I think that the intention, as I 
understand it of that provision, is to provide a floor of 
services that will be available for everyone upon which you can 
build. And I also think that if----
    Mr. Whitfield. That is your understanding. Do you know that 
to be a fact?
    Mr. Shern. No, I don't know that to be a fact.
    Mr. Whitfield. What about you, Ms. Hansen?
    Ms. Hansen. I can't answer it.
    Mr. Whitfield. Have you read the bill?
    Ms. Hansen. Not since Friday.
    Mr. Whitfield. But you all have helped work on this 
legislation. You have been a part of drafting this legislation; 
is that correct, Ms. Hansen?
    Ms. Hansen. We don't draft the legislation.
    Mr. Whitfield. Did you have input into it?
    Ms. Hansen. There have been conversations between our 
staff.
    Mr. Whitfield. Now, the CBO says that they estimate 15 
million people will lose their present insurance, health 
insurance coverage as a result of this legislation. So, Ms. 
Hansen, what would you say to your members who will lose their 
employer health coverage because of this bill?
    Ms. Hansen. Well, we take the position that people--the 
principle of choice--and we also support that people who have 
insurance now can and want to keep that. And that is something 
that we actually believe in the maintenance of a public and a 
private----
    Mr. Whitfield. Does this legislation give each individual 
the right to keep their current insurance?
    Ms. Hansen. Those are the principles that we are 
supporting.
    Mr. Whitfield. But do you know for a fact that it does it? 
Do you know for a fact that it does it?
    Ms. Hansen. I don't know for a fact personally, but the 
principles I can ascribe to----
    Mr. Whitfield. My understanding is that this legislation 
also includes an employer mandate which will force businesses 
to either provide health insurance to their employees, which is 
fine, or pay a tax of 8 percent of wages paid. Now, that is 
going to particularly hit hard small businesses. And there have 
been estimates that there may be 4.7 million Americans that 
would lose their jobs because of the additional tax that small 
business men and women will have to pay.
    Does that concern you all? Does that concern you at all, 
Dr. Shern?
    Mr. Shern. If those estimates are correct, that would be a 
concern.
    Mr. Whitfield. Ms. Hansen.
    Ms. Hansen. Right. We feel that the ability to cover should 
also be supplemented by understanding affordability and cost 
for both employer, as well as the employee.
    Mr. Whitfield. OK.
    Ms. Edelman. But it is also my understanding that small 
businesses can buy into a public plan, but everybody should be 
contributing something.
    Mr. Whitfield. Everyone.
    Ms. Edelman. This should be a shared sacrifice.
    Mr. Whitfield. Let me ask you a question. What do you think 
if we just took the money that this plan is going to cost and 
just put everyone under Medicaid? I mean, I know you are a 
supporter of Medicaid. It is a good system. What do you think 
about that?
    Ms. Edelman. Well, I think that the committee can 
deliberate. I don't care how we do it. We should thoughtfully 
determine that we are going to get health coverage for 
everyone. What they are trying to do here is to give people----
    Mr. Whitfield. Would you be opposed to everyone being under 
Medicaid?
    Ms. Edelman. I would be not be opposed to all children 
being under Medicaid. That is what I know about.
    Mr. Whitfield. What about adults?
    Ms. Edelman. But I think that the issue here is how we are 
going to give everybody coverage and choice about a public or a 
private----
    Mr. Whitfield. And my question is would you object to 
everyone being under Medicaid?
    Ms. Edelman. I am here to talk about children today and to 
say whatever plan we do, that we should absolutely make sure 
that all children and pregnant women are covered, and I would 
love it if Medicaid took them all up to 300 percent, all of the 
children got the Medicaid benefits and the Medicaid 
entitlement.
    Mr. Whitfield. I think my time has expired.
    Mrs. Capps. Thank you, Mr. Whitfield.
    May I just make a correction to a statement that was made? 
It is my impression or my understanding that CBO has not taken 
a position on this bill and that actually a private-public 
benefit advisory committee determines what the benefit is that 
should be on the floor--or what is offered in coverage in the 
new marketplace or sold in the new marketplace, and that is 
just for the record.
    And I now call upon or recognize our colleague from 
Colorado, Ms. DeGette, for 5 minutes.
    Ms. DeGette. Thank you, Madam Chair. And I want to add my 
thank to Ms. Robertson-Holmes for coming today. It is always 
important to hear the patient perspective. When you were 
testifying about the great care that you got at the Mayo 
Clinic, I was thinking about my next door neighbor when I was a 
little girl, Randy West. I knew him since I was 6 years old. 
And about 2 years ago, Randy was diagnosed with prostate cancer 
and he was treated and the doctor said they thought he was 
cured. And then the next spring when his private insurance plan 
came up for renewal, his insurance company said they would 
renew his insurance but that they would not insure him for any 
future complications he might have gotten from the prostate 
cancer. So he said, well, why should I get insurance then 
because that is the thing that is the most likely to affect me. 
So he didn't get the insurance renewal, and you know the rest 
of the story. Last summer, his symptoms returned, he went back 
to his old doctors, his old doctors would not now treat him 
because he didn't have health insurance anymore and he spent 
about 2 or 3 months trying to get on to Medicaid so he could 
afford to go see the doctor and get treatment for his now 
advanced prostate cancer. Last week, on Wednesday, was Randy's 
57th birthday, and he died suddenly of a heart attack because 
of the advanced prostate cancer that had riddled his body.
    So there are problems with the single-payer system in 
Canada, but there are real problems for 47 million Americans 
like my friend Randy West who died because he didn't get the 
insurance. And I don't even need a response to that. I just 
want to say what we are trying to do is make it so insurance 
companies don't deny people for those pre-existing conditions 
and so that people who have diseases in this country can go to 
the doctor.
    And I just want to point out to you, Ms. Hansen, I want to 
thank you for mentioning the Empowered at Home Act in your 
written testimony because Chairman Pallone and I worked on this 
bill a lot together, and what that does is it incentivizes 
States to provide home and community-based services which 
allows disabled individuals to stay in their homes. It is not 
only about better health outcome, it is also more cost 
effective. And so I want to thank you for that, and I think, 
Madam Chair, that is an important component to keep in the bill 
as we move along.
    And finally, I have to thank my dear friend, Ms. Edelman, 
all of our dear friends and a real icon for children in this 
country for coming over today, and I want to ask you a couple 
of questions about kids. As you know, I have worked for many 
years on kids' health.
    The first one is, do you think that as we design a program 
to try to enroll all kids in this country in health insurance 
or some kind of health coverage that we should look at their 
unique needs and not just assume that the adult programs will 
cover them?
    Ms. Edelman. Yes, which is why we feel so strongly about 
the Medicaid benefit package which has been thought through as 
being the most child appropriate because it is targeted at 
children and it is targeted at early diagnosis and early 
treatment. So I don't think we need to reinvent anything, and I 
hope you will not come up with a benefit package, whatever it 
is, that takes away what children now have that works, and we 
want you to extend that package to all children because that is 
what we think they need.
    Ms. DeGette. And that includes mental health and----
    Ms. Edelman. Mental health. It is the comprehensive, all 
medically necessary services. And we think that that should be 
Medicaid children, CHIP children and any children regardless of 
whether they are in an Exchange or not.
    Ms. DeGette. And we talked earlier. I think you mentioned 
in your testimony the early and periodic screening diagnosis 
and treatment benefit. That is very expensive, though. And I am 
wondering if you can opine as to whether you think that 
additional cost is worthwhile and might even save money in the 
long run for kids and, if so, why.
    Ms. Edelman. I think it would save money and when we had 
Lewin & Associates do cost estimates for extending coverage to 
all children and giving them the Medicaid benefit packets, they 
said that you could extend the EPST benefit packets to all 9 
million uninsured children--this was a 2-year ago study--and 
for about 12 percent added cost.
    So I think that the cost effectiveness of this in the long 
run is going to pay itself back. So we think it is not a big 
huge add-on.
    Ms. DeGette. Part of the draft legislation, and part which 
I am sure you have read because it applies to children, is the 
part that if children come in at birth and their parents don't 
have insurance would automatically enroll them in Medicaid for 
the first year.
    Do you think that is a good step in the legislation?
    Ms. Edelman. I think that is terrific. And we would like to 
have automatic enrollment when they go to preschool or if they 
are in any WIC program or early Head Start program. You want to 
get children in because they are prevention. You want to 
prevent them----
    Ms. DeGette. And preventive care for children actually 
saves----
    Ms. Edelman. Many, many dollars on the other end. And we 
can give you added testimony that shows you the cost of doing 
that.
    Ms. DeGette. I would appreciate it if you would supplement 
your testimony in that direction. Thank you very much, Madam 
Chair.
    Mrs. Capps. Thank you, Ms. DeGette. And now I am pleased to 
recognize for 5 minutes Dr. Burgess from Texas.
    Mr. Burgess. Thank you, Madam Chair. Ms. Wright Edelman, 
let me just ask you a question. Last fall, in the interest of 
full disclosure, I was a surrogate for the opposite side. I got 
to know President Obama's proposals last fall pretty well 
because I always had to prepare to argue against them. And one 
of the overarching themes that was always put out there first 
was that there was going to be a mandate to cover children 
under President Obama.
    Have you talked to him lately about what happened to that?
    Ms. Edelman. No. But he certainly knows that I am expecting 
him to keep his promise. And I know that he has expressed his 
great interest in seeing that we take care of all of our 
children, and I think that this is the time to do it and the 
individual mandate----
    Mr. Burgess. I don't mean to interrupt, but I always had 
difficulty getting his surrogates to identify the definition of 
a child. Sometimes it was age 19, sometimes it was age 25, 
sometimes it was age 27. Do you have an opinion as to where 
that limit should be set?
    Ms. Edelman. Well, I certainly--we would take the 
definition of a child that is under Medicaid or CHIP now, but I 
think that we are talking about everybody getting coverage. And 
we know that there are a lot of younger people in college----
    Mr. Burgess. But in the interest of time, I have got to 
interrupt you. What is the difficulty with a child on Medicaid 
today? What is the difficulty with getting them in to see a 
dentist if they have dental coverage under Medicaid?
    Ms. Edelman. Well, the first part--Texas, since you have 
the highest number of unenrolled children and we----
    Mr. Burgess. Let us just focus on those enrolled.
    Ms. Edelman. Well, may I provide reimbursement rates? We 
all heard--and because children do still face bureaucracies. 
But let us just take the child out in Prince George's County, 
Deamonte Driver, who--Deamonte Driver died last year--tried to 
get--25, 26 dentists his mother went to, couldn't get them to 
take him because of the low Medicaid, low reimbursement rates, 
and I know you are trying to do something about that in your 
proposal. And the upshot was his tooth abscessed and infected 
his brain and then he died. 250,000 emergency rooms have huge 
bureaucratic barriers first to even enrolled children and not 
enough providers, and in rural areas it is worse.
    Mr. Burgess. But fundamentally the problem has been 
reimbursement rates.
    Now, Dr. Novack, you talk about 14 days out of every month 
you cover the emergency room, and we have put a mandate on 
providers. We may not have a mandate for kids, we may not have 
a mandate on employers or a mandate on individuals, but you 
have a mandate called EMTALA, which requires that within 30 
minutes of somebody showing up at the door you have to see 
them. Is that not correct?
    Dr. Novack. That is correct. And the consequence, of 
course, is that a very large majority of my colleagues just no 
longer have any privileges at the hospital. So for sometimes 
some complex things, where it might be nice to have a 
particular person available and when someone comes into the 
emergency room, you are no longer even able to get that 
person's assistance on a difficult case because of the 
regulations. People abandon their privileges completely.
    Mr. Burgess. And this is an extremely--and both of these 
issues are really getting to the same problem. And I recall 
back in--I practiced obstetrics back in Texas for 25 years, and 
we made an agreement amongst ourselves that our individual 
practices would each take a certain number of Medicaid patients 
every month into our obstetrics practice so no one would be 
unduly burdened by a larger number of patients who reimbursed 
at a lower rate. And that worked great until you had somebody 
who had a complicating medical condition and they had to be 
referred to a specialist. And it was virtually impossible to 
find anyone because of just exactly what you described, those 
very low reimbursement rates.
    As we sit up here and plan a national program that may very 
well be based on Medicaid, I just think we are obligated to 
make the program that is already there work first and 
demonstrate that it can work before we go extending it to 
increasingly larger segments of the population.
    Dr. Novack, do you have an opinion about that.
    Dr. Novack. My sense is that it is no different than when I 
do something in orthopedics, which is you are not going to 
introduce a new procedure until there is some data in a small 
group that it works. And what is being proposed here is to push 
through massive legislation in an incredibly short order where 
there has not been full time for people across the country to 
look at it and examine the problems and try to get it passed 
before people realize what has happened. And then all of us as 
patients will live with the unintended consequences of those 
actions.
    Mr. Burgess. So we should have evidence-based policy as 
well as evidence-based medicine?
    Dr. Novack. I suspect the--as Shona has demonstrated, look, 
there are good people in health care, whether they are 
physicians, nurses, all through the system, top to bottom in 
lots of places, not just the United States. But the system 
within which you are allowed to provide care is as important to 
the delivery as the people providing it. So if we are not 
willing to put the same level of attention and same level of 
attention to detail on the level of intellectual rigor into 
designing the system, it is doomed to fail.
    Mr. Burgess. Doomed to fail. Shona, let me just--I know I 
have no time left, but I just wanted to let you know that my 
grandfather was an academic OB at the Royal Victoria Hospital 
in McGill and my dad also did his training at McGill Medical 
School. He did a fellowship at Mayo Clinic back in the 1950s, 
when there was only the one in Rochester, and never went back 
to Canada. And I am so grateful you are here today, and thank 
you for sharing your story with us.
    Ms. Robertson-Holmes. I don't want to pull down any doctors 
or anything from either side of the border. It is just what 
they are able to do.
    Mr. Burgess. The doctors and nurses are all good people. 
The systems they are having to work under are where we are 
encountering the stress. Again, thank you for sharing your 
story with us today.
    Mrs. Capps. Thank you, Dr. Burgess. And now I would 
recognize myself for 5 minutes.
    I want to just point out that this legislation is not 
coming out of nothing, that there are--I will just mention 
three examples of best practices or good care, medical home, if 
you want to call them that. Cleveland Clinic is one, Mayo 
Clinic is another. John Hopkins. All have been very 
participatory. And many of our hearings have been focused on 
areas where practices have worked and where we see examples in 
small communities.
    I want to start with you, Dr. Shern. Mental health and 
substance abuse are some of the most chronic and disabling of 
conditions. Treatment often does not begin until as long as 10 
years after diagnosis. And diagnosis, we all know, oftentimes 
happens much after the symptoms begin. This increases the risk 
of developing a very costly disability. Mental health and 
substance abuse conditions often also go hand in hand with 
other costly chronic conditions like diabetes and heart 
disease.
    Can you comment--and I want to turn to children as well as 
a former school nurse. We must address that. But I want you to 
comment briefly on how we might be able to improve the 
provisions of the draft bill to better guarantee earlier access 
to mental health treatment. We tried to take as many steps as 
we could, but this is a single--with all the stigmas and stuff 
still around, please address this for us.
    Mr. Shern. First of all, I would say that we are lucky to 
have the Institute of Medicine report on prevention in general, 
and there are many things we can do universally to drive down 
the rates of mental illness over a long period of time.
    So one thing we should think about--and I think that the 
community task force that is anticipated in the bill is, in 
fact, moving in the direction of the evidence about what is 
effective in terms of prevention. I also think that the 
inclusion of mental health screenings in adolescents, as 
recommended by the Preventive Services Task Force and as 
included in the bill, is a very important step forward.
    It is ironic that we test eyes, we test hearing, we look to 
see whether or not there is a scoliosis in the spine, but we 
don't test kids for the things that they are most at risk for 
routinely, and those are social and emotional problems. We have 
data that indicates that when we do that with an appropriate 
model, as the Preventive Services Task Force has recommended, 
we can effectively identify and treat those conditions and that 
will be beneficial in the long run. Anything we can do to 
strengthen those provisions I think would be very helpful.
    Mrs. Capps. And I am going to have to ask you to submit 
this to the written record. If you have ideas about how we 
could better integrate--support better integration of 
behavioral health and medical care, as well as in a way of 
maybe branching out. Hopefully this will be a beginning start 
and then we can expand upon it.
    You mentioned children naturally. Because when you talk 
about health care and mental health, really, as you know, Dr. 
Edelman, Marion Wright Edelman, that is when we should start 
looking at screenings. I want you to focus on a different 
topic. When you mentioned children, I always think of the 
mother and I want to elaborate on the importance. I would like 
to hear you elaborate on the importance of ensuring that women 
receive adequate maternal care coverage and the effect of a 
mother's health on the health of her children. It is so clear 
to those who have studied it that if you have adequate prenatal 
care, your chances of having a healthy baby are that much more 
important.
    Ms. Edelman. Well, a depressed mother is not going to be 
the best mother for her child. So what is good for the mother 
is always good for the child. So it is in all of our self-
interest to make sure that mothers do get prenatal care, that 
any problems that they have are--substance abuse problems, 
domestic problems, other things that may lead to them being 
less able to do all they need to do for their children, those 
can be detected early and treated early because the impact on 
their children in the short and long term will be enormous, and 
we also just know the cost effectiveness of prenatal care, if 
they are having babies that are at low birth weight, are not 
adequately nourished, and don't know how to take care of 
themselves and their children. So you can't separate the two. 
So I think going forward we should make sure that the mother is 
in good shape and the children are in good shape.
    And I am happy to submit additional evidence of the 
effectiveness of prenatal care and the effectiveness of 
maternal care and hope that there will be a full fledged 
capacity to make sure that all children have mothers who get 
full maternity care in this bill.
    Mrs. Capps. Thank you very much. We have done a bit of work 
in Congress recently to recognize the situation around maternal 
mortality. But also the fact that--I don't think many Americans 
realize that this country, the United States, has one of the 
highest rates of infant mortality, 27th out of 30 
industrialized countries. That is a red flag for starters.
    And I want to thank each of you again for your testimony. 
And now I will recognize Mrs. Christensen for 5 minutes for her 
questions.
    Mrs. Christensen. Thank you, Madam Chair, And I thank all 
of you for your testimony. Ms. Chin Hansen, AARP has taken a 
position back a few years ago in support of lifting the 
Medicaid cap for the Territories. This bill does not go that 
far.
    Is it still the position of AARP that all of the Federal 
programs should be equally accessible to all Americans 
regardless of where they live?
    Ms. Hansen. As you have in my written testimony, that it 
does speak to really supporting that elevation. So it is 
something that we continue to support.
    Mrs. Christensen. Thank you. Dr. Shern, you talk about 
providing mental health care and the savings that we would 
realize from that and the reduction in the productivity losses 
that we experience, and you give some pretty good figures to 
back that up. But I wonder if just for the record you would 
speak to the impact of treating mental health, mental illness, 
and chronic disease and how that would also produce savings in 
terms of chronic disease treatment.
    Mr. Shern. Mrs. Christensen, as I said in my verbal 
testimony today, mental health conditions are the most likely 
co-occurring conditions with other chronic illnesses. And when 
they occur, there is lots and lots of data that indicates that 
the course of treatment is much rockier, costs are much higher 
and outcomes are much poorer. We have a study of older adults 
with diabetes, called the Prospect Study, who also had 
depression, half of whom were randomly assigned to effective 
depression treatment, the other half were assigned sort of a 
watchful wait and counseling but to balance off the amount of 
time that was spent. What we found was over a 2-year period, 
those people who didn't have their depression effectively 
treated died at twice the rate of the individuals who had their 
depression effectively treated.
    And in this study we found that in the first year there was 
an overall cost increase for care, but in year two the overall 
cost of care for those people declined and their clinical 
status improved.
    So we have lots of examples of what is called collaborative 
care models in which the entire person's needs are addressed. 
In this case we are talking about diabetes and depression.
    Additionally and quickly, if you look at workplace 
presenteeism and productivity, there is also ample data--and 
this gets to your earlier point about thinking about costs more 
broadly than simply the costs within health care sectors--there 
is ample data that shows that these are very cost effective 
programs that have effective return on investment.
    Mrs. Christensen. Thank you. And, Ms. Edelman, I think most 
of the questions that I wanted to ask you have already been 
asked. But you know that I have always shared your passion and 
your commitment to making sure that every child and pregnant 
female has been covered.
    We are expecting a PAYGO bill to come to the Congress 
shortly. I think it is still coming and, cost being the major 
barrier to achieving what we all know we need to achieve on 
behalf of children and really all Americans, do you agree that 
it is important enough to take this issue out of PAYGO if that 
is where it needs to be?
    Ms. Edelman. Well, I don't think we have a money problem in 
the richest nation on Earth. I think we have a values and 
priorities problems and that if we can find the money for all 
the more powerful special interests, if we can continue without 
having had a PAYGO for the tax cuts, many of which came through 
the Bush administration, if we could find the money so quickly 
for bailing out the banks and the others, if we can continue to 
have these disparate things, I don't for a moment believe we 
can't afford to take care of our children. It is really about 
values. And if we are serious about cost containment and if we 
are serious about prevention and if we are serious about 
creating a level playing field for everybody and if we believe, 
as we profess to believe and which is America's promise, that 
every child's life is of equal value, then we will find the 
money to do what is right and cost effective. So I hope we will 
do it.
    Mrs. Christensen. Dr. Novack, do you agree--I don't agree 
with a lot--some parts of your testimony, but I agree with your 
position on MedPAC, if I understand it correctly, and where you 
say that using cost control as a driving force behind health 
reform will turn every American from being a patient to an 
expense.
    Do you also agree that this ought to be done regardless of 
cost because we cannot, as the President said, afford not to do 
it?
    Dr. Novack. No. I disagree. I think that if we look at 
overall government spending, government should work the same as 
families. And that at some point we have--look, we actually 
have a health care bubble. It is like we had a housing bubble. 
Our overall unfunded liabilities are massive in health care, 
and that bill will come due some day no matter where people 
want to stick it on the ledger. So given all the bailouts--and 
I share the concerns with the other members of the panel about 
some of the bailouts that have gone on since they seem to go 
with whoever has the biggest megaphone. But that is not an 
excuse to not use basic fiscal responsibility when we are 
trying to reform health care.
    Mrs. Christensen. But families do it in emergencies, borrow 
to meet those emergencies and make sure that they are taken 
care of.
    Mrs. Capps. Now I recognize Mr. Green for 5 minutes.
    Mr. Green. Thank you, Madam Chairman.
    Dr. Shern, I am a cosponsor of H.R. 1708, the Ending 
Medicare Disability Waiting Period Act, and it would actually 
phase out the 24-month disability waiting period for disabled 
individuals. And I want to thank you for being a member of the 
coalition in the 2-year waiting period which has more than 120 
members.
    Can you speak on the importance of that elimination, that 
24-month waiting period for individuals with mental 
disabilities and illnesses, even with the creation of this 
Exchange that is in the bill?
    Mr. Shern. I think it is very important that we eliminate 
that waiting period. It is such a counterintuitive thing. And 
you know how difficult it is for someone to qualify for SSDI, 
to make it through the disability process. And people with 
mental health and substance use conditions have a particularly 
difficult time making it through. And then once one finally 
gets through to say, well, in 2 years--it was now agreed that 
you have a chronic illness that needs to be treated and say, 
well, the good news is you made it through the SSDI. The bad 
news is we are not going to be able to provide you healthcare 
coverage for 2 years. It makes no sense.
    So I think that that repeal is really important. Anything 
we could also do to expedite the elimination of the 
discriminatory 50 percent copay in Medicare. We took care of 
eliminating it over a 5-year period. We have good data to show 
that that, in fact, drives cost on the inpatient side by 
denying people or making it more expensive for them to get 
ambulatory care.
    So we are very enthusiastic about reducing that 2-year 
waiting period, and anything we can do to drive down that copay 
I think would also be very cost effective and beneficial.
    Mr. Green. Dr. Edelman, in Texas we have the largest 
uninsured in the United States and approximately 900,000 
children uninsured. Approximately 600,000 of those children are 
Medicaid eligible but unenrolled and the remainder are SCHIP 
eligible but unenrolled. This can be attributed to times in the 
past when Texas was facing budget issues and required parents 
to reenroll their children in SCHIP every 6 months and the same 
with 6-month re-enrollment for Medicaid. There are two pieces 
of legislation. In fact, my colleague, Ms. Castor from Florida, 
and I both are cosponsors of it.
    In your testimony you mentioned 12-month continuous 
eligibility for Medicaid as part of the solution to the problem 
with the number of uninsured children in the U.S. Can you 
explain why that is important also, the 12 months for the SCHIP 
program?
    Ms. Edelman. Well, I think that if you want to keep 
children enrolled, and you should make the enrollment and re-
enrollment procedures as easy as you can possibly make it, 
rather than as difficult as many States, including Texas, has 
made it. And we lost a child last year to Bonnie Johnson whose 
mother tried to do everything right but couldn't get her 
paperwork sorted out in Texas, and this 14-year-old child died 
from kidney cancer, which could have been allayed had he not 
been dropped from coverage for 4 months.
    And I have been so pleased that the business community in 
Texas has come now and really understood the importance of 
investing preventively and that Texas is losing millions of 
dollars, in fact almost a billion dollars, by turning down a 
Federal match and the local taxpayers are paying for it in 
emergency care.
    And so I just hope that we can--and we have submitted as a 
part of our longer testimony all of the simplification things, 
including the 12-month eligibility, presumptive eligibility, 
express lane, and a number of things that can make it easy to 
get children in for preventive care. And I would love, Mr. 
Green--and thank you for your comments this morning--to submit 
for the record the new study done by the Baker Institute that 
talks about the cost effectiveness of investing in coverage for 
all children in Texas and nationally, and lastly, some of the 
studies the business community have done in Texas in support of 
their reforms for 300 percent eligibility in Texas, as well as 
for the 12-month continuous eligibility.
    Mr. Green. And we know that the numbers--you can actually 
decide if you want to keep children off of CHIP or even 
Medicaid, you know, if you make those parents go down and stand 
in line every 6 months as compared to the year. Now, during 
that year they can still be investigated. If somebody finds out 
that family may not be qualified for Medicaid or even SCHIP, 
they can go get that. I appreciate it.
    Also, Congressman Doggett is working with the Ways and 
Means Committee on the same issue for both SCHIP and Medicaid. 
Hopefully we can at least get SCHIP. It is much smaller, but we 
need to do that, look at the total goal for Medicaid also.
    Dr. Novack, let me just ask questions about your 
statements. Health care reform must be built on a foundation 
consisting of the protection of the right of individuals to 
control their own health and health care, not special interests 
of government bureaucrats. I would submit right now I don't 
know if it is controlled by government, but it is controlled by 
somebody on special interests. If you are lucky enough to have 
insurance and you get preapproval, I can tell you that it is 
already going to be controlled by someone that is--whether it 
is insurance companies or Medicaid officials or someone else. 
So I agree with you. I want health care to be controlled by 
individuals, but we all have to answer to someone. And I can't 
just go to the doctor and get everything I want. They tell me 
that is not part of the policy or you not treated for that.
    Let me go next to your statement on the first preserving 
the right to be able to spend their own money, and let me 
understand. In Arizona, there is a constitutional amendment 
that the goal is to preserve the right to always be able to 
spend your own money for lawful health care services?
    Dr. Novack. That will be on the ballot in 2010.
    Mr. Green. Is there something in Arizona law that prohibits 
people from spending their own money for their health care?
    Dr. Novack. No, but it is in Federal law, from the 1997 
Balanced Budget Act, that effectively prevents Medicare 
beneficiaries from spending their own money. If you are a 
patient on Medicare and you come to me as a Medicare provider--
and let me give you--if you bear with me, because it only takes 
a moment to do an example. If you have had your hip replaced, 
for example, two or three times and you need it done for the 
fourth time, which happens, you want to go to somebody who 
really knows what they are doing. Well, the physician you want 
to go to who does a lot of replacements, what we are seeing 
more and more frequently is that those people are no longer 
doing what we call redo or revision operations. And the reason 
is why for a primary or first-time uncomplicated hip 
replacement, Medicare pays $1,400. But for a redo----
    Mr. Green. I understand where you are coming from. Let me 
give you another example, though.
    Mr. Pallone [presiding]. Excuse me. You are over almost a 
minute and a half. So I would like to end this if I could.
    Mr. Green. Let me ask you just to compare to that. If 
someone comes into you----
    Mr. Pallone. Mr. Green, you can't ask an additional 
question.
    Mr. Green. We don't have time?
    Mr. Pallone. If he wants to respond, fine.
    Mr. Green. I just wanted to make the comparison, Mr. 
Chairman.
    Dr. Novack. The difference is a $250 difference for what 
would be three times the work. So if you say I want Dr. Jones 
to do the operation, I will pay you the difference out of 
pocket because it is extra time, the only recourse a physician 
has is to resign from Medicare and not see any Medicare 
patients for 2 full years.
    Mr. Pallone. If you want to respond to that, you can. But I 
have got to move on.
    Dr. Novack. It is technically an effective prohibition on 
spending your own money on health care.
    Mr. Pallone. If you want to respond to that.
    Mr. Green. There are a number of members here who voted for 
that Balanced Budget Act in 1997. There is a lot of things that 
have happened since then that I disagree with. But I also know 
one of the concerns is that in an area that I have that is not 
a wealthy area, if we didn't have that, if we didn't have the 
current provision in the 1997 act, we would not have people 
being able to find a doctor to be treated under Medicare--
because they couldn't afford that extra money plus what they 
are already spending on Medicare.
    Thank you, Mr. Chairman.
    Mr. Pallone. Thank you. The gentlewoman from Tennessee, 
Mrs. Blackburn.
    Mrs. Blackburn. Thank you, Mr. Chairman, and thank you all 
for taking your time to be here.
    Ms. Holmes, I wanted to talk with you for a few minutes. It 
sounds like you had an incredible journey.
    Ms. Robertson-Holmes. I did.
    Mrs. Blackburn. And you were happy to be able--and grateful 
and fortunate to be able to find health care. You were here 
during the first panel and you have heard what I have had to 
say about TennCare in the State of Tennessee and our concerns 
there, because what you outline in your testimony is what I see 
happening many times in our State. You had to fly 2,000 miles 
to access health care. In rural west Tennessee, because of all 
the cost shifting that has taken place, because people are not 
able to access health care and many providers are no longer 
taking TennCare, then they find that that health care is 
available a long way away from them. And sometimes 30 miles 
might as well be 3,000 miles if no one has the ability to take 
you there. And I am just assuming, from what I read in your 
testimony and listening to you, that your outcome had you had 
to depend on a single-payer system that allows you no recourse, 
that allows you no alternatives, which says take a number, get 
in the queue and wait your turn, that your outcome would have 
been very, very different.
    Ms. Robertson-Holmes. Very, very different. And this is the 
whole reason why I am here because I feel very--to stick my 
nose in American business, but I was fortunate to be able to 
come here. But not only did I have to just travel away from my 
home, I had to travel outside my country. And when it gets like 
that--because it is actually illegal for me to try and do what 
I did in Canada. And that is what we have to be able to--to 
open the doors of communication about and realize that you get 
rationed care. It is one thing to not have insurance, and it is 
another thing to have insurance and not have doctors.
    Mrs. Blackburn. So basically your government provided 
insurance. When you needed it, your government provided 
insurance was worthless to you?
    Ms. Robertson-Holmes. Exactly.
    Mrs. Blackburn. So you mortgaged your home, put a second 
mortgage on your home. Your husband picked up a second job.
    Ms. Robertson-Holmes. That is right.
    Mrs. Blackburn. And you got the money that was necessary, 
the $100,000 to pay for that.
    Ms. Robertson-Holmes. Yes.
    Mrs. Blackburn. Now when you had flown back to Mayo and 
then you went back to Canada with your test results, and you 
said all right, here it is, I am going to be blind in 6 weeks, 
did a bureaucrat make the decision or a physician make the 
decision?
    Ms. Robertson-Holmes. They wouldn't even look at my medical 
reports. It was get back in line and wait.
    Mrs. Blackburn. So the bureaucrat turned to a citizen and 
said, you are out of luck, get in line?
    Ms. Robertson-Holmes. Get in line.
    Mrs. Blackburn. That is real compassion, isn't it.
    Ms. Robertson-Holmes. No, absolutely zero compassion from a 
country that is known to be compassionate. The same country 
that will cover illegal immigrants the second they arrive in 
our country.
    Mrs. Blackburn. Thank you, ma'am.
    Ms. Hansen, a quick question for you, and thank you for 
being here and I know you all work hard for our Nation's 
seniors. I have lots of seniors in my district and I had the 
opportunity this weekend to visit with some of them. You know, 
they are really very concerned about what they have been 
hearing from the Obama plan, because they feel like they have 
had money taken out of their paycheck every week and now they 
get to near retirement or they get to retirement and they are 
being told basically that that is worthless to them, that if 
there is a nationalized plan that they are going to be treated 
more like--they are feeling they are going to be treated more 
like Medicaid than Medicare and they are very, very concerned 
about losing Medicare Advantage, they are very concerned about 
losing options, and concerned with losing their Part D 
coverage.
    What would you suggest that I tell these seniors that say I 
have been putting money in, it is my money and came out of my 
paycheck, I have been letting the government have first right 
of refusal on that money all of these years, and now it is 
basically people--everybody is going to have the same thing? 
How do you respond to that? What should I tell the senior?
    Ms. Hansen. Well, I think that what I think I have heard 
that the President said if you have current insurance and it 
works for you, you can keep it. So I don't know if in this 
discussion whether it is that everything comes back into the 
pot, and I don't think that the Medicare program is meant to be 
structurally dismantled. So I think that my sense is that their 
assurance of whether it is the Medicaid program that Dr. 
Edelman has spoken about and Medicare. I mean, we have these 
right now codified in law with each of these different parts. 
So there is that.
    I think one of the things that we want to do is to make 
sure they get best value for their hard earned money, for what 
they have spent. So in other words, we want to make sure they 
get safe care, we want to get timely care. We want to make sure 
when they need medications, and most older people have 
medications, of the fact that it is affordable for them.
    So these are the things that I know AARP really strongly 
supports, and so I think the ability to really square as to 
what is discussed about President Obama's plan and the 
principles of maintaining choice, coverage, and private 
options.
    Mrs. Blackburn. Thank you, I yield back.
    Mr. Pallone. Thank you.
    Gentlewoman from Ohio, Ms. Sutton.
    Ms. Sutton. Thank you very much, Mr. Chairman. Five minutes 
isn't going to do it, but I am just going to request that Ms. 
Wright Edelman and Ms. Chin Hansen and Dr. Shern, if I can 
follow up with you outside the committee to talk about some 
ideas of how we might strengthen some things and make this work 
for our children and our seniors and those who have needs, Dr. 
Shern, you have so eloquently identified.
    I want to thank you very much, Ms. Robertson-Holmes, for 
coming and testifying. Dr. Novack. And I want to address the 
issue that I think you raise. And I think it is very important 
as we have this discussion to talk about the reality that this 
isn't just about getting people health care insurance. This is 
about improving the delivery of health care to people when they 
need it the most in a way that makes sense both for health 
outcomes and economically. And so your point is well taken when 
you talk about you paid for your insurance, right?
    Ms. Robertson-Holmes. Oh, sure.
    Ms. Sutton. And when you needed it, it wasn't there.
    Ms. Robertson-Holmes. Right.
    Ms. Sutton. I listen to you because I was so struck because 
I was in the State legislature in Ohio and did a lot of work 
related to the private insurance industry, and that very same 
problem, people who paid for care and then when they needed it 
and their doctor said they needed it, the insurer wouldn't pay 
for the coverage that they had been paying for all this time. 
And there is a person by the name of Linda Kerns, it is K-E-R-
N-S, Doctor. And Linda was a witness who came in to testify. 
And Linda was a very special person and most people are, but 
she was special because she was actually an HR person for an 
insurance company. And Linda had a history in her family of 
breast cancer, that was a very aggressive form of breast 
cancer. And so her doctor when she went in for treatment, that 
she was vulnerable for this potential for breast cancer, the 
doctor wanted to treat her aggressively, and the insurance 
company bureaucrats overruled the doctor and said no, I am 
sorry, you have been paying for coverage but that care is not 
going to be provided, we don't think you need it. So she didn't 
get it. She didn't get that coverage.
    Now what she did was what you did. She eventually over 
time, with great delay, raised the money and went into debt to 
get that surgery, but there was a delay. So we really never 
know the value of that delay or the health outcome.
    Ms. Robertson-Holmes. Irreversible tissue damage, no 
question.
    Ms. Sutton. And in this country, unfortunately, there was 
no recourse for her even if there was a proven health 
consequence to the unreasonable delay or denial of that 
coverage, even though if a doctor had done it--if a doctor had 
said we are not giving that to you and then he was found to 
have unreasonably delayed or denied then, there would have been 
a malpractice case against them. There was no accountability 
for that private insurer to be held accountable for the health 
outcome other than the cost of the procedure, not the loss of 
life or health.
    Ms. Robertson-Holmes. That is the exact same situation as 
we have, and there is no accountability from the government.
    Ms. Sutton. See, this is my point though, because you 
experienced that under your system. We see people experience 
that here under our system as well and people going into 
bankruptcy because the costs are spiraling or they don't have 
access to the care they need when they need it. The problem is 
that I guess maybe what I would ask is that if you had--and you 
talked about the need to have some competition for your 
government-run plan, and that is exactly what we are offering 
here. We are assuring that people have access to coverage in 
this country, and right now the private insurers are the only 
game in town. If they unreasonably delay or deny, no 
accountability. If we have a public option that also allows 
people to have the chance to purchase it, that that cannot only 
drive down costs but I would argue can drive up the quality of 
the delivery of care.
    And so I just point that out, because I can't help but 
think of Linda.
    Ms. Robertson-Holmes. And I understand and the major 
difference between the two of us is----
    Mr. Pallone. Ms. Robertson, you have to turn that mike on, 
because otherwise you won't be transcribed.
    Ms. Robertson-Holmes. The major difference between her and 
I is that what I did by coming to this country, mortgaging my 
house, et cetera, et cetera, was illegal for me to do at home. 
It is not an avenue for me to do at home. I cannot step out of 
that. I am mandated to use that, and that is it.
    Ms. Sutton. And you would have preferred to have the option 
of buying private insurance and then you would be resolved?
    Ms. Robertson-Holmes. Or if worse came to worse, the same 
situation that happened to me here, I could have at least 
stayed in my house, had my children with me, had my father, you 
know months before he passed away still with me at my hospital 
bed. Instead I was in Arizona 2,000 miles away alone.
    Ms. Sutton. I understand, and I thank you very much for 
your testimony.
    I know I am out of time. So bureaucrats there, bureaucrats 
here. Of course this bill I know you had the question, Dr. 
Novack, from our chairman emeritus about the exact language 
that you used in your testimony to describe the bureaucrats 
that will in your opinion be performing the functions under 
this bill, but it really does provide, the bill, if you find 
the language, it provides for health care professionals to do 
the analysis and of course what we must tell the American 
people is that right now insurance companies are doing it.
    So with all due respect, thank you.
    Dr. Novack. My answer is----
    Mr. Pallone. Listen, I am sorry. I don't think she was 
addressing a question to you.
    The next person is the gentlewoman from Florida, Ms. 
Castor. I apologize that I passed over you by mistake.
    Ms. Castor. Thank you, Mr. Chairman, and thank you to all 
of the witnesses who are here.
    To Dr. Shern, you were an outstanding director of the 
Florida Mental Health Institute in Tampa at the University of 
South Florida. They miss you there, we miss you. USF is doing 
great things, as you know, in medical, in health care policy 
and research.
    Back in Tampa before I was elected to Congress, I served as 
county commissioner and the county government there had the 
responsibility for all health and social services, including 
very fairly robust children's services, compared to many other 
places across the country. But I was always floored by the 
total lack of mental health care services. There is nothing, 
there is nothing for these families that struggle day to day 
with what is going on in their homes.
    Now of course the county government also had responsibility 
for law enforcement and the county jail, and the greatest 
advocate for mental health care services was always the sheriff 
and the folks that were running the county jail because they 
understood the population in jail, and that is the most 
expensive way to address mental health care in America.
    So I am pleased that the discussion draft here in the House 
takes the first few steps in providing that comprehensive early 
integrated care, and there is no better place to start of 
course than with children.
    As a mother, what would I do if I didn't have the same 
pediatrician that I have had for my daughter's 12 years of life 
to be able to just make that phone call, to call a nurse in the 
office. It is very cost effective rather than trying to chase 
down and go to a clinic or go into an emergency room. We are 
all paying for that very expensive model out there. If you have 
health insurance and you think you are not paying for other 
people's care right now, you are wrong, you are. That is one of 
the reasons your health insurance bills and copays have been 
increasing over time to such a great extent because of the 
uninsured showing up in the ER.
    But to promote this early integrated comprehensive care 
reform that we have taken a stab at here early in our 
discussion draft, I would like you to focus on a couple of 
things. Workforce. We know we don't have those primary care 
medical professionals, and I am not sure we have the mental 
health professionals that we need. Are we doing enough in our 
discussion draft to tackle that problem? I would also like you 
to address the terrible bureaucratic red tape. Ms. Edelman has 
emphasized that time and time again. You have some good 
recommendations in here, but I don't think the discussion draft 
goes far enough. In the State of Florida we have 800,000 
children that do not have that easy access to the doctor's 
office. The State of Florida even one time quit printing the 
application form for SCHIP.
    So what else can we be doing to knock down these crazy 
bureaucratic barriers that make it difficult for a parent just 
to walk into the doctor's office and make sure that their son 
or daughter gets a checkup? So the workforce issue and this 
terrible bureaucracy.
    Mr. Shern. Workforce is a critically important component, 
and I am heartened it is addressed in the bill, and of course 
we would always like to be able to do more, because we have a 
real pipeline problem in terms of people who were being trained 
to deliver the services that we need across the spectrum.
    You talked about primary care physicians. I think we 
continue to rely more and more and more on primary care 
physicians in the medical home. As we know, the current 
incentive system isn't producing enough primary care physicians 
and we are not reinforcing them or rewarding them to the degree 
to which we can or should.
    Additionally, I think we need to think about what we can do 
to continue to improve practice of people who are in practice 
now. We don't have very good models for doing that. We have 
what has been characterized as the Nike model. We sort of train 
them and say go out and just do it. We give them CME but we 
know that the CME doesn't do what it needs to in terms of 
improving skills.
    And there are other models, some with the hope of HIT is 
better support, and comparative effectiveness research is 
better support for people to make better decisions.
    And I think I will defer to my colleague, Ms. Wright 
Edelman, to talk about bureaucracy.
    Ms. Edelman. Well, I just think a single eligibility 
standard for everybody, for all children, that is why we 
suggest 300 percent will make it easier rather than have all 
these different eligibility standards. A single set of benefits 
that are child appropriate, it will make it a whole lot easier.
    And secondly and third, we talk about all the 
simplifications and we have it in legislative language, they 
are all included in the All Healthy Children Act, would be 
another terrific start. But getting rid of all the State 
lottery and all the disparate things and the two child health 
bureaucracies, whether the children are in Exchange or in EPS 
or Medicaid or in CHIP, they should all get what they need with 
a single eligibility standard, comprehensive benefits, and the 
simple sort of measures that we all know how to do.
    And I just hope that you will look at the specific 
legislative language. We will be happy to submit it as part of 
our testimony. And these are the true child health reforms we 
need in order to make sure that all of our children get what 
they need.
    Mr. Pallone. Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman. I want to thank the 
panel. Mr. Chairman, I want to thank you and Chairman Waxman 
and everyone who has been working on this issue for so long, 
because this is it, this is not a dress rehearsal. These panels 
that we are having probably are kicking themselves that they 
are here to speak on an actual discussion draft that includes 
these critical proposed changes to our health care system. I 
just hope that Americans watching this realize that this is 
exactly what they were pushing for in the last couple elections 
where they were expressing their frustration with the current 
health care system.
    This is our chance to get this right. It doesn't have to be 
perfect, but we have to get a new framework in place, one that 
we can build on and one that answers the frustrations and the 
feeling of helplessness that millions of Americans feel out 
there.
    I think the source of that is many fold, but I will point 
to a couple things, that sense of helplessness that I am 
describing. One is that you deal with an insurance industry 
that appears to be primarily engaged in the exercise of denying 
payment for the kinds of services that people need. And there 
is a paper chase. You get these things in the mail that say we 
will not pay, this is not a bill, this is your third notice, 
this is your fourth notice. Many Americans just give up after a 
certain point because they can't fight it.
    So that is one source of the frustration. That is why I 
think we need a public plan option to compete, and I am not 
going to revisit that discussion. But as a train leaves the 
station on health care, if public plan is not on the train, it 
is a train to nowhere. It has got to be there.
    The second source of frustration on the part of many people 
is they know that there are certain kinds of things that if 
that was reimbursed in the system it would be better for their 
health, it would save the system money over the long term. They 
can see it, it is right there, but the system doesn't cover it.
    Elderly patients know that if they can spend another 20 
minutes with their physician or half an hour, God forbid, that 
in that time the physician could better understand their 
situation and probably prescribe a regimen that would make a 
lot more sense to that patient and save the system over the 
long term. But physicians who do that are penalized by a system 
that doesn't recognize that kind of primary and preventive 
care.
    So that is another thing that needs to be on the train as 
it leaves the station, primary and preventive care. The other 
one is investing in the workforce. Because if we have the 
coverage, that is all very well, you show up with your 
insurance card, but there is no providers to deliver the care.
    So these are all things that are a part of this draft, this 
is why people need to be incredibly excited that we are talking 
about this right now. This is it, this is it. This is the 
moment.
    Now with that preface, let me go to health care delivery. I 
wanted to ask you, Ms. Wright Edelman, because you talked a lot 
about SCHIP and getting these services to children, but 
continue to be frustrated on kind of the delivery system. 
Congresswoman Capps and I have pushed to try to create more 
school-based health centers and also allow for reimbursement of 
services provided there if they would otherwise be reimbursed 
if delivered in a physician's office setting.
    Could you just speak briefly to this idea of capturing 
people where they are, this concept of place-based health care, 
go to where the children are, make it easier to access services 
at that point on the front end? Ninety-eight percent of our 
kids ages 5 to 16 are in one place 5 to 6 days a week.
    Ms. Edelman. In school.
    Mr. Sarbanes. For 6 or 7 hours. We ought to take advantage 
of that. So if you could speak to that as part of this overall 
perspective.
    Ms. Edelman. I want to say amen. You go to where they are, 
you make it as easy as you can. We need to expand the community 
health centers, we need to expand school-based health centers. 
And if the mother is in WIC and that is where kids are coming 
in, you get them enrolled and you make sure that you are making 
it available. And one of these days I look, as we talk about 
health and school reform, is that we can really make the new 
schools that we construct real community centers and collocate 
services so that is easy rather than hard for people to get 
their care.
    So whatever we can to go where children and families are 
and to make sure that it is accessible would be terrific. I 
think none of this is rocket science. I think we know how to do 
it.
    And I just want to reemphasize what you have just said. 
This is it. You have got all the skeletons for what you need to 
get done in your plan. We just need to kind of finish it and 
make sure that you have got the instructional forms there.
    And I would like to say one little thing, because this is 
not a dress rehearsal. This is a window of opportunity. If we 
miss this opportunity, we are going to lose more generations of 
children and see escalating costs.
    I just was looking for a thing that is in the written 
testimony about the President's statement. And I guess I think 
it states what you have stated in strong terms. He says I 
refuse to accept--when he was signing the CHIP bill--that 
millions of our kids fail to meet their potential because we 
failed to meet their basic needs.
    In a decent society there are certain obligations that are 
not subject to tradeoffs or negotiations. Health care for our 
children is one of those obligations. This is the moment to 
fulfill that obligation, for you to fulfill it you know how to 
do it, you have got lots to build on. We have been working and 
many of the leaders here on Medicaid for 42 years. We know from 
the incremental problems how to make it simple, but we can 
address the health infrastructure. You made such a good start. 
I just hope you can just finish it and make sure that it is 
transformational and true health reform for all of us.
    Mr. Sarbanes. Thank you very much. I yield back.
    Mr. Pallone. Thank you, and I think we are done with the 
questions, but I want to thank all of you again. Obviously what 
we are doing is crucial and we do plan to move ahead and meet 
the President's deadline. Thank you very much. Again, you will 
get written questions within the next 10 days and we would ask 
you to respond to those.
    Could I ask the next panel to come forward, please? 
    Could I ask those who were standing or talking to leave the 
room so we can get on with our third panel?
    Let me introduce our three witnesses here. Again starting 
with my left is Dr. Jeffrey Levi, Executive Director for the 
Trust for America's Health. Next is Dr. Brian Smedley, Vice 
President and Director of the Health Policy Institute, Joint 
Center for Political and Economic Studies. And then we have Dr. 
Mark Kestner, Chief Medical Officer for--is it Alegent Health?
    Dr. Kestner. Alegent.
    Mr. Pallone. Alegent Health. And this panel is on 
prevention and public health, certainly one of the more 
important parts of what we are discussing in the discussion 
draft. You heard me say before that we ask you to talk for 
about 5 minutes and your written testimony, your complete 
written testimony will become part of the record. And we will 
have questions after for 5 minutes from the members, and we may 
send you written questions afterwards which we would like you 
to respond to as well.
    I see we are joined by our ranking member, Mr. Deal. And we 
will start with Dr. Levi. It is Levi?
    Mr. Levi. Yes, it is.

STATEMENT OF JEFFREY LEVI, PH.D., EXECUTIVE DIRECTOR, TRUST FOR 
 AMERICA'S HEALTH; BRIAN D. SMEDLEY, PH.D., VICE PRESIDENT AND 
 DIRECTOR, HEALTH POLICY INSTITUTE, JOINT CENTER FOR POLITICAL 
  AND ECONOMIC STUDIES; AND MARK KESTNER, M.D., CHIEF MEDICAL 
                    OFFICER, ALEGENT HEALTH

                STATEMENT OF JEFFREY LEVI, PH.D.

    Mr. Levi. Thank you, Mr. Chairman, and thank you for the 
opportunity to testify on the House discussion draft of health 
reform legislation.
    Trust for America's Health and our colleagues throughout 
the public health community are delighted that this legislation 
recognizes that prevention, wellness, and a strong public 
health system are central to health reform. We also support the 
premise that without strong prevention programs and a 
strengthened public health capacity surrounding and supporting 
the clinical care system, health reform cannot succeed.
    While my testimony will focus on the public health 
provisions of the discussion draft, I must first say that 
universal quality coverage and access to care are central to 
health reform. We believe this bill can achieve this goal. 
Inclusion of evidence-based clinical preventive services as 
part of the core benefits package with no copayments also 
assures cost effective health outcomes.
    Trust for America's Health has worked with over 200 
organizations to articulate the importance of prevention and 
wellness to health reform. Our joint statement is attached to 
my written testimony and I will briefly review its key 
components.
    First, we have urged that as part of a renewed focus on 
public health Congress should mandate the creation of a 
National Prevention Strategy. The discussion draft meets the 
central criterion by requiring the Secretary to develop a 
National Prevention and Wellness Strategy that clearly defines 
prevention objectives and offers a plan for addressing those 
priorities.
    Second, the groups urged establishment of a trust fund that 
would be financed through a mandatory appropriation to support 
expansion of public health functions and services that 
surround, support, and strengthen the health care delivery 
system. We envision the trust fund supporting core governmental 
public health functions, population level non-clinical 
prevention and wellness programs, workforce training and 
development, and public health research that improves the 
science base of our prevention efforts.
    We applaud the inclusion of the Public Health Investment 
Fund, which will support through mandatory appropriations the 
core elements of the public health title, including the 
prevention and wellness trust. By including mandatory funding 
for community health centers, the discussion draft also assures 
a much closer link between the prevention and wellness 
activities that happen in the doctor's office and those that 
happen in the community.
    Let me now review some of the key activities associated 
with the investment fund and our rationale for supporting them. 
On workforce, the focus on frontline prevention providers and 
public health workforce places appropriate emphasis on where 
the need is greatest in our health care system. Assuring the 
development of a robust public health workforce through 
creation of the public health workforce core, which will offer 
loan and scholarship assistance, finally places public health 
recruitment, training, and retention on par with the medical 
profession.
    Community prevention and wellness programs are also 
critical. The expanded investment in these programs will be 
important to the success of health reform. There are evidence-
based proven approaches that work in the community setting to 
help Americans make healthier choices, by changing norms and 
removing social policy and structural barriers to promoting 
healthier choices. We know that targeted uses of these 
interventions can reduce health care costs. We are particularly 
pleased to see that this draft recommends establishing health 
empowerment zones where multiple strategies can be used at one 
time.
    In terms of support for core public health functions, we 
appreciate the recognition in this draft that the strength of 
our Nation's State and local health departments will 
significantly affect the success of health reform. Without the 
capacity to monitor population health, respond to emergencies, 
and implement key prevention initiatives, the health care 
delivery system will always need to backfill for a diminished 
public health capacity at a higher price in dollars and human 
suffering.
    Improving the research base and revealing the evidence is 
also an important component of this legislation, and it makes a 
crucial investment in both public health and prevention 
research. While we have a strong base of prevention 
interventions today, much more needs to be learned about non-
clinical preventive interventions, including how to best 
translate science into practice and how to best structure 
public health systems to achieve better health outcomes.
    Dr. Smedley will address in more detail the issue of 
inequities, but I want to note that we are pleased that this 
draft focuses on disparities in access and health outcomes. 
From better training to targeting resources in communities 
where disparities are greatest, we harness what we already know 
will work to reduce inequities. We must recognize that the goal 
of health reform is not just creating equality of coverage and 
uniform access. We need to assure equity in health outcomes, 
too.
    Mr. Chairman, there are few times that we have the 
privilege of watching history being made. This may well be one 
of them. If the public health provisions of this draft become 
law, in the years ahead we will witness the transformation of 
our health care system from a sick care system to one that 
emphasizes prevention and wellness. This is what our Nation 
needs and what the American people want.
    Recently, Trust for America's Health released the results 
of a national bipartisan opinion survey. Perhaps the most 
impressive finding in that survey was that given a list of 
current proposals considered as parts of health reform, 
investing in prevention rated highest, even when compared to 
concepts like prohibiting denial of coverage based on pre-
existing condition.
    In short, by placing this emphasis on prevention and 
wellness in the discussion draft, this committee is responding 
to a compelling call from the American people.
    On behalf of our partners in the public health community, 
Trust for America's Health thanks you for your leadership and 
looks forward to working with you to see these enacted into 
law.
    [The prepared statement of Mr. Levi follows:]





    
    Mr. Pallone. Thank you.
    Dr. Smedley.

              STATEMENT OF BRIAN D. SMEDLEY, PH.D.

    Mr. Smedley. Thank you, Mr. Chairman, for the opportunity 
to provide testimony on the potential to address racial and 
ethnic inequities in health and health care in the context of 
the tri-committee health reform legislation.
    For nearly 40 years the Joint Center for Political and 
Economic Studies has served as one of the Nation's premier 
think tanks on a broad range of public policy issues of concern 
to African Americans and our communities of color. We therefore 
welcome the opportunity to comment on this important 
legislation.
    Many racial and ethic minorities, particularly African 
Americans, American Indians, and Alaskan Natives, native 
Hawaiians and Pacific Islanders, experience poorer health 
relative to national averages from birth to death. These 
inequities take the form of higher infant mortality, higher 
rates of disease, and disability and shortened life expectancy.
    Health inequities carry a significant human and economic 
toll, and therefore have important consequences for all 
Americans. They impair the ability of minority Americans to 
participate fully in the workforce, thereby hampering the 
Nation's efforts to recover from the economic downturn and 
compete internationally. They limit our ability to contain 
health care costs and improve overall health care quality. And 
given that half of all Americans will be people of color by the 
year 2042, health inequities increasingly define the Nation's 
health. It is therefore important that Congress view the goal 
of achieving equity and health and health care not as a special 
interest, but rather as an important central objective of any 
health reform legislation.
    To that end, the draft tri-committee legislation contains a 
number of important provisions that will strengthen the Federal 
effort to eliminate health and health care inequities. 
Importantly, the legislation offers the kind of comprehensive 
strategy of targeted investments that are likely to help 
prevent illness in the first place, manage costs when illness 
strikes, and improve health.
    Over the long haul these provisions will result in a 
healthier Nation with fewer health inequities, greater 
workforce participation and productivity, and long-term cost 
savings. These provisions do several things.
    They emphasize and support disease prevention and health 
promotion. For example, the legislation would require the CDC 
Clinical Preventative Task Force and Community Preventative 
Task Force to prioritize the elimination of health inequities.
    In addition, the legislation would authorize health 
empowerment zones, as Dr. Levi has emphasized, locally focused 
initiatives that stimulate and seed coordinated, comprehensive 
health promotion and community capacity building.
    Provisions in this draft legislation would also improve the 
diversity and distribution of the health professional 
workforce; for example, by increasing funding for the 
successful programs such as the National Health Service Corps 
and Health Careers Opportunity Program, expanding scholarships 
and loans for individuals in needed health professions in 
shortage areas, particularly nursing, and encouraging the 
training of primary care physicians. It will also strengthen 
Medicaid by expanding eligibility and by increasing 
reimbursement rates for primary care providers. And it will 
improve access to language services; for example, by requiring 
a Medicare study and demonstration on language access.
    While the tri-committee draft bill addresses a number of 
important needs to achieve health and health care equity, there 
are several areas where the legislation could be strengthened 
with evidence-based strategies that will improve the Federal 
investment in health equity. These include encouraging the 
adaptation of the Federal cultural and linguistic appropriate 
services standards which would help improve access and quality 
of care for diverse populations, expanding successful 
community-based health programs such as the Centers for Disease 
Control and Prevention's Racial and Ethic Approaches to 
Community Health Program, addressing health and all policies by 
funding and conducting health impact assessments to understand 
how Federal policies and projects in a range of sectors 
influence health.
    Strengthening the Federal health research effort by 
elevating the National Center on Minority Health and Health 
Disparities to institute status. The national center has led an 
impressive effort to improve research on health inequities at 
NIH and needs the resources and influence associated with 
institute status to continue this work.
    Strengthening Federal data collection by establishing 
standards for the collection of race, ethnicity, and primary 
language data across all public and private health insurance 
plans and health care settings, and insuring that immigrants 
lawfully present in the United States face the same eligibility 
rules as citizens for public programs, including Medicaid, 
Medicare and CHIP.
    Mr. Chairman, in conclusion, addressing health inequities 
requires comprehensive strategies that span community-based 
primary prevention to clinical services, a long-term commitment 
and investment of resources and a focus on addressing equity in 
all Federal programs in all elements of health reform 
legislation. The failure to do so ignores the reality of 
important demographic changes that are happening in the United 
States and fails to appreciate the necessity of attending to 
equity as an important step in our effort to achieve the goals 
of expanding insurance coverage, improving the quality of 
health care, and containing costs.
    Encouragingly, the tri-committee draft bill recognizes the 
importance of achieving equity in health and health care and 
proposes a number of policy strategies to achieve this goal.
    Thank you, Mr. Chairman, and we look forward to working 
with you on this important legislation.
    [The prepared statement of Mr. Smedley follows:]





    Mr. Pallone. Thank you, Dr. Smedley.
    Dr. Kestner.

                STATEMENT OF MARK KESTNER, M.D.

    Dr. Kestner. Good afternoon, Mr. Chairman and members of 
the committee, and thank you for the opportunity to be with you 
today. May name is Dr. Mark Kestner, and I am the Chief Medical 
Officer for Alegent Health.
    Today I want to give you a brief overview of Alegent 
Health's experience with prevention and wellness. We are both 
the large employer and a substantial provider of health care, 
which gives us a unique perspective on these issues.
    Alegent Health is a faith-based, not-for-profit healthcare 
system that serves eastern Nebraska and western Iowa. We have 
9,000 employees and 1,300 physicians that are proud of the care 
we provide in our 10 hospitals and in our 100 sites of service. 
Alegent is the largest nongovernmental employer in Nebraska, 
and each year we serve more than 310,000 patients.
    As a provider, we believe we are a model for post-reform 
health care systems. We employ substantial health care 
information technology to improve the quality and safety of the 
care we provide. Through the dedication and commitment of our 
physicians, a combination of both employed and independent 
physicians, we have standardized care and implemented 
evidenced-based care order sets across more than 60 major 
diagnosis fees that are continually raising the bar on the 
quality of care we provide.
    Our CMS core measure and HCAP scores are consistently among 
the highest in the Nation. In June of 2008, the Network for 
Regional Health Care Improvement identified Alegent as having 
the best combined health care quality scores in the Nation. 
Through the implementation of health IT and adoption of 
evidence-based care, Alegent is increasing the quality of care 
we provide while simultaneously lowering the costs that we 
provide. Last year we reduced our resource utilization, and the 
cost of the care continues to decline.
    We are proud to have shared these and other initiatives 
with Health and Human Services Secretary Kathleen Sebelius 10 
days ago when she paid a visit to us. And yet, Mr. Chairman and 
members of the committee, in our estimation the efforts of 
providers to raise quality and lower costs is only a small 
portion of what we need to do. We adamantly believe that people 
must be more accountable for their health. And in doing so, we 
must incentivize them and give them good information.
    We began our journey with greater consumer involvement in 
health care 3 years ago when we made a commitment as an 
organization to more fully engage our workforce and their 
health. We spent a year designing a new benefit plan that 
promoted health and wellness among our employees. In pioneering 
the new benefit plan, we identified incentives to encourage 
healthier behaviors and tools to provide meaningful costs and 
quality information as areas where Alegent could foster 
individual engagement in health care.
    There are two important constructs to Alegent's employee 
health benefit plan. First, preventive care is free. This 
ranges from services like annual physicals and mammography to 
childhood immunizations and colonoscopies. If it is 
preventative, it is free. As a result, our workforce is 
consuming more than two and a half times the preventive care 
than the Nation at large. That is an investment we are willing 
to make even without longitudinal studies to quantify the 
financial benefit to our organization.
    Second, through an innovation called Healthy Rewards 
Program we pay people to make positive changes in their 
lifestyle. If an employee quits smoking, loses weight, more 
effectively manages their chronic diseases like diabetes, or 
makes other positive changes that affect their lifestyle, 
Alegent provides a cash reward. To encourage wellness and 
prevention and help our employees get healthy, we offer a 
variety of assistance programs free of charge, free weight loss 
counseling, free smoking cessation, and chronic disease 
management programs. For those who need a little bit of extra 
help, we offer free personal health coaches.
    Our objective was first and foremost to improve the health 
of our workforce, and we believed by doing so our costs would 
decline. And while we are still building data on the effects of 
our efforts that had been on productivity and absenteeism and 
organizational health care costs, I can report that a majority 
of our employees take an annual health risk appraisal and today 
have lost 15,000 pounds as a workforce, and more than 500 of 
our employees have quit smoking.
    Our approach has allowed us to substantially slow the 
growth of our health care spending. Over the first 2 years our 
cost increases were limited to an average of 5.1 percent 
despite trends in the 8 to 10 percent range. As we approach a 
new benefit plan year, we are carefully constructing a advanced 
medical home pilot for our chronically ill employees and 
several large employers in the community.
    Key to our results was their use of the HSA and HRA 
accounts, which give employees better control in their health 
care dollars and allow us to directly reward people for 
changing unhealthy behavior.
    The data we examined developing our benefits plan suggests 
to us that people would be more inclined to take advantage of 
health and wellness programs, even free ones, if they were 
incentivized to do so. For us the use of HSAs and HRAs 
facilitates this process and provides employees an immediate 
tangible benefit in the form of subsidized health care costs. 
But to give our employees more control required us as providers 
to make other dramatic changes. First and foremost, we created 
tools to provide meaningful and relevant cost and quality 
information. We have a quality Web site where we publicly 
report our 40 quality measures, CMS 20, the 10 skip and the 10 
stroke measures, and our compliance with these measures ranges 
anywhere from 97 to 100 percent.
    In January of 2007, we introduced a Web-based cost 
estimating tool called MyCost, which is the first of its kind 
in the country. By working with third-party payer insurance 
database, MyCost was able to verify insurance policies and 
deductibles in order to provide patients an extremely accurate 
price estimate on more than 500 medical tests and procedures. 
In a little over 2 years, 85,000 individuals, employees and 
members of our community, have used it.
    In summary, Alegent Health began our health care reform 
several years ago when we made an organizational commitment to 
dramatically improve quality, lower cost, and adopt health 
information technology. We knew that this would help us become 
more effective and efficient providers, and the data shows that 
we are becoming successful in reducing our costs and our 
resource utilization. And yet, Mr. Chairman and members of the 
committee, that was simply not enough. Our challenge as a 
country, as physicians, nurses, Members of Congress and 
employers, individuals, and families is to find a way to help 
people become more individually responsible for their health 
care.
    Thank you.
    [The prepared statement of Dr. Kestner follows:]





    Mr. Pallone. Thank you. Thank all of you, and we will now 
take questions, and I will start with 5 minutes.
    I wanted to really focus, if I could, on the questions to 
Dr. Smedley, because of the disparities issue. All of you 
talked about the importance of prevention and wellness, and 
that is certainly what we hear in regard to health reform. And 
specifically experts tell us we have to address prevention and 
wellness at the community level if we want health reform to 
lead to the best health outcomes for our constituents. That is 
definitely the case for elimination of health disparities. 
Disparities arise not just because of differences in medical 
care, but also because there are factors that make it harder 
for some people than others to make healthy choices.
    Dr. Smedley, I have been most familiar with this with 
Native Americans because I am a vice chair of the Native 
American Caucus. I don't have any tribes in New Jersey, but 
over the years being on the Resources Committee, I have paid 
quite a bit of attention to the Native American issues. Best 
example probably was with the Pima, the Tohono O'Odham, where 
you saw that traditional diet, ranching, desert products were 
lost and they using, eating processed foods, and it was hard to 
go back to traditional diet because the ranches were gone and 
the desert had changed and it just wasn't possible to do that.
    So in the draft proposal we target funds to community based 
interventions or services with the primary purpose of reducing 
health disparities. Can you tell us how the recommendations 
from the Community Prevention Task Force, that is housed at CDC 
and whose work is strengthened in the draft proposal, can be 
used to target health disparities? And anything else about 
addressing health disparities within the context of prevention 
and wellness. What do you see as some of the areas that require 
new or additional research?
    All in about a minute because I have a second question to 
you.
    Mr. Smedley. Sure, Mr. Chairman, I will try to be very 
brief. As you pointed out, place matters for health. Where we 
live, work, study and play is very important. Certainly it is 
important that we all take responsibility for our individual 
health choices, but sometimes those health choices are 
constrained by the context in which we live, work, and play. 
Since you pointed out in many communities of color we face a 
number of health challenges, often the retail food environment 
is poor in segregated communities of color. You have a relative 
abundance of fast food outlets, poor sources of nutrition, a 
relative lack of grocery stores where you can get fresh fruits 
and vegetables. Similarly in many communities of color we lack 
safe places to play, recreational facilities, places to 
exercise. It is harder to encourage an active lifestyle under 
those conditions. So the CDC Preventative Task Force is an 
evidence-based process that tries to identify what are the 
kinds of community-based prevention strategies that will help 
to address these kinds of conditions. We think that is very 
important. So I certainly applaud the provisions in the draft 
bill that would strengthen that process.
    Mr. Pallone. Now on the workforce, again I will use 
American Indians because I am most familiar, I think there are 
maybe, over 2 million Native Americans and last count less than 
500 American Indian doctors, 400 something. They have an 
organization. I went to speak to them once, and that is the 
entire membership.
    In the discussion draft there are a number of provisions 
that will increase representation of racial and ethnic 
minorities. We have additional investment in the National 
Health Service Corps. Basically, how would these workforce 
provisions help address health disparities? Why is increasing 
the diversity of the workforce and not just its scale important 
in reducing health disparities? You could argue why do you need 
more Native American doctors, why can't other people take care 
of Native Americans. But I know that there is an issue there, 
and I would like to you discuss it.
    Mr. Smedley. Absolutely. The research is very clear that 
when we increase the diversity of the health provider workforce 
all of us benefit. So for example, we know that providers of 
color are more likely to want to work in medically underserved 
communities. Their very presence increases patient choice. We 
talk a lot about many patient choice. For many patients of 
color it is often harder to bridge those cultural and 
linguistic barriers without a provider of your own racial or 
ethnic background.
    It is also true that diversity in medical education and 
other health professions education settings increases the 
cultural competence of all providers. We need to be thinking 
about ways to improve the cultural competence of all of our 
health care systems, because as I mentioned in my testimony, 
very soon, in shortly over 30 years, this is about to be a 
Nation with no majority population. Our health systems need to 
be prepared to manage that diversity. And so this is one of the 
many reasons why diversity among health professions is 
important, and the provisions in the draft bill such as 
strengthening the title VII and VIII of the Health Professions 
Act are a very important toward increasing the diversity and 
distribution of providers.
    Mr. Pallone. Thank you.
    Mr. Deal.
    Mr. Deal. Thank you, Mr. Chairman. This whole panel is 
supposed to be dealing with prevention and public health, and I 
appreciate all of you being here. But I have heard a lot of 
words and I have heard little examples of specifics on this 
thing. Because it seems to me if we talk about the words 
``prevention'' and ``wellness,'' we are talking about changing 
of lifestyles.
    Now we heard Dr. Kestner talk about his company and the way 
that they incentivized wellness was through financial type 
rewards. We heard Dr. Smedley just a minute ago talk about 
community-based strategies and the fact that you don't have 
enough grocery stores in some communities to sell fresh fruits 
and vegetables, don't have safe playgrounds that cause us not 
to get enough exercise.
    In a health bill, a health reform bill, what are the 
specifics we can do to change people's lifestyles? Because you 
don't think of that in the normal context of a health care 
reform measure.
    Now specifically, and I am going to use this is a specific 
example of a question that I think we ought to address, in the 
Food Stamp Program, for example, we are pouring millions and 
hundreds of millions of dollars into it, and the recent 
stimulus package has powered even more money into the Food 
Stamp Program, but we don't have any guidelines like we have in 
the WIC Program, as I understand it, to make sure that the 
taxpayers dollars that are helping fund the purchasing of food 
doesn't go to buy things that work at counter purposes with 
what we are talking about here of wellness.
    Dr. Levi, let me start with you and ask if you would just 
comment on that.
    Mr. Levi. I think your point is very well taken. If we 
think of this as not a health care financing bill but a health 
bill, then we need to be addressing all of the elements that 
comprise helping people be healthier, and a lot of that is 
about exercising personal responsibility but then creating the 
environment where people can, not just through financial 
incentives, but really we change the norms of our society so 
people make healthier choices.
    To that end, there is actually an experimental program now 
that is getting underway within the Food Stamp Program, so that 
people will be will in a sense get higher credit if they buy 
healthier food. So that is one way of incentivizing people. 
There are certainly other things that can be done within the 
Food Stamp Program that would incentivize the purchase of 
healthier foods.
    But we also have to make sure those healthier foods are 
available, which is not the case in all communities. We need to 
make sure that people understand and know that the healthier 
foods are indeed what they should be eating. And so what it 
really takes is the kinds of community interventions that I 
think are envisioned in this legislation that, particularly 
under the concept of health empowerment zones, look at multiple 
aspects of the community. Is healthy food accessible? Do people 
know about the healthy foods? What is happening in the schools 
in terms of educating kids and changing norms? How active are 
kids able to be? How active are adults able to be? And taking 
all of those elements and developing comprehensive strategies. 
We have examples of successes like that. We have them in the 
Steps Program funded by the CDC, in the Reach Program funded by 
CDC, in the Pioneering Healthier Communities that are organized 
by YMCAs and other national organizations to bring communities 
together to identify what their communities need to make 
healthier choices, easier choices for the average person.
    That is what is going to change. You know, we are talking 
about bending the cost curve. If we do that, we can have a 
dramatic impact on people's health and what they will be 
demanding of the health care system.
    Mr. Deal. I think we all agree we want our children and 
everybody to be healthier and exercise better choices in their 
lifestyles.
    Dr. Smedley, are we talking about subsidizing grocery 
stores to come in to certain communities as a way of providing 
these kind of choices? Is that what you are talking about?
    Mr. Smedley. Well, Congressman, there actually are some 
very interesting initiatives that have leveraged public 
investment to stimulate private investment. For example, the 
Commonwealth of Pennsylvania has the Fresh Food Financing 
Initiative, which has provided that double bottom line of 
benefits both to private investors as well as to government 
investing in creating incentives so that we can create a 
healthier retail food environment.
    I think that many of the examples that Dr. Levi just 
mentioned are important examples of comprehensive strategies, 
because often we find that there is not just one issue that is 
a problem in the community. It is not just a problem of food 
resources and food options, but there are many multiple and 
systemic problems. Addressing those comprehensively as the 
Reach Program does and other programs is the way to go.
    Mr. Deal. I think in our educational activities maybe we 
should teach people how to turn the television set off a little 
bit.
    Mr. Levi. Absolutely.
    Mr. Deal. Thank you.
    Mr. Pallone. Chairman Dingell, is he here? I am sorry, our 
Vice Chair, Mrs. Capps.
    Mrs. Capps. Thank you, Mr. Chairman.
    I would like to say, as someone who spent my life in the 
last couple of decades in public health as a school nurse, this 
is a panel that I really appreciate, the testimony of each of 
you, and I also look forward to this 5 minutes being just 
dedicated to proving the worth of prevention, in other words, 
my frustration with CBO for not being able or not scoring this 
topic.
    And Dr. Levi, I will start with you, but I hope I give a 
chance for each of you to comment.
    Your testimony mentions a report from Trust of America's 
Health released last year showing the return on investment from 
proven community level prevention. Can you explain briefly the 
methodology of this report if you think this could help me or 
help us all in our case towards scoring savings? We have to 
learn how to do this as government as well; otherwise, we are 
not going to be able to counter some of the front costs that 
are entailed here.
    Mr. Levi. I agree, and you know, I think making the case to 
the Congressional Budget Office is going to be critical at some 
point. I would preface my explanation of our report in our work 
by saying, whether or not CBO is convinced should not stop us 
from investing in prevention because whether we meet the narrow 
criteria that CBO is forced, in some respects, by law to 
address shouldn't mean that we don't see this as a worthwhile 
investment in improving the Nation's health.
    We worked with the New York Academy of Medicine, Prevention 
Institute and, above all, the Urban Institute economists to 
develop a model that looked at successful community level 
prevention efforts, in other words, efforts that took place 
outside of the doctor's office, to see whether, through 
education, through changing the environment, changing policies, 
we could see improved health outcomes.
    We focused ultimately on smoking cessation, physical 
activity, and nutrition, which are the drivers of some of the 
most expensive health care costs that we see today. And what we 
found was that there are, indeed, successful examples of those 
interventions. What we found also is that we probably can 
implement those at probably less than $10 per person, and even 
if we saw only a 5 percent impact of those interventions, which 
is very much on the conservative side in terms of what the 
evidence shows, we could see a $5.60 return for every dollar we 
invested.
    The challenge here is that the winners in this, if you want 
to call it the winners, the people who save, are better care, 
the private insurers, and to some degree also, Medicaid. In the 
CBO scoring system, a discretionary investment that has pay off 
on the entitlement side can't be scored in anyone's favor, and 
that is actually a congressional rule. But just as importantly, 
I think what we need to think about is that those who benefit 
are not necessarily contributing, and so we need to think of 
this as a public investment that will ultimately reduce overall 
health care.
    Mrs. Capps. My question to you now is very pragmatic, and I 
am going to expand it to all three of you, and time is of the 
essence. I mean, this is really an obstacle, in my opinion, to 
the pushback against the huge cost, as it is portrayed, of this 
health care legislation. Can you give us some advice, what can 
Congress do to facilitate the process of enabling CBO, or 
whatever term you want to use, to be able or have that 
capability of scoring prevention?
    And you know, you are not even talking about quality of 
life for consumers of health. We will take that off the table, 
because that is probably hard to measure, or longevity, that 
has been held up by some to be a deterrent because as people 
live longer, they are going to get more chronic diseases over 
the course of their lifetime. You know, what should we do on 
this committee to begin that process? I will start with you 
briefly.
    Mr. Levi. Two very quick comments. One is, Congress can 
remove this firewall between discretionary investment and 
entitlement savings.
    I think the second is to start a dialogue with the 
economics community and the Congressional Budget Office, 
because not everyone agrees with this notion that you just 
mentioned that if we reduce these chronic diseases, then people 
are going to live longer, and they are ultimately going to cost 
more. There is this whole concept we call compression of 
morbidity which suggests that if we actually reduce obesity, 
and there are a number of models from a number of different 
economists now that tend to show, for example, if you reduce 
obesity, you are not necessarily prolonging life, but you are 
improving the quality of life and reducing health care costs 
because the chronic diseases are additive. They don't 
necessarily shorten life, and so I think those are two 
examples. Start that dialogue and remove some barriers.
    Mrs. Capps. Thank you. I know I have used my time. I don't 
know if there is a way for a quick response from the other two 
if they want to.
    Mr. Pallone. Go ahead, sure.
    Mr. Smedley. I would just add, I think that Dr. Levi 
answered that quite well. We also need to consider the next 
generation is likely to be less healthy than the current adult 
population.
    Mrs. Capps. Why is that?
    Mr. Smedley. Because they are more obese. They are at risk 
for more chronic diseases. So we need to be considering the 
fact that this is the generation that will support my 
colleagues and I in our old age. So hopefully we will be 
forward thinking.
    Mrs. Capps. Is that documented that they are less healthy?
    Mr. Smedley. Yes.
    Mrs. Capps. Any further point from you?
    Mr. Smedley. Be happy to provide reference.
    Mrs. Capps. Please do.
    Dr. Kestner. I would just comment that we have senior 
experience in showing that preventative care decreases our 
expenses.
    Mrs. Capps. So there is data out there? Any of you want to 
supply any information, I would appreciate it very much.
    Mr. Pallone. Sure. Any follow-up in writing is appreciated.
    Thank you.
    Gentleman from Texas, Mr. Burgess.
    Mr. Burgess. Thank you, Mr. Chairman.
    Dr. Smedley, I am very interested in some of the things to 
which you testified and may be beyond the scope of what we are 
doing and dealing with in these hearings, but I have similar 
neighborhoods in my district, and there is not a grocery store 
from one end of the community to the other. Plenty of places to 
buy alcohol, typically in 40-ounce containers, and plenty of 
places to buy fast food, and of course, cigarettes are 
available on every street corner.
    This just points to one of the difficulties that we have, 
and we had worked with a group Social Compact. They are so far 
away from our last Census in 2000, it is very difficult to get 
private grocery stores interested in moving back to the area 
because they say, well, the demographics just won't support a 
grocery store, but in fact, the demographics have changed and 
the purchasing patterns have changed, and again, we are still 
far away from the Census. Social Compact was able to put out 
some data that showed perhaps this is worthwhile of a Wal-Mart 
Supercenter, for example, locating in the area. We are actively 
trying to push that, but it is just extremely difficult to get 
those things accomplished. No problem at all getting another 
liquor store to move in. It is really hard to keep them out in 
fact.
    I just wonder if we shouldn't allow a little more 
flexibility in some of our Federal food stamp programs. You 
can't buy alcohol; that is correct. Can't buy cigarettes; that 
is correct. Can't buy hot food, but there are some hot foods 
like a rotisserie chicken, for example, that may serve a 
family's nutritional needs very well. And the fact that that 
activity is restricted may be putting an undue burden on people 
who are willing to move into the community.
    And I don't purport to have any of the answers. I have 
worked with some of the people at Robert Wood Johnson in trying 
to craft language that we might put in a bill, but it is 
extremely difficult. But I appreciate what you are doing, what 
you are trying to do because I think that gets to the root of a 
lot of the problems that I know I see it at home. And you are 
correct; the next generation is only going to be successively 
less healthy because some of the learned behaviors that are 
going on today.
    I want to talk about Alegent for just a moment because you 
are a success story, and we heard from a previous panel that 
maybe we should be pursuing evidence-based policy, and your 
policies at Alegent are clearly something that are worthy of 
not just our attention and study but perhaps our emulation. And 
you have showed rather dramatically, I think, you and Wayne 
Sensor have shown, you can't just make things free; you have 
got to make them important, and the way we make things 
important is attach money to them.
    So I hope that this committee will look seriously at what 
you have done with your health reimbursement accounts and your 
health savings accounts and your ability to bring people in not 
just to affect things on a small scale but to affect things on 
a large scale. And the impressive thing is you did it with your 
9,000 workforce first before you went forward and began to sell 
it to the rest of the community.
    So, again, I hope we will look seriously at what you have 
done and what you have been able to accomplish. My 
understanding--and tell me if I am correct, Dr. Kestner--on the 
consumer based health plan, if you look at high-option at PPO 
plans, they are going at about a 7.5 percent year rate of 
growth as far as costs; Medicare and Medicaid, 7.3, 7.8 
percent, depending upon who you want to read; but consumer 
directed health plans are growing at about 2, 2.25 percent a 
year. Has that been your experience as well?
    Dr. Kestner. Our cumulative 2-year experience is 1.5.
    Mr. Burgess. 1.5?
    Dr. Kestner. Excuse me, I am sorry, 5.1. And I think we 
recognize that the impact going forward will be on preventative 
measures. We still have patients that have problems with 
obesity, with smoking, and those are things that we are going 
to have to--that are going to be expensive for us in the long 
run. So, on the short term, we have already seen a benefit in 
implementing a strategy, and on the long term, we anticipate 
seeing an increasing decrease in our health care expenses.
    Mr. Burgess. Now, I don't know if you have had a chance to 
read the draft that is before us today for discussion, but as 
far as you are aware does the draft that has been proposed by 
the majority, does it increase or decrease your ability to do 
what you want to do particularly with health savings accounts?
    Dr. Kestner. Right. I think any strategy needs to engage 
the patient in the dialogue, empower them in economic decisions 
regarding access, but allowing open access. And I think the 
most important thing from my perspective is the ability to 
engage the dialogue when they are well. All too often we access 
health care at a point of sickness, and really preventative 
care is engaging people and starting the dialogue when they are 
well. So any strategies that focus on prevention and begins 
that dialogue early I think are benefits to the population at 
large.
    Mr. Burgess. Just one more brief question. Do you allow for 
partnering with your physicians and your facility at all? Are 
there like inventory service centers where there is physician 
ownership involved in any of Alegent's facilities?
    Dr. Kestner. Yes. We have joint ventures in ambulatory 
service centers.
    Mr. Burgess. Are you aware that the draft under discussion 
today would prohibit such activities in the future?
    Dr. Kestner. I am superficially aware of discussions that 
are going on.
    Mr. Burgess. Do you believe in the pride of ownership? I 
mean, when a physician has an ownership position in an entity, 
my feeling is it makes it run better.
    Dr. Kestner. I believe with the dialogue that we have had 
in our health system our physicians feel pride of ownership, 
whether they have an investment interest or not. I think that 
has been part of our culture of giving physicians decision 
making and the ability to drive health care through evidence-
based care and empowering them to make decisions for our health 
care delivery model. So, whether they have an investment 
interest or not, I think we have tried to make sure they have a 
pride of ownership in our system.
    Mr. Burgess. Do you think this bill before us today fosters 
that empowerment?
    Dr. Kestner. The one that is up for discussion at this 
point in time?
    Mr. Burgess. Yes.
    Dr. Kestner. Yes.
    Mr. Burgess. Thank you.
    Mr. Pallone. Thank you. Gentlewoman from the Virgin 
Islands, Mrs. Christensen.
    Mrs. Christensen. Thank you, Mr. Chairman, and thank you 
for being here to all of the panelists.
    Dr. Levi, we have really appreciated the work from the 
Trust for America's Health, and we appreciate also your support 
of the health empowerment zones.
    One of the basic services that is not covered for adults is 
dental care. How important do you think that it is that it be 
included in terms of prevention or its impact on chronic 
diseases and other health care problems?
    Mr. Levi. We believe access to dental care is a vital 
component to keeping people healthy and keeping people 
functioning and economically productive. There is growing 
evidence, especially on preventive care, of links of good 
dental health with even heart disease. And so there is, indeed, 
a correlation with some chronic diseases, but just as 
importantly, I think, you know, good oral health keeps people 
healthier, keeps people functioning, keeps people out of pain 
and, therefore, probably more employable. So it is both a 
health benefit and an economic benefit.
    Mrs. Christensen. Thank you.
    Dr. Smedley, welcome back.
    Mr. Smedley. Thank you.
    Mrs. Christensen. The Iowa Medical Treatment Report on 
equal treatment of which you are the lead author and editor was 
a landmark document, and the recommendations from that report 
have been held up as the standard for eliminating health 
disparities. You mentioned a few areas, but if there are any 
others, to what extent does this draft legislation meet and 
address those recommendations? And where are we falling short?
    Mr. Smedley. Sure, yes, thank you.
    There are a number of provisions within this draft bill 
that address some of the provisions or the recommendations of 
the Iowa Medical Treatment Report. As I mentioned in my oral 
testimony, there are some areas where we can go further in 
terms of adopting the Federal Cultural and Linguistic 
Appropriate Services Standards, ensuring that we strengthen our 
Federal health research.
    Data collection is also one of those areas where I think it 
is clear that we are going to have to have a much more robust 
systematized system of collecting data on race, ethnicity, 
primary language and probably other demographic variables in 
order to understand when and under what circumstances we see 
inequality in both access to and the quality of care as well as 
outcomes.
    I will even go a step further and suggest that we ought to 
publicly report these data because that will give us a level of 
accountability both for consumers, for providers and health 
systems, as well as government. One of the responsibilities of 
government, of course, is to ensure that there is not unlawful 
discrimination in the provision of care, and until we publicly 
report and more carefully collect this data, we will not know 
when that occurs.
    Mrs. Christensen. Thank you.
    Dr. Kestner, I really applaud the fact that in the absence 
of the longitudinal data showing what that investment might pay 
back from providing that free preventative care, you did 
provide it for all employees. And you have talked about some of 
the shelter and benefits that you have already seen.
    But in looking at the public plan that we are proposing, 
and the possibility that it would allow for innovation, you are 
a not-for-profit. Is there something in your experience that 
can inform and maybe support what we are trying to do in a 
public plan and its ability to do the kind of innovation that 
we see that you are doing at Alegent?
    Dr. Kestner. I would hate to see any plan be nothing more 
than a reproduction of what we already have, which is people 
seeking care when they hurt; people being given a pill and not 
understanding the cost of that pill; and then not returning 
unless they have been noncompliant or haven't gotten better.
    And so I think that any plan that engages the consumer in 
the dialogue about not only the consequences of their health 
care decisions but the cost of their health care decisions is 
going to be important.
    Mrs. Christensen. Thank you.
    And Dr. Smedley, in my last couple of minutes, we talked 
about diversity in the health care workforce. You weren't just 
talking about doctors and nurses, were you?
    Mr. Smedley. Yes. We need diversity in all of our health 
professions. Allied health professions, mental health fields, 
dentistry.
    Mrs. Christensen. What about some of those commissions and 
councils and tasks forces?
    Mr. Smedley. The CBC task forces--yes, absolutely, we need 
diversity on all of the policy-making bodies that are outlined 
either in this draft legislation, as well as existing bodies 
because, again, with the changing demographic of this Nation, 
with the importance of addressing demographic and equity 
issues, we need to put these issues front and center in all of 
our conversations around health policy. So I would strongly 
encourage diversity in all of its forms to be represented on 
these task forces and panels.
    Mrs. Christensen. Thank you.
    Thank you, Mr. Chairman.
    Mr. Pallone. Thank you.
    Gentleman from Georgia, Mr. Gingrey.
    Mr. Gingrey. Thank you, Mr. Chairman.
    Dr. Smedley, in your testimony you talked about racial and 
ethnic minorities and disparity in care. You state, a 
potentially significant source of racial and ethnic health care 
disparities among insured populations lies in the fact that 
minorities are likely to be disproportionately enrolled, and I 
think we will quote, lower tier health insurance plans. There 
are large access problems in the Medicaid program where many 
beneficiaries are unable to find a doctor that accepts Medicaid 
because of inadequate reimbursement and high administrative 
burdens. Do you believe the government-run Medicaid program and 
how it is administered exacerbates health disparities?
    Mr. Smedley. Well, Congressman, I think that, in the case 
of Medicaid, you are absolutely right, that low reimbursement 
rates simply make it prohibitive for providers to accept, in 
some cases, Medicaid patients.
    But this draft bill would increase reimbursement rates in 
ways that I think will hopefully encourage take up of Medicaid 
patients. Unfortunately, we have associated stigma with 
Medicaid, despite the fact that it is a very comprehensive 
benefit plan. As Ms. Wright Edelman pointed out earlier, it 
offers a number of very, very important benefits particularly 
for children who are at risk for poor health outcomes.
    So I think we can build on the Medicaid program, improve 
it, and ensure that patients who have Medicaid coverage are 
actually able to get the care that they need.
    Mr. Gingrey. Thank you for that response, and of course, 
you mentioned that there would be improved reimbursement. That 
is true for primary care physicians and medical home managers, 
but certainly, the reimbursement is likely to be less for 
specialists, general surgeons, OB/GYN doctors, et cetera. So 
you think if Medicaid beneficiaries had an opportunity, and we 
have suggested that from this side, our ranking member has 
suggested a number of times, if Medicaid beneficiaries had the 
opportunity to opt into a private policy with government 
assistance, so-called premium support, do you believe they 
would find it easier to find a doctor that would take them?
    Mr. Smedley. Congressman, I am not aware of any data that 
you would inform an answer. I know that some of the proposals 
that were offered in terms of tax credits and so forth were 
insufficient to cover the cost of private health insurance. I 
believe the cost estimates now for a family is about $12,000. 
So, clearly, we would need a sizeable tax credit for a low-
income family to afford a private plan like that.
    Unfortunately, I have no data.
    Mr. Gingrey. Well, reclaiming my time, certainly, it would 
remove the stigma, and when you are talking about let's say the 
CHIP program, rather than having the child or children running 
all across town trying to find a doctor that would accept CHIP, 
it would be wonderful if they could, with premium support, be 
enrolled in a family policy so everybody could kind of go to 
the same medical clinic.
    Let me switch over to Dr. Kestner for just a second because 
you were talking about HSAs. I think, Dr. Kestner, in your 
testimony, you credited HSAs and HRA's as keys to disease 
management lifestyle changes.
    Earlier, I don't know if you heard on the first panel, Dr. 
Parente of the Medical Leadership Institute, he suggested that 
rather than what is recommended in this 800-page draft document 
from the tri-committees that would require everybody to have 
first dollar health insurance and also for employers to provide 
it; his suggestion was, if there is going to be a requirement 
on the part of the so-called patient, maybe it should be a 
requirement for catastrophic coverage and not first dollar. The 
catastrophic coverage, of course, would prevent all these 
bankruptcies, these three out of five bankruptcies that people 
talk about that are brought about by basically serious medical 
illnesses that folks can't pay for. What do you think about 
that suggestion?
    Dr. Kestner. Well, our strategy has been to be transparent 
with costs so that consumers can make educated decisions. So, 
if I have a condition that requires immediate care, I have an 
option of going to an urgent care center, see my primary care 
doctor or an emergency department, and each of those costs 
something different.
    Part of my decision-making will be, what is coming out of 
my pocket as far as the first dollars, and certainly, it is a 
more cost-effective strategy to go to a primary care physician, 
if I know I am paying $10 for that visit, as compared to an 
emergency department, where I potentially would be paying far 
more.
    And so I think it is important for us to have a strategy 
that engages the consumer in the day-to-day decision-making 
that they have with regards to that.
    Mr. Gingrey. Let me reclaim my time in the 1 second that I 
have got left, Mr. Chairman, if you will bear with me.
    You know, it is estimated that of the 47 million or 50 
million people that don't have health insurance in this 
country, that maybe 18 million of them are folks that make at 
least $50,000 a year, and I would suggest to you that a lot of 
them are going bare, opting out of getting health insurance 
because they feel like they don't really need it. They are 10 
feet tall and bulletproof, and they are kind of wasting their 
money. And they know, at the end of the day, if they pay over a 
period of 15 or 20 years with an employer-based system, and 
then all of the sudden they get sick and they lose their job, 
that the insurance company is going to either say, you are not 
insurable, we are not going to cover you, or if we do, we are 
going to charge you 300 percent of standard rates.
    Maybe, you know, there is a place here for insurance reform 
in regard to people like that who have done the right thing and 
have credible service, and therefore, they shouldn't have to 
pay these exorbitant rates or even get in a high-risk pool 
because they have done the right thing.
    Mr. Chairman, I know I have exhausted my time. There is 
probably not time for a response unless you want to allow----
    Mr. Pallone. If you would like to respond, go ahead.
    Dr. Kestner. No, thank you.
    Mr. Levi. Mr. Chairman, if I can make one very short point.
    The question was about first dollar coverage, but as I 
understand Alegent's program, there is first dollar coverage 
for preventive services, and since this is a panel about 
prevention and public health, I think it is really important to 
keep in mind that the things that are going to save people's 
lives and ultimately save health care costs are the things that 
really need to have first dollar coverage without copayments 
because that is what is going to incentivize better.
    Mr. Gingrey. Certainly with the preventive care I would 
agree with that.
    Mr. Pallone. Thank you.
    Gentlewoman from Illinois, Ms. Schakowsky.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    I wanted to ask Mr. Kestner a question. Your Web site says, 
``we are proud to offer a generous financial assistance 
program.'' But then it goes on to say, ``medical bills are 
limited to 20 percent of a total household family income.''
    So a family of four making $55,000 a year, with a $200,000 
medical bill, my staff--they are always right--calculated that 
the family would have to pay $11,000. So as we are sitting here 
talking about affordability, do you think a family of four 
making $55,000 should be paying $11,000 in medical bills?
    Dr. Kestner. I believe we do have a very generous 
commitment to our community with regards to indigent care. We 
have contributed $60 million----
    Ms. Schakowsky. But indigent--$55,000 is probably not 
indigent. So the statement that you have--I guess really what I 
am getting at, even with your program, which may be more 
generous than most, we are still talking about really 
significant out-of-pocket costs that could be overly burdensome 
for a family, right?
    Dr. Kestner. That could be, yes.
    Ms. Schakowsky. Here is one of the things I want to get at. 
This issue of the necessity of patients to really understand 
the cost of health care presumes that medical decisions are 
mostly patient-driven, and I just--I unfortunately didn't hear 
your testimony. I was with a doctor. I just fractured my foot, 
and you know, I didn't go in there and say, give me some X-rays 
and I think I need a boot, which I now have, and you know, I 
mean these are things that the doctors tell us.
    And when we looked at that article about McAllen, Texas, 
versus El Paso, probably everybody's read it in the New Yorker, 
about the amount of difference in Medicaid payments per 
patient, wouldn't you all agree that this is by and large 
overwhelmingly provider-driven as opposed to consumer-driven?
    Dr. Kestner. I will just comment on our experience. Since 
engaging our physician workforce in the discussion of evidence-
based care and standardizing our processes and having a 
transparent, quality Web site, we have been able to demonstrate 
a decrease in our cost of care. I think that is where the 
discussion begins is when we have to engage people in the 
discussion about what the evidence shows, what is necessary, 
and have that healthy dialogue that we all loved in medical 
school, as compared to being driven by the decisions that are 
made today which may be fear of malpractice----
    Ms. Schakowsky. May be self-referral and profit.
    Dr. Kestner. I think by and large most physicians want to 
do the right thing, but I think we have put them in a system 
where doing the right thing may not be evidence-based and, at 
times, may not be the best for the patient.
    Ms. Schakowsky. So, Dr. Smedley, would you agree that 
mostly patients don't decide about their health care?
    Mr. Smedley. I think that is absolutely right. Patient 
decisions are often shaped by the options presented by doctors. 
In the cases of patients of color, which is my concern, there 
is some evidence that patients of color are not provided with 
the same range of options as the majority group patients. So if 
that is the case, then I think we need to be very concerned 
that these are not truly consumer-informed decisions.
    Ms. Schakowsky. Also, one of the things that this article, 
if you handle it right, the way I read it, at McAllen, Texas, 
is that the doctors actually were not directing people to 
preventive care, that a decision had been made in certain 
places and I guess other places around the country, too, not to 
engage in preventive care. And again, I am assuming your 
testimony was even cost-wise, aside from health-wise, this is a 
bad decision.
    Mr. Smedley. That is correct.
    Ms. Schakowsky. OK. Thank you.
    Mr. Pallone. Thank you.
    Mr. Green.
    Mr. Green. Thank you, Mr. Chairman. And I would like to 
thank our panel for being here, the last panel.
    We know that diabetes and obesity sometimes are economic-
related, but we know in the minority community, whether it is 
African American, Hispanic, Asian American, it is almost an 
epidemic. And one of the best ways you deal with that is 
through prevention. Don't wait for that diabetic to know they 
are diabetic. Maybe it is pre-diabetes, and they have a 
diabetic episode before they go into an emergency room. That is 
what is so important about the prevention.
    On our committee, I get frustrated because literally 2 
years ago with our current OMB director, we were on a health 
care panel for U.S. News and World Report, like most Members of 
Congress get frustrated because we try and get a score on 
prevention, and he told me in front of all the other folks, 
this is not your--he was former CBO, Congressional Budget 
Office, director--he said, this is not your father's CBO. Send 
us those, and we will score them better.
    We are not seeing any changes. Granted he is at OMB now, 
and I don't know if OMB has changed, but I would sure like it.
    And that is our frustration, and Dr. Levi, you talked about 
it.
    There are so many things we need to do for health care in 
our country that needs to push the envelope further back 
instead of waiting till someone finds out that they have these 
chronic illnesses.
    Dr. Levi, as you know, school-aged children is the 
population group that is most responsible for transmission of 
contagious respiratory viruses like influenza. Just recently, I 
introduced a bill, H.R. 2596, the No Child Left Unimmunized 
Act, which would authorize HHS to conduct a school-based 
influenza vaccination program project to test the feasibility 
of using our Nation's schools as vaccination centers. And what 
are your thoughts on making it school-based vaccinations, 
especially for some of the influenza virus vaccines? We already 
use, in our district, and I know a lot of school districts use 
their schools for vaccinations for the mandatory vaccination 
programs throughout the school. But what do you think about 
making them for other vaccines, including influenza?
    Mr. Levi. I think it is a very good idea, and I think we 
need to be as creative as possible to make sure that as many 
people as possible are immunized. I think, in reality, that as 
we are facing this pandemic of H1N1 influenza and seeing that 
young people may be among the most vulnerable, they may be 
highly prioritized for a pandemic vaccine come the fall, and 
using our schools may be one of the most effective ways of 
doing that, and that could be a wonderful proof of concept for 
your legislation.
    Mr. Green. Any other from anyone else on the panel?
    If not, thank you, Mr. Chairman.
    Ms. Schakowsky. Will the gentleman yield?
    Mr. Green. I would be glad to yield to my colleague from 
Chicago.
    Ms. Schakowsky. This business of how we score is a really 
troublesome thing. I am just wondering, is there the kind of 
research conducted, not just on health outcomes where we 
concede prevention pays and it really works, but how it 
actually saves dollars? You know, I really think when we are 
talking about 10 years, you know, we are looking out into the 
future when we talk even about the costs, then we ought to have 
something. Is there some research that can help us quantify 
that?
    Mr. Levi. Well, ironically, the wider the net you cast, the 
more research there is, certainly in terms of productivity, in 
terms of contributing to a tax base, in terms of not requiring 
disability payments, all those kinds of things. You know, you 
can't mix and match those things in the scoring process, and I 
think I want to come back to----
    Ms. Schakowsky. Did you say we cannot mix and match? Why 
not? I think we need some advocacy help here from those who 
believe that prevention is the key to help us do that.
    Mr. Levi. But some of these rules have been set and can be 
changed by Congress, and that is what--that may indeed be what 
it takes.
    I think it is also important to think about sort of the 
evidence standard, and you know, we look for, you know, there 
are different levels of evidence that you may need to make it 
move forward with a decision. But I think when you have so many 
businesses voting with their feet around prevention programs, 
whether it is clinical preventive services or even nonclinical 
preventive services----
    Ms. Schakowsky. By that you mean buying them?
    Mr. Levi. By buying it, investing in it, and saying they 
have the evidence for their stockholders that this saves them 
money. It seems odd that the private sector can be ahead of the 
public sector in recognizing the value.
    Ms. Schakowsky. That is a really good point. Maybe we ought 
to enlist some of those findings. I know my nephew does 
preventing back injury at a lot of factories, and it works. 
Anyway, thanks.
    Mr. Green. Mr. Chairman, I know I am out of time, but I 
would hope we would push back just what this panel is about and 
look at prevention and as best we can to fund that and use our 
own examples maybe over the next 10 years and show we can 
reduce obesity, we can reduce diabetes, and some of things that 
we are going to pay a lot of money for if we don't in some type 
of national plan.
    Mr. Levi. And that is certainly part of the goal through 
the Recovery Act in terms of the community-based prevention 
programs that are being funded there, and that I know that HHS 
is working very hard to make sure that the evaluation system 
that is developed for that investment will be able to help us 
answer these questions.
    Mr. Pallone. Thank you.
    Gentlewoman from Tennessee, Mrs. Blackburn.
    Mrs. Blackburn. Thank you, Mr. Chairman.
    You all must feel like you are batting cleanup. You have 
been here all day I bet listening to all of these, and I 
appreciate the focus that you have on prevention and wellness 
programs. I think many times we look at medical care, but we 
don't look at health care and don't look at health, and it is 
frustrating for us.
    And so many times I have said I thought one of the greatest 
disservices that we have done to children is they no longer 
have physical education, and they don't take life--when they 
are all through school, they don't have physical education 
classes that they are attending, and then secondly when they 
get into high school, they don't have life skills classes, so 
they don't understand the impact of what they eat, of the 
different food groups or the food pyramid and how that affects 
their lives, the importance of the interface between exercise 
and also what they eat and how that weighs in on some of the 
health issues, as we have read in testimony that has been given 
to us today and heard from some of our witnesses.
    Obesity, diabetes, chronic heart disease, if you address 
those, you would move a long way toward addressing some of our 
Nation's health care woes. And many times people say, well, 
change how you are looking at this; look at it as health, as 
opposed to looking at it with medical care delivery. And of 
course, having been--as someone who served in a State 
legislative body and looking at these issues and bringing that 
to bear here at the Federal level, sometimes, you know, you do 
stop and think a little bit about that.
    What I would like to hear from each of you in the 3 minutes 
that I have, I want each of you to tell me if this 852-page 
bill, if you think, at the end of the day, it is going to 
provide a structure for Americans to be healthier and thereby 
need to consume less medical care, because the quality of life 
and the way this affects individuals should be a focus of the 
policy that we decide what is going to happen as we look at 
health reform. We all know that the system needs some reforms. 
I am one of those that favors handling it through the private 
sector so that it stays patient-centered and consumer-driven.
    But I would like to hear from each of you, at the end of 
the day, the draft before you, would it allow for greater 
emphasis on wellness, for prevention, for healthier lifestyles, 
and individuals to consume less medical care?
    Dr. Levi, we will start with you.
    Mr. Levi. Absolutely, on both the clinical side and the 
community side, and I will make three very quick points.
    First, solid coverage there are no copayments of the 
evidence-based clinical prevention services I think is 
critical. Whether it is a public program, a private insurance 
plan, it has to be there.
    Second, the investment in community prevention will get at 
the very things that you are talking about. Some of the best 
community-based prevention programs are the ones that target 
kids, get them to change their lifestyles, and through the 
kids, they educate their parents, because some of us are just 
over the hill and uneducable unless we are reached through 
kids. And we can make those permanent lifestyle changes, and 
that is why the investment in community preventive programs is 
going to be so important.
    And third, and I think just as importantly is this 
investment in the core public health capacity because if we 
strengthen our State and local health departments then they 
will be able to provide the services that surround the normal 
health care delivery system.
    Mrs. Blackburn. I need to move on. I am running out of 
time.
    Dr. Smedley.
    Mr. Smedley. As you know, we spend less than 5 cents out of 
every health care dollar on prevention. This draft bill takes a 
step toward righting that equation.
    It is also true that we have not paid enough attention to 
the issues of achieving equity, ensuring that everybody has 
access to primary care. These are all important elements that 
are reflected in this draft bill which I think are going to 
save costs.
    Mrs. Blackburn. But should it be mandated or be personal 
choice?
    Mr. Smedley. I don't believe this bill creates that kind of 
mandate. But what it does, through the investment in 
prevention, is it creates healthier communities.
    Mrs. Blackburn. OK.
    Dr. Kestner.
    Dr. Kestner. I think the bill addresses the access issue as 
well as the investment in primary care and public health, and I 
think that is where the first relationship should be 
established with our citizenry is in a public health sector and 
primary care, as compared to outside of care that we experience 
today.
    Mrs. Blackburn. Thank you very much.
    I yield back.
    Mr. Pallone. Thank you.
    Gentlewoman from Wisconsin, Ms. Baldwin.
    Ms. Baldwin. Thank you, Mr. Chairman.
    I appreciate the fact that you have had this panel today 
devoted to public health and prevention and health care 
disparities.
    I am introducing a bill today that is very relevant to this 
topic. What the bill does is it takes the first steps in 
identifying and addressing health care disparities faced by 
lesbian, gay, bisexual and transgender Americans. The bill is 
based in large part on the extraordinary work of the tri-
caucuses on racial and ethnic health care disparities; the 
Congressional Black Caucus, the Congressional Hispanic Caucus, 
and the Asian, Pacific Islander Caucus have done extraordinary 
work teaming together to put together a bill that is called the 
Health Equity and Accountability Act which I believe will also 
be introduced this week.
    We know that there are disparities in health care faced by 
the LGBT community, but we know this largely based on anecdotal 
information or some data derived from locally administered or 
privately administered health surveys. And I can tell you that 
it was, in some cases, quite challenging putting together this 
legislation because of the lack of data and the lack of 
evidence.
    And so I want to just ask some very basic questions, 
starting with you, Dr. Smedley. Having studied racial and 
ethnic health care disparities, how important is data 
collection to understanding and addressing health care 
disparities?
    Mr. Smedley. It is absolutely vital.
    In the case of LGBT populations, as you pointed out, 
lacking data, it is difficult to understand when and under what 
circumstances these populations face both health status and 
health care inequities. So it is very important to have that 
data. Once we have that data, we not only raise public 
awareness, but we can focus and target our intervention so we 
are addressing the problem successfully.
    Ms. Baldwin. The National Health Institute survey, which I 
understand to be the Federal Government's most comprehensive 
and influential survey, does not include any questions on 
sexual orientation or gender identity. Do you think it should?
    Mr. Smedley. Yes.
    Ms. Baldwin. And to my knowledge, actually, no Federal 
health survey at all includes any questions on sexual 
orientation or gender identity. Do you think this would be 
important as a routine inclusion in health surveys where we are 
trying to collect information?
    Mr. Smedley. Yes. I believe that, I may be mistaken about 
this, but I believe that BRFS, the Behavioral Risk Factor 
Study, may allow that as an option, but we should certainly 
ensure that we are understanding all of our populations where 
we see inequalities in health and health status.
    Ms. Baldwin. I would ask you also, Dr. Smedley, how 
important and relevant are goal setting and aspirational 
documents like Healthy People 2010? I know there is an effort 
under way to revise and update for Healthy People 2020 
document. How important are these goal-setting documents to 
reducing health care disparities?
    Mr. Smedley. Again, vitally important. Some have criticized 
Healthy People 2010 for having goals that are difficult to 
attain, but unless we articulate what our vision is of a 
healthy society, it is going to be very difficult to put in 
place the policies and indeed to create the political to 
achieve those goals. I believe it is very important that we 
have strong aspirations for equity for millions of populations 
that face inequity.
    Mr. Levi. If I could just add one point here, I think one 
of the criticisms in the past of the Healthy People process has 
been we set goals, and we don't have the data sets to tell us 
whether we are even achieving those goals, and part of what is 
in this discussion draft is creating an assistant secretary for 
health information, which would increase I think the 
transparency of the data and create a process by which we would 
do a better job of answering some of the questions that you 
want to have answered.
    Ms. Baldwin. I would note, from the Healthy People 2010 
document, this is sort of a vicious cycle because it is silent 
to LGBT health issues because the authors of that document 
said, we don't have any data to point to any disparities, so we 
can't talk about how we need to address those disparities.
    Dr. Levi, I know your organization has done terrific work 
on demonstrating that community-based prevention programs can 
have a significant return on investment, and it is also my 
understanding that different communities targeted often respond 
differently to different interventions.
    So tell me a little bit about targeting those 
interventions, and how much do these programs need to be 
targeted or tailored to do different cultural subgroups?
    Mr. Levi. I guess I would answer it in two ways. One is we 
have a lot of evidence that from some national programs like 
the REACH program, Access program, or the Pioneering Healthier 
Communities Program, where there is an overall goal of trying 
to reduce the prevalence of certain conditions and a 
recognition on a community basis what is happening in that 
community. Some communities need more exercise promotion. Some 
people need more nutrition promotion. Some people have higher 
rates of smoking. Those kinds of particular issues need to be 
addressed in the context of the community.
    And then there is a second part, which is what sub 
communities. That is thinking more geographically. And then 
when you are thinking about racial and ethnic communities or 
the LBGT communities, what particular issues do you also need 
to think about?
    And I think the LBGT community is a perfect example. If we 
had thought about community prevention at the very beginning of 
the HIV epidemic, we would have been addressing what Ron Stall 
from, formally at CDC, talks about syndemics, which is, the 
risk for the disease you are wanting to prevent, in this case 
HIV, is related to other factors, such as experience of 
domestic violence, mental health issues, alcohol issues. It can 
be smoking, depending on what aspect you are looking at. That 
all needs to be addressed together.
    And when you are thinking about community prevention, that 
is what you want to do; you want to bring all of these pieces 
together. But coming back to the beginning, you can't do it 
without data.
    Ms. Baldwin. Thank you.
    Mr. Pallone. Thank you.
    Gentlewoman from Florida, Ms. Castor.
    Ms. Castor. Thank you, Mr. Chairman. Thank you all for your 
testimony.
    I am fortunate that back in my hometown I have a great 
College of Public Health, and the dean there is Dr. Donna 
Peterson. I have been keeping her informed all the way along 
during the health care reform discussion dialogue from the 
outline now and into the discussion draft.
    And her initial comments were, boy, you all are on the 
right track when it comes to community health centers, and 
there is certainly a consensus in the Congress, many of them 
rooted on issues of Chairman Waxman, Chairman Pallone, Mr. 
Clyburn, the Whip. We are on track with workforce issues. 
Everyone, there is great consensus around improving the primary 
care of the workforce, and the SGR, how we are going to 
compensate those folks.
    She expressed some concern on whether or not we are really 
doing enough for community's public health initiative. We see 
the initial draft here, the discussion draft, and I thought 
that Ranking Member Deal raised a good point, too, about 
personal responsibility and how we get parents to turn off the 
TV and encourage their kids to exercise. And it can't just be 
that we hope that people see President Obama and the First Lady 
work out in the morning, and that is going to be a great 
inspiration. We need a Surgeon General, I think, that is going 
to be very proactive. And we don't have that yet. We need the 
CDC to take an even more proactive role.
    We know back home, our local governments and school 
districts and States, many are in severe budget crises, and 
oftentimes, the first things to go are the sidewalks, the 
other--the parks initiatives, summer programming for kids.
    Tell me, what is out there right now, what do local 
communities depend on right now from the Federal Government on 
those community public health and investing in infrastructure 
initiatives? What grants are there now? And then we can talk 
about what is in the discussion draft and where we need to go.
    Mr. Levi. There certainly are Federal programs that will 
support this kind of community prevention, but we are talking a 
fraction of the level of investment that is in the discussion.
    Ms. Castor. And it is out of which--is it out of HHS?
    Mr. Levi. Mostly out of HHS and mostly out of CDC, but the 
budgets for those programs have either been relatively flat or 
declining over the last 5 years. Our entire effort around 
chronic disease prevention has been declining over the last 5 
or 6 years. Obesity is a perfect example where we recognize 
that this is a huge public problem, and we haven't even found 
the resources to fund every State to have an obesity program, 
and particularly now, in a time of economic crisis, it is not 
like State and local governments have the resources to 
backfill. And in an economic recession, it becomes even more 
important for us to be thinking about those issues because it 
is harder to eat healthier----
    Ms. Castor. I have a limited time. Is there another Federal 
pot of money or initiative you identified besides this CDC?
    Mr. Levi. The other pot of money, the big pot of money is 
the $650 million in community prevention that is in the 
Recovery Act and that will be released shortly.
    Mr. Smedley. If I could add, not only are those funds from 
the prevention and wellness also good, I think the entire 
stimulus package can be looked at as a public health 
intervention because of the many provisions around housing, 
transportation, early education. We know that early start, 
healthy start programs work. They save money, as Dr. Levi 
indicated.
    So if we can think about the stimulus dollars as a public 
health intervention and ensure that those dollars are going to 
communities to create safe public transportation to stimulate 
healthy lifestyles, then this can meet multiple purposes.
    Ms. Castor. And in your health reform bill, we need to 
build upon those historic investments that come out of the 
Recover Act. I mean, Donna Christensen has a great empowerment 
zone initiative, but it seems like our local communities need a 
new healthy communities block grant initiative that is 
consistent over time that maybe doesn't compete with the 
other--if there is anyone from the Association of Counties Or 
League of Cities that you all work with, I would like to 
investigate that.
    Thank you, Mr. Chairman.
    Mr. Pallone. Thank you, and I think we are done for today.
    I want to thank all of you, and again, as I mentioned, you 
will probably get some written questions that we would like you 
to get back to us as soon as you can, but again, this is a very 
important part of what we are doing, the prevention and the 
public health provisions. So thank you as we proceed.
    And let me remind Members we are going to recess because we 
will be reconvening tomorrow as well as Thursday. Tomorrow, at 
9:30, the full committee will meet to hear from Secretary 
Sebelius, but after that is done, we will reconvene as a 
subcommittee and have a number of panels to continue with the 
subcommittees activities.
    So, without objection, this subcommittee will recess and 
reconvene tomorrow following the conclusion of the full 
committee hearing that begins at 9:30 a.m.
    [Whereupon, at 3:25 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]







    COMPREHENSIVE HEALTH CARE REFORM DISCUSSION DRAFT--DAY 2, PART 1

                              ----------                              


                         TUESDAY, JUNE 24, 2009

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The committee met, pursuant to call, at 9:41 a.m., in Room 
2123, Rayburn House Office Building, Hon. Henry A. Waxman 
[chairman of the committee] presiding.
    Present: Representatives Waxman, Dingell, Markey, Rush, 
Eshoo, Engel, Green, DeGette, Capps, Harman, Schakowsky, 
Gonzalez, Inslee, Baldwin, Matheson, Melancon, Barrow, Hill, 
Matsui, Christensen, Sarbanes, Murphy of Connecticut, Sutton, 
Braley, Welch, Barton, Hall, Upton, Stearns, Deal, Whitfield, 
Shimkus, Buyer, Pitts, Walden, Terry, Murphy of Pennsylvania, 
Burgess, Blackburn, Gingrey, and Scalise.
    Staff Present: Karen Nelson, Deputy Committee Staff 
Director for Health; Andy Schneider, Chief Health Counsel; 
Purvee Kempf, Counsel; Sarah Despres, Counsel; Jack Ebeler, 
Senior Advisor on Health Policy; Robert Clark, Policy Advisor; 
Tim Gronniger, Professional Staff Member; Stephen Cha, 
Professional Staff Member; Allison Corr, Special Assistant; 
Alvin Banks, Special Assistant; Jon Donenberg, Fellow; Camille 
Sealy, Fellow; Karen Lightfoot, Communications Director/Senior 
Policy Advisor; Caren Auchman, Communications Associate; 
Lindsay Vidal, Special Assistant; Earley Green, Chief Clerk; 
Jen Berenholz, Deputy Clerk; Mitchell Smiley, Special 
Assistant; Miriam Edelman, Special Assistant; Ryan Long, 
Minority Chief Health Counsel; Brandon Clark, Minority 
Professional Staff Member; and Chad Grant, Minority Legislative 
Analyst.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. In February, President Obama called upon the 
Congress to enact legislation to reform America's health care 
system. In April, Governor Kathleen Sebelius was sworn in as 
Secretary of Health and Human Services. Her Department has the 
lead responsibility for improving the health of the American 
people.
    Last Friday, I joined with Chairman Rangel and Chairman 
Miller and Chairman Emeritus Dingell to propose a discussion 
draft on health reform. This morning, we have the honor of 
hearing Secretary Sebelius present the administration's views 
on the discussion draft.
    Based on her contributions today and on what we will hear 
and learn from the 50 stakeholders appearing before the Health 
Subcommittee this week and on the input from the Members, we 
will revise the discussion draft and introduce a bill for 
consideration by the three committees.
    Our legislation will reduce health care costs. It will 
cover all Americans. It will improve the quality of care. And 
it will be fully paid for. The lead author will be John 
Dingell, chairman emeritus of this committee, who has 
faithfully carried on his father's legacy as an undisputed 
leader in the struggle for health reform.
    I want to emphasize a few important points about the 
discussion draft. First, it is just that, a draft for 
discussion for the legislation. We are seeking input from the 
administration and others because we want to improve the draft 
before introducing legislation.
    Second, the draft builds on what works in our uniquely 
American system. It builds on the employer-based system for 
providing health coverage to workers and their dependents. It 
relies on and improves Medicare as a source of health coverage 
for the elderly and the disabled. It builds upon Medicaid to 
extend coverage to low-income Americans.
    Third, the draft fixes what is broken. It fixes the broken 
individual health insurance market by creating a new insurance 
exchange through which uninsured Americans can enroll in their 
choice of health care plan. Those who cannot afford to purchase 
the coverage available in the exchange will receive assistance.
    A public option will be available within the insurance 
exchange to give consumers an alternative to private health 
insurers for their health care coverage. This public option 
will be self-supporting, will not receive ongoing subsidies 
from the Federal Government. The public option will compete. No 
one is obligated to sign up for the public option. No provider 
is obligated to provide medical services under the public 
option. But the public option will provide competition so that 
we can make the market work and keep everybody honest.
    The draft contains provisions to reduce rural, racial, and 
ethnic disparities in disease incident and treatment. The draft 
fixes a broken Medicare physician payment system and prevents 
the irrational cuts that are scheduled under current law from 
going into effect.
    The draft takes the steps necessary to fix the shortage of 
primary care practitioners and nurses and other providers. And, 
finally, the draft ensures that people have a choice: choice of 
doctors, choice of benefits packages, and choice among 
insurance plans.
    This approach builds on what works and fixes what is broken 
and makes sure that people have choices. It is pragmatic, and 
it will produce the results the Nation's health care system so 
desperately needs: lower costs, broader coverage, and better 
quality.
    Today we will continue on a journey that began over a 
hundred years ago to provide health insurance for all 
Americans. Some of our greatest Presidents of the 20th 
century--Teddy Roosevelt, Franklin Roosevelt, and Harry 
Truman--were advocates for health insurance for all Americans. 
President Clinton fought hard for his administration's 
proposal. Those initiatives may have failed, but the hope that 
inspired them was never defeated. The time has finally come to 
redeem that hope and to deliver true health reform.
    In my conversations with colleagues and constituents, I am 
getting the clear sense that there is now a willingness to 
tackle this issue and to resolve the problems and bring forward 
a much better health care system for all Americans. With 
President Obama in the White House, we now have the best 
opportunity ever to enact health reform. I am determined that 
we not let this opportunity slip from our grasp.
    I look forward to this morning's testimony and continue 
with urgent pragmatism to send health reform legislation to the 
President for his signature this year.
    I want to recognize for an opening statement the ranking 
Republican member of the committee, Mr. Barton.
    [The prepared statement of Mr. Waxman follows:]





    
   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Mr. Chairman.
    You and I, earlier this year, attended several White House 
health care summits. At those summits, both in the large 
meetings and in the working group meetings, I said that the 
Republicans in the House and the Republicans on this committee 
were very ready and very willing to work with the President, 
with you and Mr. Pallone and other members of the majority to 
create a new health care system for America.
    There is no Member of Congress on either side of the aisle 
that is opposed to improvements and reforms in our current 
health care system. So we were ready to work. You told me 
repeatedly that you were ready to work with myself and the 
other Republicans.
    Having said that, actions speak louder than words. While 
you and I have held several meetings, personal meetings--and we 
held one meeting with Chairman Pallone and Ranking Member Deal 
of the subcommittee, we agreed to work together. The brown bag 
lunch that was supposed to occur because of that was scheduled 
and rescheduled. And, finally, last week, we were supposed to 
have had it last Friday at noon. We were called the afternoon 
before and told that that brown bag lunch on a bipartisan basis 
could not be scheduled because you were attending a press 
conference to unveil the Democratic health care bill.
    That is not bipartisanship. That is not inclusiveness. It 
sure made me feel like the young woman who was being wooed by a 
young man and the young man kept promising to take her out on a 
date, and he finally called her up and said, ``Well, I know we 
had a date tomorrow, but I can't do it because I am getting 
married to somebody else.'' I guess there are some people that 
do both, but luckily you are not one of them and I am not 
either.
    But it is what it is. So we now have a bill. We have the 
Secretary of Health and Human Services here to probably wax 
eloquent in support of your bill. I haven't read her testimony, 
but I bet it is going to be supportive.
    The good news is we are going to have a series of hearings, 
and we will, at some point in time, go to markup. Hope springs 
eternal on our side that some of our ideas may yet be included.
    The bill in its current form--I have not read all 805 pages 
of it; I am not going to fib about that. But I have seen 
summaries, and it is a massive government involvement in 
Americans' health care. It is hugely expensive. I have seen 
estimates as high as $3 trillion over 10 years. I am told that 
the word ``shall'' is mentioned over 1,300 times. I am told 
that there are 38 new mandates, that there are dozens of new 
bureaucracies.
    I listened to your opening statement, Mr. Chairman, and 
heard you say that nobody has to take the government plan who 
doesn't want it. That may well be true, technically, but if you 
put so many mandates on private insurance that it becomes cost-
prohibitive, and if you raise the Medicaid eligibility to 400 
percent, there are going to be millions of Americans that lose 
their coverage because the private businesses that offer it 
can't afford it, and then there are going to be millions of 
Americans who say, why should I pay a monthly premium of X 
dollars when I can go on Medicaid and pay little or nothing? 
You know, the short of it is that, if your bill were to become 
law, we wouldn't have much of a private health care system in 
America within 10 to 20 years.
    So put me down as undecided, Mr. Chairman. We will work 
with you. We have a number of amendments. We have a Republican 
alternative that is private-sector-based, lets the individuals 
maintain their choice. We do some of the things that you do in 
your bill. We do have a permanent physician reimbursement fix. 
We do have a tax credit, reimbursable tax credit for low-income 
Americans.
    But the big difference between the Republican bill and the 
Democratic proposal is that on the Republican side we still 
believe in the marketplace, we don't have all the mandates, we 
don't force Americans into a government plan that we think is 
not very good for America.
    With that, Mr. Chairman, I will submit the rest of my 
statement for the record, and look forward to these hearings.
    Mr. Waxman. Thank you, Mr. Barton. And I am sincere in 
saying I want to work with you and share a brown bag lunch with 
you. And this bill is a draft.
    I want to recognize Mr. Dingell, the chairman emeritus of 
the committee, the champion of health care reform, and the man 
who will be the first name on the legislation that will produce 
health care reform.
    Mr. Dingell.

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

    Mr. Dingell. Mr. Chairman, first, thank you for holding 
this important hearing. And thank you for your remarkable 
leadership on moving forward towards resolution of the health 
care problems we have in this country.
    I want you to know that I am grateful and proud, and I am 
particularly appreciative of the kind words you said about my 
dad. And on behalf of my dad and I, I want to thank you for 
your kind words and thank you for your friendship.
    I also want to do something of a personal character here, 
and that is to welcome Secretary Sebelius to the committee.
    Your father was a valuable member of this committee and sat 
in this room for a number of years, and we were always proud to 
have him here. And your father-in-law was a valuable Member of 
the House, as you will recall, and was a man who was much 
respected. So your coming is like coming home, and we hope you 
feel that way, Madam Secretary.
    This week marks the beginning of a truly historic process, 
an opportunity to fulfill our moral and economic obligations to 
provide quality, affordable health care coverage for all 
Americans.
    The current system is not working. When my dad started on 
this years ago, it was a matter of humanitarian concern. 
Americans were dying for want of health care, and health care 
was not available to most Americans. Today, that still is true 
to one degree or another, but it is now an economic necessity, 
something which must be done to enable the United States to 
continue to compete in the world marketplace. And our 
industries are being killed by the lack of this kind of support 
in a fiercely competitive world economy.
    Forty-seven million Americans are currently without health 
care, and upwards of 86 million will be without health care at 
some point during this year. More and more Americans are being 
forced to make decisions they never should be forced to make: 
Do they pay their monthly health insurance premium, if they can 
get a health insurance policy, or do they pay the utility 
bills, the mortgage, or do they buy food for the family?
    American business owners are facing a tough decision as to 
whether to meet the monthly payroll or to pay health insurance 
contributions for their employees. And if you look at the 
American automobile, it has $750 worth of steel in it and 
$1,600 worth of health care. Foreign competitors don't confront 
that problem.
    The Federal budget can no longer sustain our current health 
care spending. If health care costs grow unabated, the costs to 
the country will be more than 20 percent of its gross domestic 
product on health by 2018.
    The discussion draft--and I stress the words ``discussion 
draft''--we are considering is a uniquely American solution to 
this crisis.
    It has been a privilege for me to work with you, Mr. 
Chairman, with Chairman Rangel and Chairman Miller on putting 
this draft together. And I want to commend all of those, 
including the subcommittee chairmen of the three committees, 
who have worked so hard to bring about unprecedented 
coordination that went into producing this single discussion 
draft for the three committees of jurisdiction.
    And I want to make some things clear. The discussion draft 
will not create a single-payer system. It will not ration care. 
It will not attempt to destroy the private-market system or the 
system of employer-sponsored health care many Americans enjoy 
today. And anybody who says otherwise simply hasn't read the 
bill or is not being truthful either with himself or anybody 
else.
    That being said, each of us in this room has our own vision 
of what ideal health care reform looks like. While the 
specifics may be different, we all share some common goals. 
First, we must pass legislation that reduces the cost of health 
care for families, businesses, and government. Second, we must 
pass legislation that makes quality, affordable health care 
available to all Americans. And we must pay for this 
legislation, and we must pass the legislation now.
    The choices we make over the coming months are going to be 
historically significant, and they will rank with the passage 
of Social Security and Medicare. If we are courageous and enact 
comprehensive health care reform, our product will meet the 
test of history and, I would note, will rank, as I mentioned, 
with Medicare and with Social Security.
    Medicare was mentioned on the editorial page on Sunday of 
the New York Times. It is only short of the flag in its 
popularity. If we are not courageous, we will have failed this 
generation and generations to come, and the country will suffer 
for it.
    I am certain this year that we will pass comprehensive 
health care reform that will build on the existing system and 
keep intact that which is working in our system, and give 
people the piece of mind that, no matter what life changes they 
face, they will always have access to health insurance. The 
American people deserve nothing less.
    Thank you, Mr. Chairman.
    Mr. Waxman. Thank you very much, Mr. Dingell.
    I now want to recognize Mr. Deal. Mr. Pallone, as the 
chairman of the subcommittee, gave his opening statement 
yesterday. Mr. Deal did not have that opportunity. And I want, 
by unanimous consent, that all members have an opportunity to 
submit a written statement, opening statement for the record.
    Mr. Deal, for the last opening statement.

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

    Mr. Deal. Thank you, Mr. Chairman. And thank you for 
holding this hearing, a series of panels today and tomorrow.
    I want to welcome all of the witnesses who are joining us. 
Especially express my appreciation and welcome to Dr. Todd 
Williamson, who is the president of the Georgia Medical 
Association. Certainly, as we consider this draft this week, 
hearing from these witnesses is important.
    Mr. Chairman, I think we have reached consensus that 
appropriate reforms are necessary, but we differ with respect 
to the right methods of reform which will yield cost and 
higher-quality savings and the decisions that should be left to 
doctors and patients and not Federal bureaucrats as they make 
choices about health care for our people. More government, in 
my opinion, is simply not the answer, but the draft before us 
seems to think that that is the answer.
    As far as the Republican views are concerned, we have seen 
thus far an attempt to approach health care reform in a 
bipartisan fashion that has resulted in what we consider to be 
a partisan proposal which refuses to address the concerns of 
Members on our side of the aisle. Last Friday, we received an 
852-page reform draft. That is merely 1 legislative day before 
the committee began its hearings.
    We are concerned about the cost. The Congressional Budget 
Office has yet to weigh in on those costs. Early analysis by 
Mr. Steve Parente, who testified before our Health Subcommittee 
yesterday, scores the legislation at a whopping $3.5 trillion 
over the next decade. We need to come up with real solutions to 
improve health care that American families can afford.
    The promise of the Obama administration and the leadership 
here on the Hill has been that if you like what you have, then 
you can keep it. I believe that is simply a play on words, 
because if this draft does what I think it will do, it will 
destroy that private health insurance market and will 
ultimately lead to what I consider a one-size-fits-all 
government plan.
    If we focus on reforming the health care delivery system 
with the benefit of the American people in mind, then we should 
not focus our efforts on things that will destroy the private 
insurance market. I believe we should be encouraging physicians 
to enter into the field of medicine as the demand for health-
care-related services will continue to grow.
    But with the proposal before us today, which benchmarks 
public plan reimbursements to Medicare, that in itself 
continues to drive providers out of the system. And I believe 
we will fall short of the objective that all of us share: of 
having a system that encourages doctors to enter, it promotes 
physician-patient-driven decisions, and allows everyone to gain 
access to health care coverage.
    Mr. Chairman, we all agree that changes to our health care 
delivery system have the potential to yield significant savings 
and improvements in the efficiency of delivery of care, but we 
must ensure that reforms that we put into place promote 
competition and transparency.
    As we move forward, I hope we will get that CBO score. I 
think it is important to the deliberations that lie before us.
    And, Mr. Chairman, I want to reiterate again that those of 
us on our side of the aisle look forward to being able to work 
in a bipartisan fashion as we consider the potential for 
amendments that will obviously be suggested.
    Thanks again to our witness, our Secretary, and thanks to 
all the witnesses who will make up the panels that will follow.
    With that, I yield back.
    Mr. Waxman. Thank you very much, Mr. Deal.
    Well, it is my pleasure to welcome Kathleen Sebelius to our 
committee for the first time as our Nation's Secretary of 
Health and Human Services. And it is highly appropriate that 
your first testimony is on the reforming of the Nation's health 
care system. That is the President's highest priority and is a 
subject on which the Secretary brings a unique breadth of 
experience, most recently as a two-term Governor of Kansas, 
service for 8 years as Kansas State Insurance Commissioner--
exceptionally valuable experience as we proceed with enacting 
and implementing health care reform--and, before that, 8 years 
in the Kansas House of Representatives.
    Madam Secretary, I want to welcome you. We look forward to 
working with you and to your testimony today. Your full 
prepared statement will be in the record, and we would like to 
recognize you to proceed as you see fit.

STATEMENT OF THE HON. KATHLEEN SEBELIUS, SECRETARY, DEPARTMENT 
                  OF HEALTH AND HUMAN SERVICES

    Secretary Sebelius. Thank you, Chairman Waxman, Chairman 
Emeritus Dingell, Ranking Member Barton, Chairman Pallone, 
Ranking Member Deal. Thank you for this opportunity to join you 
for a critical conversation about health reform in America.
    As the chairman emeritus has already recognized, my father 
did serve on this committee, and he was here when Medicare was 
passed. So I feel privileged to be part of this historic 
conversation and delighted to have the chance to work with you 
on this critical issue.
    No question that your release of a discussion draft last 
week with your colleagues from Education and Labor and the Ways 
and Means Committees represents an historic moment in this 
debate. We not only appreciate the hard work you have already 
done but are grateful for all the work that you are about to do 
as we work together to, at long last, enact reform.
    Health reform constitutes one of our most important 
domestic priorities, and we know the cost of doing nothing is 
simply too high. As the President has said, unless we fix what 
is broken in our current system, everyone's health care is in 
jeopardy. Reform is not a luxury, it is a necessity.
    Today in America we have, by far, the most expensive health 
system in the world. We spend 50 percent more per person than 
the average developed country, spending more on health care 
than housing or food. Health insurance premiums have doubled 
since 2000, and the high cost of care is crippling businesses 
who are struggling to provide care to their employees and stay 
competitive in this global world.
    Small businesses and their workers, the backbone of the 
American economy, are clearly suffering. As recently as 16 
years ago, 61 percent of small businesses offered health care 
to their employees. Today, only 38 percent do.
    Last week, I was in Congressman Pallone's district with 
business owners in New Jersey who met with me about the 
sacrifices they have to make in their companies in order to 
provide health benefits to their employees. Even then, some of 
their employees can't afford the care they need.
    We spend more on health care than any other Nation but 
aren't any healthier. Only three developed countries have 
higher infant mortality rates. Our Nation ranks 24th in life 
expectancy among developed countries. More than one-third of 
our citizens are obese. And we know that 75 percent of our 
health costs are spent on chronic disease.
    Without reform, these problems only get worse. In 2008, we 
spent an estimated $2.4 trillion on health care. If we do 
nothing, by 2018 we will spend $4.4 trillion. Today, we spend 
about 18 percent of our GDP on health costs. Doing nothing, 
those costs reach 34 percent of GDP by 2040, and 72 million 
Americans will be uninsured. The CBO has recently estimated 
that, by 2025, 25 percent of America's economic output will be 
tied up in the health system, limiting all our other 
investments and priorities.
    So there are many problems with our health system today, 
but there is also a reason for optimism. Across this country 
there are lots of examples of hospitals and providers who are 
using new technology, cutting costs, and improving the quality 
of care.
    Two weeks ago, I was in Omaha, Nebraska, at Lakeside 
Hospital, an Alegent health care system, one of the Nation's 
first fully digital hospitals, and saw firsthand how health 
information technology can help doctors and patients. Health 
care providers like the Kaiser system in California, the Mayo 
Clinic, Geisinger, Intermountain Health Care, have lowered 
costs but, more importantly, have improved outcomes for their 
patients. I have spoken to community health center providers 
from Ohio, Tennessee, and Pennsylvania who have helped outline 
how health information technologies helped them save resources 
and provide better care. Our challenge is how to take the best 
practices and spread them across the entire country.
    I have every confidence we can meet the challenge and 
achieve the goals of achieving of reducing costs for families, 
businesses, and government, protecting people's choices of 
doctors, hospitals, and health plans, and, at long last, 
assuring affordable, quality health care for all Americans. And 
we can do it without adding to the deficit.
    Now, the President is open to good ideas about how we 
finance health reform, but we are not open to deficit-spending. 
Health reform will be paid for, and it will be deficit-neutral 
over 10 years.
    The President has already introduced his proposals that 
provide about $950 billion over the next decade to finance 
health reform. Many of the resources come from wringing waste 
out of the current system and aggressively prosecuting fraud 
and abuse. We are currently paying for strategies which don't 
work or overpaying for medicines and equipment. It is time to 
make a better use of these dollars.
    We know that reform can reduce costs for families, 
businesses, and government, protect people's choice, and assure 
affordable health care. As we move forward, we will be guided 
by simple principles: protect what works about health care, and 
fix what is broken.
    We have reviewed the key features of the tri-committee 
draft proposal, Mr. Chairman, from you and your House 
colleagues, and it is clear that you and your committee have 
embraced these principles.
    By creating a health exchange that will ensure numerous 
private insurance plan options along with the public insurance 
option, the plan promotes choice and competition. By lowering 
health costs and providing premium credits, the plan makes 
health care affordable for all Americans. By investing in 
prevention and wellness initiatives, we help to prevent disease 
and illness and allow Americans to live longer, healthier 
lives. And with meaningful delivery system reforms, your 
policies offer lower-cost yet higher-quality health care.
    Under the plan you have proposed, Americans will no longer 
have to worry about being denied care because of a pre-existing 
condition. They will have easier access to tools that can help 
them prevent disease and stay healthy. Investments in primary 
care and underserved areas will improve all Americans' access 
to care. And the Medicaid reforms proposed in this bill have 
taken important steps to improve the critical safety net 
program, making it an income-based program and improving 
reimbursement for primary care.
    This discussion draft represents an historic step forward. 
And while we are still examining all the details, I agree with 
the President, who said this proposal represents a major step 
toward our goal of fixing what is broken about health care and 
building on what works.
    So, Mr. Chairman, I am eager to work with this committee 
and your colleagues in the House and colleagues across the 
aisle in the Senate to deliver the reform we so desperately 
need. And I appreciate the opportunity to engage in this 
discussion, and look forward to your questions.
    [The prepared statement of Secretary Sebelius follows:]





    Mr. Waxman. Thank you very much, Secretary Sebelius, for 
your testimony.
    I want to start off the questions period myself.
    This issue of health care reform was part of the campaign 
President Obama waged in order to be elected President. And if 
there is any issue for which he has a clear mandate, it is to 
work on this very issue. And he has made this his number-one 
domestic priority. And I want to underscore, in questioning 
you, some of the aspects of what he hopes to accomplish and 
what he wants us to do in this effort.
    Based on the President's approach, our draft--and it is 
just a draft--sets out a comprehensive approach to reform. It 
addresses prevention and wellness; the health care workforce; 
quality of care; broad-based, shared responsibility in dealing 
with the costs; and coverage through insurance reforms; a new 
exchange for people to go to get their insurance; affordability 
credits; improvements in Medicaid; substantial savings and 
improvements in Medicare.
    Is this what the administration is committed to, or should 
we approach this in a more compartmentalized manner? Should we 
approach this in a comprehensive way?
    Secretary Sebelius. Well, Mr. Chairman, as you said, this 
was one of the key priorities of then-Senator Obama and now-
President Obama, and he believes strongly that we can't fix the 
economy without fixing health care. And so a comprehensive 
approach to a reform of the system is what is required and, I 
think, is what this legislation addresses in many of its 
components.
    There is no question that you can't do just one thing at a 
time in order to have the system work for all Americans and 
fundamentally lower costs. There is no question that we can't 
continue on the cost curve that we are on right now. It is 
unsustainable and will not serve anyone well. Those who have 
health insurance now are a month, a year, 2 years away from not 
being able to afford the coverage they have. Those who don't 
have coverage can't access some of the best technology and the 
best medical care in the world.
    So we need a comprehensive approach, and we need to 
essentially shift the system toward wellness and prevention and 
away from the sickness system that we have. So I think the 
elements that you have put forward in the discussion draft do 
just that.
    Mr. Waxman. Undertaking this kind of comprehensive reform 
is pretty complicated, and it is going to require an enormous 
amount of effort from Members of Congress, some of whom will 
say, ``Well, maybe we should delay, maybe we should go slower, 
maybe we should do it next year or the year after.''
    What is the administration's view of the timetable for 
action and the need for action?
    Secretary Sebelius. Well, I think the President feels 
strongly that there is an enormous urgency about this issue 
which has directly to do with our economic well-being as a 
Nation and our competitiveness in a global society; that our 
workers are less competitive with their colleagues across the 
world because of the increasing costs of health care borne by 
individual business owners.
    Small-business owners, the engine of our economy in States 
across this country, the fastest growing segment of our 
economy, are often less competitive to have high-quality 
workers, talented workers because they seek to have health care 
provided along with their wages, and too many small employers 
can't any longer do that.
    Our focus on prevention and wellness needs to be 
dramatically increased so we not only have a healthier society 
and lower costs, but have a society where our children are not 
facing the prospect, which currently American children face, 
where we are seeing the first generation who may live shorter 
lives than their parents based on the rise in diabetes.
    So we have some challenges, Mr. Chairman, that cause us to 
enact legislation this year, to urge the action of both the 
House and the Senate on this important issue. It is difficult, 
it is complicated. If it were easy, as the President likes to 
say, it probably would have been done a long time ago.
    Mr. Waxman. Let me ask you one last question, because my 
time is almost out. We have businesses who pay too much; we 
have government that is paying too much. We have small 
businesses who can't afford it at all for their employees. And, 
of course, if you are without insurance and you have to go pay 
for your health care bill, it is impossible. So a lot of people 
go without the needed services.
    Do you think we need a shared responsibility for every 
sector--individuals, employers, providers, and government--to 
move forward together and that everyone has to share in the 
cost? No particular sector says somebody else will pay for me, 
but we all have to be in there and share in the costs? And, 
collectively, we are all better off as a society.
    Secretary Sebelius. Well, I don't think there is any 
question that, if you build on the current system, which is 
absolutely what the President wants to do and what the 
discussion draft proposes, then there is a shared 
responsibility.
    Over 99 percent of large employers provide health care 
coverage. A lot of small employers already do, but some don't. 
We have situations where some Americans opt in and some opt out 
of the insurance market. We need more personal responsibility, 
certainly, in the life choices we make, which can help lower 
health costs. We need parents to get involved and informed. We 
need more preventive care.
    So there is certainly a sense that we are in this together. 
This is a fundamental issue. It is probably the most personal 
issue to every American, what happens to their health care, 
their family's health care. And I think there is no question 
that it needs to be comprehensive and it needs to involve 
everyone.
    Mr. Waxman. Thank you very much.
    Mr. Barton?
    Mr. Barton. Thank you, Mr. Chairman.
    Thank you, Madam Secretary, for being here.
    You said in your opening statement that there would be no 
deficit-financing as a result of this health care reform 
package if it became law. Is that literally true?
    Secretary Sebelius. Mr. Chairman, I was quoting the 
President. The President has said consistently that he will not 
sign a bill unless it is paid for.
    Mr. Barton. So, we just want it established on the record 
right off the bat that there will be no increase in the deficit 
as a result of a comprehensive health care package if it does 
become law? That is just, I mean, plain language.
    Secretary Sebelius. That is what the President has stated 
as one of his top priorities: It will be paid for within the 
period.
    Mr. Barton. OK.
    Let me walk through just one part of your program. Creates 
a new category of coverage under Medicaid at 133 percent of 
poverty, which will be 100 percent paid for by the Federal 
Government, no State match, for childless adults between the 
ages of 19 and 64. This one provision, if I understand it 
correctly, could add as many as 20 million Americans to the 
Medicaid program.
    Now, I don't know what the cost number is for coverage per 
person under Medicaid, so I just picked a number. And if my 
number is wrong, correct me. But I said $6,000 a year for 
insurance. That may be too high. But if you cover 20 million 
people at $6,000 per year, that is $120 billion right there per 
year.
    How do you pay for that? What are some of your pay-fors? 
Because, in the bill, they are to be determined later. So give 
me an example of a pay-for that is $120 billion a year.
    Secretary Sebelius. Congressman Barton, the President has 
proposed about $660 billion in savings from the current 
Medicare and Medicaid program. In addition, he has proposed 
revenue enhancers of about----
    Mr. Barton. That is over a 10-year period.
    Secretary Sebelius. Yes, sir. And I think your figure is--
--
    Mr. Barton. Per year. $120 billion per year.
    Secretary Sebelius. Well, I would start with the premise 
that, first of all, I don't know the numbers accurately, and I 
assume that your $20 million is within the ballpark.
    I just can tell you that, whatever the proposal that comes 
forward, the President has insisted that the bill will be paid 
for. The measures that are proposed will be paid for.
    Mr. Barton. You are a former Governor, I believe. Isn't 
that correct?
    Secretary Sebelius. Yes, sir, two-term.
    Mr. Barton. I believe of Kansas, is that----
    Secretary Sebelius. Kansas is the State.
    Mr. Barton. Governor of Kansas. Does Kansas have a balanced 
budget requirement for its State budget?
    Secretary Sebelius. Yes, sir.
    Mr. Barton. It does. OK. When you were Governor of Kansas, 
by law, you had to submit pay-fors when you submitted a budget 
that spent money. Isn't that correct?
    Secretary Sebelius. Well, we spent money within the 
revenues we had.
    Mr. Barton. Yes, ma'am. Now, again, my numbers may not be 
the number, but they are definitely in the ballpark. If I give 
the President the benefit of the doubt that there are out there 
$600 billion over 10 years in savings, $60 billion a year, this 
one expansion in Medicaid is still $60 billion a year short.
    You are the Secretary of Health and Human Services. I 
assume you have had some interaction with Chairman Waxman and 
Chairman Rangel, Chairman Miller in providing this draft bill. 
You have to have some idea of how you are going to pay for it.
    And, again, I am giving you the benefit. If the President 
says he can save $60 billion a year, I will stipulate, for 
purposes of this hearing, he saves 60. But I think you need to 
put $60 billion more in savings or in tax increases on the 
table.
    Secretary Sebelius. Well, Mr. Barton----
    Mr. Barton. You had to do it when you were Governor.
    Secretary Sebelius. That is true, sir. And this is a 
discussion draft. What I can assure you is, at the end of the 
day, the bill that passes will be paid for. We will work 
closely with the chairman here in the House and the Senators on 
the other side to come up with strategies to do just that.
    Mr. Barton. Well, shouldn't we tell them upfront?
    Secretary Sebelius. We don't have a CBO score yet for this 
bill nor a score for the various proposals that are in this 
bill. But I can----
    Mr. Barton. But at least you have to put on the table where 
you are going to get the money.
    Secretary Sebelius. I understand.
    Mr. Barton. It is not a box of chocolates, you don't know 
what you are going to get, and you just pull it out, ``Oh, 
there is $60 billion.'' Whatever.
    Well, Mr. Chairman, my time has expired. But I think we 
have established a basic point. I mean, it is a good thing if 
you are going to have no deficit-financing. I commend the 
President for that. But it is a bad thing if you don't shoot 
straight with the American people where you are going to get 
the money.
    And nobody says that we are going to be able to save money 
to pay for these huge expansions, totally by savings pay for 
these huge expansions. I just pointed out one part of the bill, 
and already we are at least, in my numbers, $60 billion per 
year short.
    Thank you, Mr. Chairman.
    Mr. Waxman. Thank you, Mr. Barton.
    Mr. Dingell.
    Mr. Dingell. Mr. Chairman, I thank you.
    Madam Secretary, again, welcome. My questions will, I hope, 
evoke a yes or no answer.
    Would it be appropriate to state that the tri-committee 
discussion draft that was released last week aligns with the 
health reform principles the President has outlined earlier 
this year? Yes or no?
    Secretary Sebelius. Yes, sir.
    Mr. Dingell. Now, Madam Secretary, there has been quite a 
bit of discussion about the inclusion of a public health 
insurance option in the reform legislation. Does President 
Obama support the inclusion of a public health option in the 
reform legislation?
    Secretary Sebelius. Yes, he does.
    Mr. Dingell. Madam Secretary, hospitals and doctors are not 
required to participate in the public option. Is that correct?
    Secretary Sebelius. That is correct.
    Mr. Dingell. Premiums and co-payments under that part of 
the proposal will cover the claims, will they not?
    Secretary Sebelius. I am sorry, sir?
    Mr. Dingell. I said, premiums and co-payments under the 
public option will cover the costs.
    Secretary Sebelius. That is my understanding.
    Mr. Dingell. The public option must adhere to the same 
rules and regulations as all other plans.
    Secretary Sebelius. That is correct.
    Mr. Dingell. The public option will be administered by a 
separate agency from the one that runs the exchange.
    Secretary Sebelius. That is the way the draft is written, 
yes, sir.
    Mr. Dingell. The public option will offer the same minimum 
benefit design as all other plans in the exchange.
    Secretary Sebelius. Yes, a level playing field.
    Mr. Dingell. Individuals and families will be permitted to 
apply subsidies towards both public and private plans in equal 
fashion.
    Secretary Sebelius. Yes, sir.
    Mr. Dingell. And I apologize, too, Madam Secretary, but we 
have a lot of business to do here, and I hope I am not being 
discourteous.
    Madam Secretary, there has been justified concern over the 
consolidation of the health insurance market and the impact it 
has on health insurance claims. According to the American 
Medical Association, 94 percent of the insurance markets in the 
United States are now highly concentrated. This has decreased 
the amount of competition, and this is a major cause of 
spiraling health concerns. Yes or no?
    Secretary Sebelius. There is a monopoly in much of the 
country in the private insurance market, yes.
    Mr. Dingell. Now, this is a serious concern then. How does 
the public plan address this concern? And this is not yes or 
no.
    Secretary Sebelius. I appreciate that.
    I think what the public option within the marketplace, 
within the new health exchange, does is use market principles--
competition and choice--to lower costs and provide consumers a 
choice of plans.
    So I think that the public option--absent a public option, 
in many areas in the country, two-thirds of my State, for 
instance, and States around this country, there would be only 
one choice, which is not terribly effective in terms of holding 
costs down and certainly does not provide consumer choice of a 
side-by-side plan, which is why States in State employee plans 
create public options standing side by side with private, why 
many States have done that in the children's insurance program, 
side-by-side options, to give choice and provide some 
competition.
    Mr. Dingell. Now, Madam Secretary, as a former Governor and 
a former insurance commissioner, you are able to speak to this 
question. State insurance regulators are not able to regulate 
except as regards solvency of the insurance companies. Is that 
not correct?
    Secretary Sebelius. Sir, they can regulate solvency and 
also have some cost regulation, but, frequently, if there is no 
choice in the market, cost regulation is almost irrelevant.
    Mr. Dingell. So competition being put into the market would 
be the one thing that would make this system work by having the 
public option there. Is that correct?
    Secretary Sebelius. Well, again, it is a marketplace 
strategy that competition is often much more effective than 
heavy-handed regulation.
    Mr. Dingell. Now, Madam Secretary, there are questions 
about whether the tri-committee proposal is a complex concept. 
It includes exchanges, a public health option, subsidies, 
Medicare and Medicaid improvements, responsibilities for 
individual employers.
    Will the administration be able to fully implement and 
administer this proposal?
    Mr. Waxman. Thank you, Mr. Dingell.
    Secretary Sebelius. Yes.
    Mr. Waxman. Your time has expired, but we do want the to 
get the answer.
    What is the answer?
    Secretary Sebelius. Yes, sir.
    Mr. Waxman. That is it?
    Mr. Dingell. That is why I asked it that way, Mr. Chairman.
    Mr. Waxman. Thank you, Mr. Dingell.
    The gentleman from Georgia.
    Mr. Deal. Thank you, Mr. Chairman.
    Madam Secretary, our esteemed chairman made a comment back 
during the markup of the American Recovery and Reinvestment 
Act, which said, ``I think it is highly unlikely that you are 
going to find millionaires who would like to go on Medicaid.''
    One of the concerns that this bill arises in the minds of 
many of us is whether or not we are treating low-income 
citizens as second-class citizens by automatically enrolling 
them in Medicaid.
    So my question would be this: Why do you believe that a 
family making $29,000 a year is not as able to make choices as 
a family making $30,000 a year? And why would it be better to 
simply automatically enroll them, with no choice, in Medicaid, 
as opposed to giving them a subsidy to allow them to go into 
the private insurance market?
    Secretary Sebelius. Well, Congressman, some of those 
families, a limited number, are in jobs right now where they 
have employer-provided coverage, and they certainly would not 
shift that coverage.
    But a large number, particularly of, not families, but 
single adults who are at 100 percent or below the poverty line, 
who are making often a very small amount of money, have no 
coverage at all. They are uninsured and find themselves not in 
an ownership capacity.
    So I think the committee's look at expanding Medicaid to 
133 percent also follows the experience of many States that 
have already done that and found that the most effective 
strategy to expand coverage. It is a larger market. It often 
provides a benefit package that is cost-effective and, frankly, 
is often far less expensive than the private options that 
exist, which is why States who have expanded coverage have 
chosen the Medicaid route instead of the private insurance 
route.
    Mr. Deal. As I understand the draft, it would propose that 
everyone under the age of 65 who is under the 133 percent of 
the Federal poverty level would be enrolled in Medicaid.
    Can you give us, first of all, how many people do you think 
that that encompasses? And how many of those people currently 
have private health insurance?
    Secretary Sebelius. Sir, I don't want to cite numbers off 
the top of my head. And I can easily return to you with those 
numbers. I apologize.
    I know that there are a fairly significant number of the 
so-called childless adults, not parents, typically because a 
number of States, again, have taken steps for parents whose 
children are eligible for the CHIP program to actually provide 
expanded family coverage, because they found that a very 
effective strategy when enrolling children.
    But I think we are talking primarily about childless adults 
often below that--I think they make less than $6,600 a year if 
you are at 133 percent of poverty. And I can get back to you 
with those specific numbers. I apologize.
    Mr. Deal. Would you please do that?
    Secretary Sebelius. Yes.
    Mr. Deal. On page 73 of the bill, there is a provision that 
provides for automatic enrollment----
    [Interruption in hearing room for medical emergency. Brief 
recess.]
    Mr. Waxman. The committee will come back to order.
    A young woman who is an intern here on the Capitol got 
dizzy, fell down, and hit her head. And she was attended to by 
a number of members and staff who are medical people, doctors, 
and the emergency assistance at the Capitol. So hopefully she 
will be fine, God willing, and there will be no consequences as 
a result of it.
    But I do want to make that comment. And as we get any 
further reports, I will inform everybody of the situation. We 
are distressed about this incident, but with good medical care 
and the resilience of youth, even the President's health care 
bill will not scare her from recovery. Maybe the hope of it 
will spur her on.
    Mr. Deal, you were in the middle of your questions, and I 
want to recognize you for 2 minutes.
    Mr. Deal. Thank you, Mr. Chairman.
    Madam Secretary, on page 73 of the bill, it provides for 
the automatic enrollment of individuals into the Medicaid 
program.
    I want to just ask you if the citizenship and identity 
verification requirements that are in the current law will 
still appertain into the automatic enrollment processes.
    And will you assure us that individuals who are illegally 
in our country or otherwise ineligible for taxpayer-supported 
Medicaid will not be enrolled under this provision of this bill 
while you serve as our Secretary?
    Secretary Sebelius. Mr. Deal, I can assure you that States 
now, because of the various Federal rules requiring 
verification of identity, have those systems in place and 
really have, I think, developed systems to verify identity not 
only of existing clientele but of enrolling clientele. And that 
would certainly be in place as we move forward.
    Mr. Deal. So it would not be your intention or something 
that you would not allow to happen that the automatic 
enrollment process would not overlook or override those current 
verification requirements.
    Secretary Sebelius. That is correct.
    Mr. Deal. Thank you, Madam Secretary.
    And I yield back my time, Mr. Chairman.
    Mr. Waxman. Thank you, Mr. Deal.
    Mr. Pallone, the chairman of the subcommittee.
    Mr. Pallone. Thank you, Mr. Chairman.
    And thank you, Secretary, for being with us today.
    I wanted to take my time just to ask about Medicare and 
Medicaid. I think there is a certain amount of confusion 
because, obviously, in this discussion draft, and the President 
has stressed, that we can save money that would be used to pay 
for this plan through savings in Medicare and Medicaid. But, at 
the same time, there are major enhancements and improvements in 
both programs that are in the discussion draft. And I think 
there is a certain amount of confusion about that.
    Overall, I think that if you view the combination of the 
Medicare and Medicaid savings and the benefit enhancements, 
overall there is a marked improvement in both Medicare and 
Medicaid. But I wanted to just ask you questions about that.
    In other words, the draft proposes to begin filling in the 
donut hole in the Medicare prescription drug benefit, to 
eliminate cost-sharing on preventive services, to expand the 
eligibility and accessibility of Medicare subsidies for low-
income enrollees.
    Taken as a whole, how do you view the combination of these 
Medicare savings proposals and the benefit enhancements as an 
improvement in the Medicare program?
    Secretary Sebelius. Well, Congressman, I think that there 
is no question right now that there are areas where we are 
spending money that don't result in higher-quality care or 
better results for patients. I think what this discussion draft 
puts forward is a way, as you have suggested, to enhance the 
current program, to put dollars into areas where we think there 
will be much better results for patients.
    Hospital re-admissions is a category that is targeted for 
some focused attention. One out of every five patients leaving 
the hospital is re-admitted within a series of weeks. That is 
not good for the patient, and it certainly costs a lot of money 
to the system. So, coordinating post-release care, actually 
providing incentives for follow-up care is a significant 
improvement that will not only lower cost for re-admissions but 
actually provide a lot better care for the patients.
    And those, I think, are the kinds of examples that the 
discussion draft incorporates. Better quality in the long run, 
following what we know are best practices that are in some 
parts of the system but not appearing throughout the system, 
and, frankly, not continuing to overpay for services that have 
no shown benefit or result.
    Mr. Pallone. Did you want to talk about filling the donut 
hole in this context? Because I know that is very much on the 
minds of the seniors, and we do propose to do that in this 
discussion draft.
    Secretary Sebelius. Well, I think that is a huge step 
forward. As you saw, the chairman of AARP recently endorsed the 
strategy that is appearing in both the House and the Senate to 
fill the donut hole.
    It is a huge issue. I can tell you, as an insurance 
commissioner, we used to face this situation with citizens who 
had no idea or really hadn't counted on the fact that their 
benefits would suddenly cease and their premiums would continue 
on. They hadn't saved appropriately for it. And often they were 
the--I mean, the first people to hit the donut hole were the 
folks who had the highest cost in prescription drugs. And it 
was not only a huge shock but something that forced a lot of 
people to stop buying their medications, to stop following the 
doctor's prescriptions, to end up in the hospital again without 
the care to keep them well.
    So this is a huge issue for seniors across this country who 
have benefitted greatly from lower-cost drugs but, when they 
hit the barrier, are really in worse shape than they were in 
the beginning because they are still paying premiums and they 
have no health prescription benefit.
    Mr. Pallone. Now, what about Medicaid? There is a major 
expansion here in terms of increased reimbursement rate, 
covering people in many States that, you know, that are below 
the 100 percent or the 133 percent with Federal dollars. Would 
you want to comment on that?
    Because I just want to stress how, even though we are 
having savings from Medicare and Medicaid, we are really 
improving the programs significantly.
    Secretary Sebelius. Well, there, again, a lot of the 
conversation with providers, at least in my home State, was not 
really focused on Medicare, which is often a very popular 
program, but on Medicaid, which often under-reimburses doctors 
and particularly primary care and family providers. So, 
enhanced reimbursement for primary care, I think, is a huge 
step forward.
    And, frankly, having a situation where, if you are an adult 
or a family below 133 percent of poverty, wherever you go, you 
would have the same benefits. If you move across the State 
line, if you need to travel with your family elsewhere, you 
would have similar benefits, the kind of portability that 
currently is not available to a lot of people because the 
benefits change each State at a time. So that is a significant 
step forward.
    Mr. Pallone, while you are discussing Medicaid, I just 
wanted to share with the committee that at least my staff has 
told me that the number, at least that we have been given by 
CBO, for childless adults, non-disabled childless adults who 
are in Medicaid is really a $3,000-a-person average cost, not 
$6,000 as was suggested.
    Mr. Pallone. Thank you very much.
    Mr. Waxman. Thank you, Mr. Pallone.
    I want to now recognize Mr. Whitfield.
    But I do want to announce to members there is pending on 
the House floor a Republican motion to adjourn. We are going to 
continue the hearing, so those who want to respond to that vote 
should do so and then come back. But we will proceed.
    Mr. Whitfield.
    Mr. Whitfield. Mr. Chairman, thank you very much.
    And, Madam Secretary, we are pleased that you are with us 
here today.
    You know, the question about the prescription drug benefit 
reminds me that, of course, before we passed the prescription 
drug benefit, most citizens on Medicare did not receive that 
benefit, and so they were paying for those medicines. And now 
we are trying to fill the donut hole so they don't have to pay 
for that either.
    So, as politicians, you know, we like to expand coverage 
and give coverage and make it--it sounds like that we don't 
want anyone to pay for anything. And yet, I know your father 
was involved with Medicare, according to your testimony, and I 
was looking at some of the debate about Medicare when it was 
adopted in 1965, and they were making some of the same 
arguments that you were making, really, in your testimony. And 
in 1965 they projected that, by 1990, the cost of Medicare 
would be $9 billion. As it turned out, it is almost $200 
billion.
    And so, we all like to--we know that our health care needs 
to be reformed. And then when you talk about it being paid for, 
it is going to be budget-neutral, and then when they talk 
about, well, we are going to get a lot of money out of 
increasing efficiencies, wringing waste out of the current 
system, and being more aggressive to stop fraud, you know, it 
is so nebulous.
    And you are a very practical person. You have had 
experience as a governor. Do you honestly think that we can 
reform this system and actually save money and yet provide 
better quality health care?
    Secretary Sebelius. Congressman, I do. And I do so not 
based on some hypothetical situation, but based on visiting 
health systems throughout this country, in the middle of the 
country, on the coasts, that do just that: who have higher-
quality outcomes time-in and time-out for their patients, who 
have used technology and the provider protocol provided to make 
sure that the results are better each and every time, and who 
lower cost.
    I have seen it in systems around the country, and I am 
absolutely confident that we can do it throughout the United 
States.
    Mr. Whitfield. Well, I am glad you are confident, but, you 
know, I really am skeptical about it. But I hope you are right.
    But when we talk about being budget-neutral, that is good 
for the government, and, of course, the taxpayers pay for the 
government. But then this bill has a pay-or-play mandate on 
employers, requiring them to provide a minimum benefit, as 
established by the Health Benefits Advisory Council, of 8 
percent of wages paid. So there is a mandate there for small-
business people to pay 8 percent of wages to provide a benefit 
defined by a commission that is established in this bill. So, 
for these small-business people, I mean, if someone has wages 
they are paying $500,000 a year, that is going to cost them 
$40,000.
    Now, are you concerned about the ability of small 
businesses to be able to continue to be competitive and provide 
jobs for the employees and pay this, as well?
    Secretary Sebelius. Well, absolutely, I am concerned about 
the competitiveness of our small-business owners. And I think 
health care costs are one of the areas that is a huge challenge 
for every small-business owner I talk to. They can't get great 
employees without offering health benefits. They are priced out 
of the market.
    So, several things in this bill. First of all, the 
discussion draft makes it clear that there will be a specific 
small-business exemption from the pay-or-play. It is my 
understanding that the committees are still working on the 
language. So that will occur. It is in the Massachusetts----
    Mr. Whitfield. No, I know that there is an exemption, but 
there are going to be some people that will be hit by this.
    Secretary Sebelius. And the----
    Mr. Whitfield. And that is OK.
    Secretary Sebelius. --creation, though, in the marketplace, 
I would suggest, actually gives them a cost advantage that they 
don't have now, pooling larger risk, giving affordable 
coverage.
    Mr. Whitfield. Let me ask you just one other question, 
because my time is about expire. One of the criticisms we 
always hear about a one-payer, single-payer system and 
universal health coverage in other countries is that it 
rationalizes health care. And, in America, our most expensive 
part of health care deals with end-of-life care. That is a big 
percentage of the way we spend money.
    And I am not saying there is anything wrong with 
rationalizing health care. But, to really get big savings, do 
you think that we should be rationalizing health care in the 
U.S.? Many countries do because that is the way they control 
their costs. I mean, do you think that we should be doing that?
    Secretary Sebelius. Absolutely not. I think that, again, 
the creation of a health exchange marketplace is not a single-
payer system. And I think you will hear today from some 
proponents who will strongly suggest that we should be looking 
at a single-payer system, but that is not what the President, 
that is not what the chairman have put forward. They have put 
forward a plan that builds on the current system.
    Rationing care, frankly, is something that happens each and 
every day under our current system, and it is often done by 
private insurers who get between a doctor and their patient and 
decide which practices can be met, which procedures can be paid 
for, what prescriptions.
    I think this is an opportunity, really, to make sure we 
have more patient-centered care, that we follow the protocols 
that work.
    Mr. Whitfield. Thank you, Mr. Chairman.
    Mr. Waxman. Thank you, Mr. Whitfield.
    Mr. Markey.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    Last year, Madam Secretary, I introduced legislation with 
then-Congressman Rahm Emanuel and Congressman Chris Smith from 
New Jersey called the ``Independence at Home Act.'' And the 
bill created a Medicare pilot project focused on improving the 
coordination of care and reducing costs for the most vulnerable 
Medicare beneficiaries, those with multiple severe, chronic 
conditions, such as Alzheimer's, ALS, Parkinson's, and other 
complex, debilitating diseases, who also need help with two or 
more activities of daily living, such as dressing, feeding, et 
cetera.
    CBO has reported that 5 percent of Medicare beneficiaries 
account for 43 percent of overall Medicare spending. And CMS 
has noted that approximately 20 percent of Medicare 
beneficiaries with five or more chronic conditions, account for 
66 percent of program spending.
    Could you talk a little bit about how we can focus on those 
Medicare beneficiaries with multiple chronic diseases and how 
perhaps a program like that, focusing on home and better 
coordination, can help to reduce the costs?
    Secretary Sebelius. Well, we have not only the 
demonstration that you are responsible for but, I think, a 
number of projects under way looking at coordinating care, 
particularly for the vulnerable, high-cost individuals. And, 
certainly, having an opportunity to do that in a home base 
instead of a hospital-based service is not only better for the 
patient but may provide some enhanced cost savings.
    So we are eager to work with you, Mr. Markey, to continue 
to figure out better ways to not only coordinate care for 
individuals who suffer from various chronic diseases and have 
ongoing underlying conditions, but also to make it a more 
patient-centered system, which would lead us to more home care 
delivery.
    Mr. Markey. OK. So, in terms of home-based programs for the 
beneficiary population, do you see a shifting in that direction 
to make sure that, you know, we try to reduce costs by trying 
to stabilize these people at home?
    Secretary Sebelius. Well, as you know, there is a lot of 
effort under way, and a lot of it has been at the State basis, 
and I am hoping that with health reform we can have a real 
collaborative partnership on rebalancing care, both not only 
trying to prevent hospitalizations before they occur and 
provide care at home but also the nursing home. A number of the 
patients that you are describing often end up in a nursing home 
setting because they don't have access to the wrap-around 
services that they need.
    So we would like to enhance that sort of home-based care, 
the care that really allows people to not only be more 
independent but also at a lower cost than in a hospital or a 
nursing home.
    Mr. Markey. Our bill also would enable teams of primary 
care doctors, NPs, pharmacists, and other care providers to 
form an organization to contract with HHS to provide services 
to these chronically ill beneficiaries in their homes as part 
of a 3-year demonstration.
    The organizations would be required to achieve savings of 
at least 5 percent compared to what these beneficiaries would 
cost if they were served by these coordinated care 
organizations. If they don't, they must repay Medicare. If they 
achieve more than 5 percent, they can keep 80 percent of these 
savings, with 20 percent of the savings returned to Medicare.
    Do you think that makes any sense, to have cost-savings 
sharing as a system that we could construct in the country?
    Secretary Sebelius. Well, I certainly support the notion of 
beginning to pay for outcomes and not for contact. Too much of 
the Medicare system is driven right now by the number of times 
a provider touches a patient, not necessarily what happens at 
the end of the day.
    So the system you describe, which not only would provide 
for a coordinated strategy, which is really what we need to 
occur throughout the country, but also save money, it makes 
sense to provide those incentives to providers.
    Mr. Markey. Great.
    Thank you for your service. Thank you for being here.
    Mr. Waxman. Thank you, Mr. Markey.
    Mrs. Christensen.
    Mrs. Christensen. Thank you, Mr. Chairman.
    And I guess there is some benefit, I guess, at least in 
this instance, to being a delegate and not having to go to 
vote.
    Welcome, Madam Secretary. It is good to see you.
    Last week, we had some very good conversations on health 
disparities, but I note that, at least in reading your 
testimony, because I had to step out, both in the Senate and 
here, there was very little, if any, reference made to this 
very important issue that, by itself, results in close to 
100,000 premature, preventable deaths every year.
    So I hope that you will work to ensure that your entire 
Department is very sensitive to this critical issue and that 
the Office of Minority Health and, in particular, the National 
Center for Minority and Health Disparity Research will be 
elevated to an entity that is very critical to achieving the 
goals of eliminating health disparities.
    The bill directs that a national prevention and wellness 
strategy initiative be in place, and you will be responsible 
for identifying the key health and health care disparities. 
Could you discuss briefly how you plan to fulfill this 
requirement and ensure that all areas of concern be identified?
    And how will the Agency for Healthcare Quality and Research 
be involved, since they have been doing national health 
disparity reports for the last 5 years?
    Secretary Sebelius. Well, as I shared with you, 
Congresswoman, last week, I am, as the new Secretary, concerned 
that we make sure we do a lot more than publish the yearly 
reports, which have alarming statistics about health 
disparities. And, frankly, they are not getting any better; the 
gap is, in fact, widening.
    Health reform is a piece of the puzzle. I don't think there 
is any question that having access for everyone to higher-
quality preventable care, a health home, is a step in the right 
direction.
    But I had a recent very productive meeting with 
stakeholders representing a lot of the groups who are often 
underserved and assured them that we not only wanted a one-time 
meeting but I want an ongoing strategy.
    I have met with our team at our Center for Research and 
Quality about how it is that we are going to actually begin to 
close this gap, because just providing reform and continuing 
the gap doesn't work.
    So we are aggressively taking on not only what has been 
already reported as effective strategies, but want the new team 
to be particularly focused on the issue of great concern to you 
and to me.
    Mrs. Christensen. I have another issue of great concern 
that really relates to territories. In your testimony, you said 
that reform is not a luxury, it is a necessity, and I 
definitely agree with that. And, because it is a necessity, I 
think that certain issues, like equitable coverage for all 
Americans, should not really be held hostage to cost. And we 
discussed that a lot at the hearing yesterday.
    That said, I am interested in hearing your thoughts about 
the treatment of the U.S. territories in the current draft. We 
have been working for years to remove the Medicaid cap. The 
bill, while it does provide additional funding to the 
territories, does not move us in that direction at all. And we 
are not eligible for subsidies.
    So, to me, it makes it far less possible for men and women, 
American citizens, legal residents living in the territories to 
achieve the benefits that this bill will provide for the rest 
of Americans. So I would like to hear your thoughts on that.
    Secretary Sebelius. Well, Congresswoman, I would like to 
provide an opportunity for you to have that discussion with me 
and our staff and really would like to work with you as this 
process--this is a work in progress, and it is a discussion 
draft. And I would just like to work with you to see how we can 
help enhance the areas that you have identified as problematic.
    Mrs. Christensen. Thank you.
    Thank you, Mr. Chairman.
    Mr. Waxman. Thank you very much, Mrs. Christensen.
    Mr. Stearns.
    Mr. Stearns. Thank you, Mr. Chairman.
    Madam Secretary, I note that you earlier said that, with 
the donut hole, that the benefits stop and the payment 
continues. But, of course, you understand that is for a small 
amount of time until they get above a certain amount, and then 
almost 100 percent of their benefits are paid for.
    I think you understand that. So it is not proper to say 
that their benefits stop, because their benefits----
    Secretary Sebelius. Well, they stop for a substantial 
period of time, depending on how fast----
    Mr. Stearns. Yes, yes, but--anyway, I have two questions, 
Madam Secretary.
    The President has indicated that if you--he said, quote, 
``If you like your health care plan, you will be able to keep 
your health care plan, period. No one will take it away from 
you, no matter what.''
    I have here--The Lewin Group has done a study, and it is a 
bipartisan study, which found that 120 million people, nearly 
67 percent of non-Medicare Americans, would lose their current 
coverage and be forced into a government-run insurance if a 
government plan was included.
    Do you have any evidence that, if a government plan is 
offered, that 120 million people will be able to keep their 
current insurance?
    Secretary Sebelius. Well, Congressman, it is my 
understanding that that Lewin study has been updated or at 
least disputed by a number of people, that those numbers were 
significantly higher than folks----
    Mr. Stearns. So your answer is that you dispute the Lewin 
plan.
    Secretary Sebelius. I do.
    Mr. Stearns. OK.
    The next question is then, I have here a study by the HSI 
Network, LLC, June 24, 2009. Their study said that the bill we 
are discussing today would cost an astounding $3.5 trillion. Do 
you dispute that fact?
    Secretary Sebelius. Sir, I am waiting to see what the CBO 
score says. I don't know the figures that you have just quoted. 
I don't know who the group is.
    Mr. Stearns. Have you seen this report?
    Secretary Sebelius. No, I have not.
    Mr. Stearns. OK.
    Now, the President has indicated that if any bill arrives 
from Congress that is not controlling cost, that is a bill he 
can't support.
    So the first question is, you don't agree this report; you 
don't know about it. They say it is going to cost $3.5 
trillion. Where, if it is not 3.5 or 3.2 or, let's say, 2.8, 
where are you going to get the money to pay for this bill?
    Secretary Sebelius. Again, Congressman, I think that once 
the bill is scored and once the proposals are put forward, I am 
eager to work with the committees in the House and the 
committees in the Senate to identify the cost savings.
    The President has proposed about a billion dollars' worth 
of revenue enhancements and cost savings that he feels are 
appropriate to spend on this. There are other ideas that are 
being proposed by Members of the Senate and Members of the 
House, and we are eager to work on paying for the bill.
    Mr. Stearns. Well, of course, $1 billion is not going to 
approach $3.5 trillion.
    Secretary Sebelius. But, sir, I----
    Mr. Stearns. So $1 billion is just a pittance compared to 
the 3.5 that this report shows it is going to cost.
    Another question is that you really don't have any idea 
where you are going to get the money to pay for this. Do you 
have any evidence that shows if the government spends $3.5 
trillion that it will save money? Let's not take the $3.5 
trillion, let's just ask you, if we spend all this money, where 
are you going to save it?
    Secretary Sebelius. Sir, I think you start from the premise 
that we can't afford what we are doing. So not doing anything 
is not an option. $2 trillion-plus a year is being spent, and 
Americans are less healthy than they were years ago. So we have 
to change what currently is happening.
    And I think there is every evidence that the combination of 
health technology, driving quality, and actually beginning to 
pay for prevention and wellness, promoting primary care instead 
of disease care, is a huge cost-saver over time. It is 
effective to have Americans in healthier conditions. It is good 
for our businesses, it is good for our workforce. So it will 
save money.
    Mr. Stearns. Well, I think all the things you suggested 
both sides would agree on. What the question is is, how do we 
do that? How do we reform the system so that there is universal 
access, universal affordability, but at the same time, we don't 
have a government program that is going to cost $3.5 trillion 
that is not paid for, with no statistics to show that it is 
going to save money?
    There could be an alternative suggestion. And I just 
suggest, Madam Secretary, that you read the HSI Network, LLC, 
report that came out and go back with the latest report from 
The Lewin Group. And I think certainly before you come up here, 
you should have some answer how you are going to pay for this.
    And, with that, I yield back.
    Mr. Waxman. Thank you, Mr. Stearns.
    Ms. DeGette.
    Ms. DeGette. Thank you very much, Mr. Chairman.
    Madam Secretary, one area that I have been working 
extensively with Chairman Waxman and also Senators Rockefeller 
and Whitehouse on is legislation that would strengthen the 
Federal health care quality infrastructure in order to identify 
and track key health indicators, as well as to develop and 
implement new science across the States. What this bill does 
that we introduced would establish national priorities for 
health care quality, and it specifies that pediatric health 
care quality is one of the first.
    And a lot of this legislation has now been incorporated in 
the discussion draft that we are talking about today. But the 
draft bill also contains a provision that requires the director 
of the Agency for Healthcare Research and Quality to work with 
you, as Secretary, to develop quality measures for the delivery 
of health care services in the United States.
    And I think this is an important requirement, but I am 
worried about the implications for pediatric health care 
quality measures, because even though the discussion draft 
requires the measures to be designed to assess the delivery of 
health care services to individuals, regardless of age, the 
section is funded with Medicare dollars. And so, under the 
previous administration, HHS determined that Medicare dollars 
could not be used for pediatric measures.
    I am wondering if you can comment on this and what plans 
the administration has to address pediatric health care quality 
and what the view of the agency is going to be.
    Secretary Sebelius. Well, Congresswoman, I think that we 
are convinced that Medicare can be a leader in improving 
quality of care for all Americans. And, certainly, the 
development of quality standards, I think, is appropriately 
done under that umbrella.
    But all Americans definitely includes children, and that is 
a huge priority of the country's moving forward. So there will 
be a coordinated effort to make sure that the pediatric 
standards are very much developed in terms of quality outcomes.
    Ms. DeGette. And do you think that can be done with the 
Medicare dollars? Or is that something we are going to have to 
explore, as we move forward to the final legislation?
    Secretary Sebelius. In the discussions with our current 
leadership team at CMS, they are confident that we could 
fulfill the mandate that is in the bill right now to develop 
standards, including pediatric standards.
    Ms. DeGette. OK. Because there is--I know you recognize, 
the medical establishment, and, of course, our icon who was 
here, Marian Wright Edelman, who was here yesterday: Children 
are not just mini-adults. So we have to develop separate 
standards.
    Secretary Sebelius. That is right.
    Ms. DeGette. I wonder if you could talk for a minute about 
the administration's view on the title 7 health workforce 
dollars that are included in the discussion draft.
    Secretary Sebelius. Well, I think, as you look toward the 
future of a reformed health system, workforce issues are hugely 
important. And I think that a step was taken, a significant 
step, in the stimulus act, beginning to fund the pipeline of 
critical health care workers: doctors, mental health providers, 
nurse practitioners, additional nursing staff.
    And this discussion draft, I think, takes that to the next 
chapter, which recognizes not only a shift in incentives for 
doctors to focus on primary care, but also has enhanced 
workforce capacity, again, with a whole series of initiatives 
that would provide for more health care providers in more parts 
of the country.
    Ms. DeGette. Thank you.
    One last question. One of the provisions I was really 
pleased to have included in the discussion draft was the idea 
of auto-enrollment at birth for children whose parents don't 
have insurance plans, to put those babies in, and then 12-month 
continuous eligibility for children.
    I am wondering if you can comment on the administration's 
position on that kind of auto-enrollment.
    Secretary Sebelius. Well, I think it has been shown that 
the enrollment efforts vary from State to State, often. And 
some still require a face-to-face visit; others have various 
complicated forms.
    So what has been proven as best practices, I think, is an 
easier presumptive enrollment when kids show up at the 
hospital. Certainly, auto-enrollment at the time of birth would 
facilitate including children in the system and make sure they 
get a healthy start on life. So I think that is a big step 
forward.
    Ms. DeGette. Thank you.
    Thank you very much, Mr. Chairman.
    Mr. Waxman. Thank you, Ms. DeGette.
    Mr. Buyer.
    Mr. Buyer. Thank you very much.
    Madam Secretary, what type of revenue enhancers have been 
discussed?
    Secretary Sebelius. Well, at this point, Congressman, the 
President has proposed a return to the itemized deduction that 
was present in the days of Ronald Reagan and feels that that 
would be an appropriate way to raise additional revenues.
    Mr. Buyer. How much? About how much revenue would that 
raise?
    Secretary Sebelius. $340 billion is my recollection.
    Mr. Buyer. OK. What are some other ideas that have been 
discussed?
    Secretary Sebelius. That is the revenue enhancer that the 
President has proposed.
    Mr. Buyer. That is $340 billion. What else?
    Secretary Sebelius. That is the revenue enhancer that the 
President has discussed. He has also proposed over $660 billion 
worth of saving. So we are at about just under a trillion 
dollars.
    Mr. Buyer. OK. And we are still looking for another $2 
trillion?
    Secretary Sebelius. Sir, I don't know--I have never had 
anybody discuss a $3 trillion bill, so I am not really prepared 
to talk about a $3 trillion bill. I don't think there is a 
score on this bill. It is my understanding----
    Mr. Buyer. Going to the itemized deduction, could you talk 
about that just a little bit further? Who would that impact?
    Secretary Sebelius. It would impact basically the 
wealthiest Americans, who currently are paying a different 
level of tax rate on their itemized deduction than middle-
income Americans. And it would, again, restore the rates----
    Mr. Buyer. OK. At that would be set--at what adjusted gross 
income level would that be set?
    Secretary Sebelius. Pardon me?
    Mr. Buyer. At what adjusted gross income level would that 
be set? In other words, you are either going to deny additional 
itemized deductions--is that what you are discussing?
    Secretary Sebelius. It just readjusts the rate. They 
continue to itemize deductions, the highest-income Americans--
--
    Mr. Buyer. So if an American family making $80,000----
    Secretary Sebelius. No, sir. It is my understanding that it 
is over $200,000, the last time I saw the proposal, but that 
could have changed.
    Mr. Buyer. At $200,000. But then what happened to the 
President's promise and assurance to the American people that 
he would not increase taxes on anyone making below $250,000? 
Aren't you going to set 250? Otherwise, he breaks his promise 
to the American people.
    Secretary Sebelius. Sir, he has put forward this proposal, 
and he is eager for Congress to talk about it. He thinks this 
is a way to raise additional revenue for----
    Mr. Buyer. So it is OK for him to promise one thing to the 
American people and do another, just like what George Bush did. 
``I won't increase taxes,'' and he did it anyway. So that is 
what your boss is proposing.
    Did you say, to remind your boss, ``Wait a minute, I am 
your Cabinet Secretary, I am responsible for this. Do you 
realize you are about to break your promise to the American 
people if you do this?''
    Secretary Sebelius. I did not say that to the President.
    Mr. Buyer. What did you say to the President? What did you 
advise the President?
    Secretary Sebelius. I told him I was eager to help him pass 
health reform, and I was eager to help fulfill his commitment 
that it would be paid for within the period of time that the 
bill proposes, over a decade. I think that is a fair promise to 
the American people, that it won't increase the deficit. And I 
am eager to work with you, sir, to help get that done.
    Mr. Buyer. Medicaid, when you were Governor and as a 
commissioner of Medicaid, States get a grade with regard to the 
administration of Medicaid by the States. What was your grade 
when you were the commissioner and Governor with regard to the 
administration of the Medicaid plan?
    Secretary Sebelius. Grade by whom?
    Mr. Buyer. Pardon?
    Secretary Sebelius. Who is grading me? I don't know what 
you are talking about. But, I mean, I guess the people of 
Kansas thought I got a pretty good grade because I got re-
elected as insurance commissioner and as Governor.
    Mr. Buyer. OK. Well, you got a D. Maybe you thought that 
was good and that was acceptable. I am only concerned that, if 
you think that a D is good and acceptable and you are glib 
about it here today, Madam Secretary----
    Mr. Waxman. Will the gentleman yield?
    Secretary Sebelius. Sir, I don't know what you are talking 
about.
    Mr. Waxman. Will the gentleman yield? Who graded----
    Mr. Buyer. No, I am not going to yield.
    The question I have here is, if we are going to say unto 
our States that we are going to--the Federal Government will 
pick up additional cost on Medicaid, aren't we sending a signal 
unto the States that if the Federal Government is going to pick 
up additional costs, that they don't have to be as concerned 
and cost-conscious? Should I worry about that?
    Secretary Sebelius. Well, I would say that the bulk of the 
Medicaid beneficiaries will still have a very significant State 
share. And I don't know any Governor in the country who is not 
concerned about the cost of Medicaid.
    Mr. Buyer. One of the other things that does concern me, 
though, is with regard to doctors, you say that everyone will 
be guaranteed their choice of their doctor. Yet, when we are 
going to have some shifting that, in fact, will occur--and 
that, in fact, is recognized. So an individual who likes going 
to their doctor, now all of a sudden, their plan may not be--
their doctor may say, ``I am not going to participate in the 
government option.'' Then they lose their choice of doctor.
    Would that be correct under this plan?
    Mr. Waxman. The gentleman's time has expired.
    Secretary Sebelius. Only if the individual chooses the 
public option.
    Mr. Buyer. Say again?
    Secretary Sebelius. Only if the individual chooses the 
public option.
    Mr. Buyer. Right. Then they lose their choice of doctor if 
the doctor does not participate.
    Secretary Sebelius. Well, that is the individual's choice. 
Doctors would not be mandated to be in the program, that is 
correct.
    Mr. Waxman. And that is true of private insurance, as well.
    Secretary Sebelius. That is true.
    Mr. Waxman. The gentleman's time has expired.
    Mrs. Capps.
    Mrs. Capps. Welcome, Madam Secretary. And thank you very 
much for being here today and for your testimony.
    I just want to make one brief comment about a population, 
about a group of people being discussed earlier in the 
conversation, those who will be covered, the childless adults 
who would be covered under Medicaid in this legislation, with 
the cost amount. You are being asked about it. It is not as 
though these are folks that we are not paying for already and 
the kind of health care they receive currently, which is most 
often way expensive and inappropriate for their health needs--
no prevention and so forth. I think that needs to be part of 
the discussion.
    But my questions to you have to do with the part of the 
country you come from, Kansas, as well as part of my district, 
which is rural America, and some of the barriers to care there.
    But, first, I want to take advantage of your expertise as 
insurance commissioner for a State and have you share with us 
briefly about some of the types of reforms that are needed to 
improve our current insurance market, some of the common abuses 
that you have seen, and how you believe this bill will 
address--and that will actually be a big cost savings, as well.
    Secretary Sebelius. Well, thank you, Congresswoman.
    I think there is no question, particularly in the 
individual market but also often in the small-business market, 
there are constantly cherry-picking activities by private 
insurers, which do one of two things and often both 
simultaneously: Costs can be dramatically increased year after 
year, driving people out of the marketplace. But also, in the 
individual marketplace, the pre-existing condition barriers 
often either make insurance impossible to obtain or totally 
unaffordable to obtain.
    So it is a huge barrier to Americans accessing quality 
health care.
    Mrs. Capps. And are there provisions specifically in this 
legislation that you believe will address this?
    Secretary Sebelius. Absolutely. Not only the kind of--you 
have a couple of provisions. You have a loss ratio provision, 
which would allow a different oversight to medical loss ratios, 
helping to eliminate some of the overhead cost. There is a 
provision that would exclude insurers any longer from denying 
people coverage based on pre-existing conditions. And there is 
a much more community-rated aspect to the health exchange, 
which would, again, limit the kind of spikes in cost that 
small-business owners often see driving them out of the 
marketplace.
    Mrs. Capps. Thank you.
    Now, to a part of my district, I represent a county in 
California, San Luis Obispo, in which one company, WellPoint, 
has way more than 50 percent of the market. It is the only 
private insurer. And the county also has a shortage of primary 
physicians because of a locality or reimbursement issue that is 
far different from what the cost of living in the area really 
is. But this county also doesn't quite qualify for a health 
professional shortage area. So there are these traps that many 
of the folks feel like they are existing in.
    Could you talk about your experience, maybe, that is 
similar, but also how this legislation could improve the choice 
of health plans for consumers in a county such as the one I 
have described; and how, also, we really need to be able to 
attract new physicians to certain areas like the one I 
mentioned and many others in rural America, as well as some 
underserved areas in metropolitan areas, as well?
    Secretary Sebelius. There is no question, I think, that the 
public option in the marketplace achieves the very goals that 
you just described, where consumers would have choice and there 
would also be cost competition--two principles, I think, that 
the administration very much believes in.
    In terms of the workforce issue, again, the initial 
investment in the stimulus act began the pathway to enhancing 
workforce, particularly in underserved areas, with a doubling 
of the Commissioned Corps. But I think this bill takes an even 
bigger step forward, recognizing that loan repayment is an 
effective strategy. It attracts people to underserved areas.
    I would say the implementation of health IT will be a 
significant enhance factor for providers who often don't want 
to be isolated but, with health IT, can be in frequent 
consultation with specialists and with colleagues in various 
parts of the country, in various parts of the State, so they 
are not in isolated practices.
    So there are a number of features that are not only in this 
discussion draft but in the bills that you have previously 
passed that I think really help to address the workforce issue.
    Mrs. Capps. Thank you very much.
    I yield back.
    Mr. Waxman. Thank you, Mrs. Capps.
    We now go to Mr. Burgess.
    Mr. Burgess. Thanks, Mr. Chairman.
    Madam Secretary, I am over here in the broom closest, 
behind the kids' table, which is where they keep me on this 
committee. And welcome to our committee this morning.
    During your confirmation hearing before the Senate, I 
believe the statement was made that you said, ``If confirmed, I 
will not only be an eager partner to work with Congress, but 
that I understand bipartisanship.'' Is that a reasonable 
facsimile of the testimony that day?
    Secretary Sebelius. Yes, sir.
    Mr. Burgess. Now, I know that the Senate HELP Committee, 
the ranking member has sent a letter, June 16th, in a follow-up 
to a request submitted June 10th sent by the ranking member of 
the Senate HELP Committee, where they note that despite 
providing technical assistance to the majority regarding the 
Affordable Health Choices Act, that same courtesy had not been 
made available to the minority of the committee.
    When can we tell the Senate to expect that you are going to 
help them, the Republicans on the Senate HELP Committee, with 
the same technical assistance that you have provided to the 
majority on the Senate side?
    Secretary Sebelius. Sir, it is my understanding that our 
staff and Nancy-Ann DeParle, who is the White House head of the 
Health Reform Office, have been in the House and in the Senate 
on a daily basis, providing information and expertise, 
modeling, a whole variety of situations.
    I am not sure specifically what was requested that has not 
been provided, but I know that they have been available, 
accessible, and very present day-in and day-out.
    Mr. Burgess. Well, Mr. Chairman, I would ask unanimous 
consent to make the Senate letter part of the record.
    And then, just a follow-up: For our committee here, on the 
House side, will that same technical expertise be made 
available to the minority in the House?
    Secretary Sebelius. Sir, as much as we can provide 
background information and assistance, we stand ready to do 
that.
    Mr. Burgess. And we stand ready to access that.
    Let me ask you a question. In your prepared testimony this 
morning, there is a discussion about the President has 
introduced proposals that will provide nearly $950 billion over 
10 years to finance reform. That is following the statement, 
the President is open to good ideas on how we finance--will not 
add to the deficit.
    Now, in a world in which 96 percent of people have health 
coverage, am I correct in presuming that the money that is 
afforded for disproportionate-share hospitals and upper payment 
limits, that those fund will no longer be necessary for our 
safety net hospitals? And is that where a portion of this $950 
billion is coming from?
    Secretary Sebelius. There is a proposal as part of the 
package that at least a reduction in the DSH payments be 
anticipated as health reform is fully implemented.
    I don't think anybody anticipates a world in which there 
would be no additional help and assistance to those hospitals 
that are providing the bulk of care to people who are 
uninsured, but hopefully the uninsured will go down.
    There are additional, I think, features about that--
cultural competency--a range of additional services that have 
to be provided.
    Mr. Burgess. And just to point out, in my home State of 
Texas, a significant number of the uninsured are in the country 
without benefit of a Social Security number. And until we 
resolve that issue, the need for safety net hospitals is going 
to continue, because I suspect that there will be some people 
who are left out of the 96 percent who actually have health 
coverage.
    Now--and I was glad to hear you re-emphasize this morning 
that the President wanted to protect what works and fix what is 
broken. I am glad you went to Omaha. I went to Omaha earlier 
this year. In fact, Alegent came here last year and did an 
event with us. They are one of the forward-looking institutions 
in this country, and there are many others.
    But testimony at this committee yesterday really--without 
the ability to have the health savings account and the health 
reimbursement account to be able to provide the correct 
incentives for their patients to access the preventive care 
that we all want people to feel is important, without those 
tools it would be very difficult for them to operate the kind 
of facility that they have today.
    Secretary Sebelius. I am sorry. Without the health 
savings----
    Mr. Burgess. Without the health savings accounts and the 
money made available through health reimbursement accounts.
    And I guess what I am getting at is, could we get this 
morning a definitive answer? From my read of this bill that is 
before us, it appears that health savings accounts are not 
going to count as qualified coverage. Is that correct, from 
your reading of the bill?
    Secretary Sebelius. Sir, I can't--I will go back and make 
absolutely sure. I don't--I know that there is no intent to 
eliminate health savings accounts. How they are actually 
defined I need to recheck. But health savings accounts would 
still be available to Americans as they are today.
    Mr. Burgess. I am not certain that that is correct under 
the language of the bill. And I think the President could do a 
good service by instructing us to help people avoid a penalty 
for not having credible coverage or qualified coverage if they 
choose to get their insurance through a health savings account 
and, again, that have the----
    Secretary Sebelius. You are saying a health savings account 
absent another insurance policy.
    Mr. Burgess. That is correct.
    Mr. Waxman. Will the gentleman yield to me? Your time has 
expired, but I did want to clarify----
    Mr. Burgess. No, my time is just starting. It hasn't gone 
green yet.
    Mr. Waxman. Well, I don't want to dispute with on you that, 
but----
    Mr. Burgess. I will be happy to yield to the chairman.
    Mr. Waxman [continuing]. I want to clarify that I do 
believe that health savings accounts are not adversely affected 
in the draft bill. That would be a ways and tax issue. But I 
don't think that is the intention. And we will get a 
clarification because you raise an important question.
    Mr. Burgess. Just briefly reclaiming my time, if you look 
at the rate of increase of all of the different products out 
there--high option PPO, Medicare, Medicaid--all increase at a 
rate of 7.5 percent a year. We heard testimony from the chief 
medical officer at Alegent yesterday that their rate of 
increase was about 5 percent a year.
    So it seems to me that, if we want to figure out what 
works, we would look at those types of programs, give people an 
incentive to select healthy behaviors, make it important to 
them, and I think we will find that people, by and large, will 
do the right thing. It is not for everyone----
    Mr. Waxman. Mr. Burgess, thank you very much. Other members 
are waiting, and the Secretary is going to have to leave, so I 
do----
    Mr. Burgess. I yield back.
    Mr. Waxman [continuing]. Want to get to some of the others.
    Ms. Matsui.
    Ms. Matsui. Thank you, Mr. Chairman.
    And welcome, Madam Secretary. We are so happy to see you 
here.
    Secretary Sebelius. Thank you.
    Ms. Matsui. I was pleased to see that components of 
legislation that I authored in the Public Health Workforce 
Investment Act were incorporated into the draft bill before us 
today. The creation of a public health workforce corps is a 
major step forward and will revolutionize public health 
forever.
    It is also, as you know, a necessary step because we are 
staring a public health workforce crisis directly in the face. 
In order to satisfy our future public health needs, we will 
need to train three times as many public health workers as we 
are today. Otherwise, the rates of obesity, diabetes, and other 
chronic diseases will likely rise. And we need to reinvest in 
this crucial part of our public health infrastructure so that 
we can take community-based action to prevent a long-term 
public health crisis.
    Secretary Sebelius, you are head of what I figure is the 
largest public health agency in the world. You probably know as 
well as anyone that the public health workforce is rapidly 
aging. By 2012, half of the public health workforce, in some 
States, will be ready to retire.
    In my opinion, our public health system did a good job in 
managing the recent H1N1 flu outbreak, but this incident has 
shown us how critical it is to not let our public health 
workforce deteriorate any further. And I am pleased that my 
piece of it was incorporated into the draft bill.
    Madam Secretary, I want my colleagues to understand how 
critical the public health workforce is. Will you please 
outline for the benefit of this committee how your job is 
dependent on having a robust public health workforce backing 
you up?
    Secretary Sebelius. Well, Congresswoman, first of all, 
thank you for your leadership in this area and your 
longstanding expertise and insistence that the public health 
infrastructure has to be part of this dialogue and discussion.
    And I think you appropriately identified the recent 
situation, still with us, of the H1N1 virus and the 
anticipation that we will need additional activity points to 
the need for a robust infrastructure. And, as you correctly 
point out, in many parts of the country, it is not robust 
enough now, and we are facing a looming retirement of lots of 
individuals.
    So having not only the pipeline--you know, the Commissioned 
Corps has doubled--there are efforts to enhance, again, through 
the Recovery Act, the community health center aspect of the 
public health backbone in this country. And I think that is an 
important step forward.
    No question that we need not only further attention to 
workforce issues, but also further attention to quality 
standards in public health agencies throughout the country. And 
I can assure you that our new leadership of Dr. Tom Frieden at 
the Centers for Disease Control is a huge believer that the 
people health infrastructure needs to be enhanced and needs to 
be improved and needs to be focused on. And he is coming to 
this job as a new CDC leader with that agenda at the forefront 
of his priorities, and it is one that I share.
    Ms. Matsui. Well, why are we facing such a crisis in the 
public health workforce today? I know part of it is that we 
need more graduates from public health programs. But I think 
the other part of it is that we may not have the right 
incentives for the graduates we do have to enter public 
service.
    Secretary Sebelius. Well, I think the whole incentive 
system in health care is one that is on the table for review as 
we look at the reform agenda, how we not only attract more 
students to medicine in the first place, but how we attract 
more of those students to the appropriate shortages.
    Ms. Matsui. But do you think that the scholarship and loan 
repayment provisions in the draft bill will help incent public 
health graduates to the public workforce?
    Secretary Sebelius. I don't think there is any question 
that those strategies have been proven to be enormously 
effective.
    Students, unfortunately, today are emerging with mountains 
of debt, and often public health officials aren't paid as 
handsomely as some in the private sector. So helping to retire 
that debt, helping to erase that debt, is an enormous step to 
allowing students to actually make choices that they might find 
more rewarding but currently find financially out of reach.
    Ms. Matsui. OK. I thank you very much.
    I yield back the balance of my time.
    Mr. Pallone [presiding]. Thank you.
    The gentleman from Georgia, Mr. Gingrey.
    Mr. Gingrey. Madam Secretary, thank you for being with us 
this morning. You were asked a little bit earlier about your 
grade as Governor. I would say that your grade so far this 
morning has been pretty good. So hopefully you won't mind a 
couple of tough questions from me.
    Quoting in your testimony, ``Without reform, according to 
the Medicare actuaries, we will spend about $4.4 trillion on 
health care in 2018. And, by 2040, health care costs will reach 
34 percent of GDP.''
    Madam Secretary, these numbers are, indeed, staggering, and 
I share your concerns. However, I have another concern; I need 
to be reassured that you share that.
    The Medicare trustees report that the Medicare program will 
become insolvent by 2016. Roughly 45 percent of Americans 
currently receive their health care from a government payer, 
and yet your testimony focuses almost exclusively on the 
private sector, private-sector health insurance companies, and 
ways in which they should be reformed.
    Since his inauguration, President Obama has spoken of the 
need for entitlement reform. Certainly, President Bush did the 
same. So, given that 45 percent of all Americans get their 
health care from a government program and the fact that your 
Department oversees the largest government program tasked with 
insurance that quality health care for our seniors is available 
both today and in the future, shouldn't entitlement reform be 
an integral part of this legislation?
    Secretary Sebelius. Yes, sir, I think it definitely should. 
And that is why I am confident that not only a number the 
proposals to enhance quality for seniors are important--and we 
have talked a bit about closing the donut hole, which is a huge 
issue--but also the savings that are proposed by the President 
will enhance the lifetime of the Medicare program that you have 
just cited and also lower premium rates, Part B premium rates, 
for the seniors who are paying them.
    So it is a win-win-win situation. It helps to pay for a 
longer life, frankly, of the program that is so important to 
millions of American seniors----
    Mr. Gingrey. Well, Madam Secretary, reclaiming my time 
since it is so limited, I would have to tell you that I think 
that is nibbling around the edges when the latest Medicare 
trustee report says that, by 2083, we will have $37.8 trillion 
worth of unfunded liability in the Medicare program.
    You state that, since 2000, the year 2000, private health 
insurances premiums have almost doubled, growing three times 
faster than wages. Madam Secretary, do you know what percentage 
Medicare Part B premiums have increased since 2000? You just 
referenced that just a second ago.
    Let me just tell you if you don't have it on the tip of 
your tongue, they have more than doubled since 2000; 11.7 
percent. That is how much Medicare Part B premiums have gone up 
since 2000. So I would suggest to you that the parity between 
Medicare Part B premium increases and insurance, private 
insurance premium increases suggest that high health care costs 
are rampant, and they are integrated. So it is not just 
private, but it is public as well. So we need both private 
insurance reform and Medicare reform. Simply to turn the system 
over to the government I think will not solve this problem and, 
without addressing Medicare reform, will leave many seniors 
without quality health care coverage.
    Let me just real quickly, if I might, Mr. Chairman.
    Secretary, you quote in your testimony that, reform will 
guarantee choice of doctors and health plans. No American 
should be forced to give up the doctor they trust or the plan 
they like. If you like your current health care, indeed you can 
keep it.
    Do I take it from your testimony that you mean all 
Americans will be able to keep the health plan that they like, 
including the 11 million seniors who get their Medicare from 
Medicare Advantage?
    Secretary Sebelius. Well, sir, I certainly hope so.
    The proposal to stop overpaying for Medicare Advantage is 
one that is included in the President's cost savings. After 
years of examination, there are no enhanced benefits, and they 
are being paid at about a 14 percent higher rate than other 
programs. As you know, the Center for Medicare Services has 
proposed that there be fewer plans this year because of the 
proliferation of plans and the fact that consumers often didn't 
choose them. We have got a bunch of plans that have fewer than 
a hundred people choosing them, and that is not a very cost-
effective way to run a system. So there will be a 
consolidation. But, ideally, the doctors and the networks will 
remain available.
    Mr. Pallone. The gentleman's time has expired.
    Mr. Gingrey. Mr. Chairman, I thank you for your patience.
    Madam Secretary, I thank you for your response.
    Mr. Pallone. Thank you.
    Next we have the gentleman from Ohio, Mr. Space.
    Mr. Space. Thank you, Mr. Chairman.
    Thank you, Madam Secretary, for joining us today. And as a 
native Ohioan, I want to welcome you as well.
    There are so many different areas worthy of discussion that 
it is difficult for me to define one to ask you about. But 
given the rural nature of my district and Ohio generally, and 
given the special challenges that those in rural America face 
when accessing health care and the barriers that we have got, 
and given that one of those challenges happens to be attracting 
and retaining sufficient workforce, specifically primary care 
doctors, specialists, some adolescent specialists, in 
particular, what in your assessment does the President's 
initiatives and what does this bill do with respect to 
attracting and retaining quality workforce in rural areas where 
that has historically been a problem?
    Secretary Sebelius. Well, Congressman, I share your 
concerns about rural access. It certainly is something I worked 
on as Governor of a State like Kansas, where two-thirds of our 
population is in very rural areas.
    I think there is no question that the incentives for 
enhanced workforce is a step in the right direction. I think 
that telemedicine, which is on the horizon and certainly an 
important component of health IT, is a huge step forward. A lot 
of providers in Kansas, and I am sure in Ohio, are concerned 
about their isolation and want to make sure they are able to 
access colleagues and access consultation. And I think the 
steps that are included in this legislation that pay for 
student loans and encourage additional incentives for primary 
care and family care doctors also enhance the workforce in 
rural as well as urban areas.
    Mr. Space. And I just have a couple more minutes, and I 
want to just make a comment as a followup. You mentioned 
telemedicine, and I guess I want to take this opportunity to 
explain to you as a member of the administration just how 
important it is to access broadband and high-speed Internet in 
those areas that can benefit from telemedicine; that bridging 
that digital divide is so very important in so many areas, 
including accessing quality health care.
    One other area I wanted to bring up has to do with some of 
the geographic disparities pertaining to chronic disease. And 
coming from Appalachia, one of the things we see, for example, 
is a higher rate than average or normal in diabetes incidents. 
How do we make wellness and prevention programs address these 
specific regional disparities when it comes to chronic diseases 
like diabetes?
    Secretary Sebelius. Well, there is a new grant that we just 
made available which actually focuses specifically on areas 
with the highest rates of diabetes and chronic disease in terms 
of providing incentives and providing additional resources, to 
not only coordinate care but do much more effective monitoring 
of conditions. I think that there is no question that 
preventive care at a much earlier stage helps. But also what 
helps to prevent hospitalizations, amputations, a variety of 
things, is to make sure that those suffering from diabetes 
actually are staying on an appropriate regime, and that 
monitoring is what the grant is designed to do. I think we are 
trying to follow some best practices which have proven to be 
very effective. And my guess is that your area is likely to be, 
unfortunately, rising high on the list of an area that is 
likely to be one of the--I think there are 133 communities that 
will have additional resources to focus just on this effort.
    Mr. Space. Thank you, Madam Secretary.
    And I yield back my time.
    Mr. Pallone. Thank you.
    Mr. Walden.
    Mr. Walden. Thank you, Mr. Chairman.
    Madam Secretary, thanks for being here today and the work 
that you are doing. I have some questions.
    I, like many of my colleagues, am just starting to look 
through the discussion draft that is out. And I know that you 
have undoubtedly played a role in working with some members of 
the committee on this. So if you can help me on some of these 
things.
    Is it true that, under the bill, an employer could be 
subject to an 8 percent tax even if they offer a worker an 
employer-sponsored health care policy?
    Secretary Sebelius. Yes, I think that is accurate; that 
there are some ways, if it isn't determined to be credible 
coverage, that you could have the pay-or-play provision.
    Mr. Walden. And I think, if I am reading it correctly, 
isn't it also true that if the employee decided to go through 
their own plan, the employer could still end up having to pay, 
if they went through the exchange, I guess it is? Tell me how 
that process works. Because an employee could refuse the plan 
from the employer. Correct?
    Secretary Sebelius. I must confess, Congressman.
    Mr. Walden. The people behind you are shaking their head 
yes.
    Secretary Sebelius. I am not familiar with that specific 
provision. I would be glad to get back. If you want to give me 
the questions, I will immediately respond. I am just not----
    Mr. Walden. Well, my understanding is that an employer 
could offer an employee--employer sponsored health coverage, 
and then the worker could turn it down and enroll in an 
exchange plan. The employer would still be liable for the 8 
percent tax even though providing the employer-sponsored care 
could be cheaper, is what I understand. So if you could take a 
look at that.
    Secretary Sebelius. I will definitely take a look at that.
    Mr. Walden. And is it true that, in order for the employer 
to avoid paying the 8 percent tax, the employer has to offer a 
plan that the new commissioner deems to be a qualified health 
benefit plan?
    Secretary Sebelius. That is correct.
    Mr. Walden. Can an employer require an employee to accept 
the employer-provided health care coverage?
    Secretary Sebelius. Can you require an employee to accept 
it? I don't know again how the provisions are drafted. I am not 
aware of any mandatory--in a private insurance market, how you 
mandate that anyone accept a plan. But I haven't read the 
outline of the bill. Sorry.
    Mr. Walden. Do you know if, in these provisions, are States 
and Federal Government considered employees under this draft?
    Secretary Sebelius. States and Federal Government?
    Mr. Walden. Considered employers.
    Mr. Pallone. Mr. Walden, can I just--I am not trying to 
stop you, but I mean, the draft--the discussion draft is put 
together by the Members, and I don't know that she can 
necessarily be the person to comment on what is in it. But if 
you want to continue.
    Mr. Walden. Well, we are on my time here.
    Mr. Pallone. I am going to give you some extra time. But I 
just want you to understand that we didn't ask her here to 
comment on the provisions of the draft, per se.
    Mr. Walden. Oh, I thought earlier she was indicating that 
the administration supports this draft or concepts of this 
draft. Is that not true?
    Secretary Sebelius. Sir, I said that we support the 
principles that prompted the draft. I am sorry, I am not--the 
draft came out on Friday, and I didn't write the draft, and I 
am not intimately familiar. But I would be happy to answer 
questions if you have questions for me. I would be----
    Mr. Pallone. I mean, I don't want to stop you.
    Mr. Walden. Reclaiming my time, if I could. So you haven't 
read this draft either then?
    Secretary Sebelius. I have read it. I can't--I don't have 
it memorized.
    Mr. Walden. No, I appreciate that. You are ahead of me. I 
haven't read it fully. But I also know the way this committee 
has been operating of late, it moves rather rapidly. So I doubt 
we will have a chance to ask you these questions before we 
suddenly have to vote on this. So that is why--I don't mean to 
be disrespectful. I know that others on the committee have 
asked you a pretty specific set of yes-or-no questions.
    Secretary Sebelius. Again, I am just trying to be honest 
with you. If I don't know the answer, I will be happy to get it 
for you.
    Mr. Walden. Let me go to another point then, and that was a 
comment you made about Medicare and Part D. And this I don't 
think is necessarily in the draft. Do you know what the 
Medicare Part B premium was in 2000? I am not going to play a 
gotcha game here, but it was about $45.50. In 2008, it was 
$96.40. Medicare Part D for 2009 was $29, which was 30 percent 
lower than the original projected when we passed Medicare Part 
D in 2003.
    I understand you issued a report yesterday showing that 
employer-sponsored premiums for health care doubled between I 
think it is 2000 and 2008 for health insurance. Medicare Part B 
premiums have more than doubled, 110 percent increase, in the 
same time span.
    I think what a lot of people are asking me about, when I 
was home in Rufus and Arlington and Fossil out in my district, 
they are saying, if Medicare is going broke by 2017 and we are 
just going to expand and add all of these people into a 
government-run system, but we can't get access to providers now 
in the government-run system, which as you know is a big issue 
in rural areas, getting access to a doctor if you are on 
Medicare. They are saying, how is this new government-run plan 
going to hold down costs? And how is it going to expand? How 
are we going to pay for this, is the underlying issue here. And 
the estimates, they are just saying, you know, you talked about 
health insurance could cost us, or health coverage, $4 trillion 
or something. This plan alone I think some estimates are that. 
So people at home are really struggling with the dollar amounts 
here.
    Secretary Sebelius. Well, Congressman, the plan, again, at 
least the payments the administration has put forward, not only 
saves dollars in Medicare but helps to expand the life 
expectancy of the Medicare trust fund, an important feature, 
and lower overall costs in the Part B premium for the 
beneficiaries who are currently paying, as you say, a higher 
cost.
    I am a believer that Medicare has to get at the front of 
the lower-cost, higher-quality care for the beneficiaries of 
the system, and that we can be not only innovative but help to 
drive the best practices which exist now in various parts of 
the country to scale. So that is really one of the intents of 
the new program moving forward.
    Mr. Walden. All right.
    I appreciate that, and I will close with this, that I spent 
5 years on a small community hospital board, and it seemed that 
Medicare gave us the most headaches, not the least 
reimbursement but second to least reimbursement, and there was 
enormous cost shift going on when the Federal Government was 
involved. And now you have got this access issue, trying to get 
physicians that will even take Medicare patients.
    I don't want us to just create a government-run system that 
mirrors one that isn't sustainable right now. And you know as 
well as I do that some of the goofy rules in Medicare that 
drives seniors to the hospital to get an injection when they 
should be able to get it at home. Telemedicine is a great 
thing. But if you are a provider and you are on the other end 
of the telemedicine, you don't get reimbursed for that 
consultation under Medicare. So there is a disincentive to 
doctors to participate.
    There are some things, irrespective of this debate, we 
could do to really improve Medicare, I think.
    Mr. Chairman, thanks for your generosity on the time.
    Mr. Pallone. Sure.
    Now, let me just remind members--we mentioned this earlier, 
but I want you to know that the Secretary has to leave at 
12:00. Now, of course, we are going to have written questions 
from many members, including those who have already spoken and 
those who have not, to follow up, and she will get back to us.
    Mr. Deal. Mr. Chairman.
    Mr. Pallone. Yes.
    Mr. Deal. Could we ask the Secretary if she could have the 
answers back by July 6? I think that would give about a week.
    Mr. Pallone. Normally we submit the questions within 10 
days. So that would--I am trying to figure this out here. If 
you all agree to send her the questions within 10 days, then I 
think she has to have at least--I don't know. July 6 is kind of 
early, isn't it?
    Mrs. Blackburn. Mr. Chairman. Just as a form of suggestion 
to this, maybe with the remaining time, those of us that do 
have specific questions, if we can just address our question to 
her and then not get a response but get the response in 
writing.
    Mr. Pallone. This is what I am going to do. She has about 5 
minutes left or 10 minutes left. I have Mr. Engel is next, and 
then I have you, the gentlewoman from Tennessee. I think that 
is all we are going to be able to do. I am not going to put a 
timetable on when you get back to us with the written responses 
at this time.
    Mr. Scalise. Mr. Chairman. I would like to be on that list, 
too, for questions.
    Mr. Pallone. All right. Let me explain again. Anyone can 
submit written questions. Normally the committee asks----
    Mr. Terry. I think, on something this important, I am just 
really offended that we don't have the opportunity to ask 
questions to her.
    Mr. Pallone. I don't know what to tell you. I just don't 
want to waste the time that we have remaining.
    Mr. Terry. Other directors and Secretaries came in when we 
were the majority, and you raised holy hell if they didn't stay 
here for every question.
    Mr. Pallone. Well, there is not much I can do about that 
now.
    I am going to ask Mr. Engel--you are next. Go ahead.
    Mr. Engel. Thank you.
    Thank you very much, Mr. Chairman.
    Madam Secretary, first of all, welcome. I heard your 
opening statement, and I was delighted when President Obama 
selected you, and I think you are doing and will continue to do 
a great job. So welcome.
    I want to call two things to your attention, which are two 
health priorities of mine.
    Firstly, I was pleased to see that my legislation, the 
Early Treatment for HIV Act, which I introduced with Speaker 
Pelosi, was included in the House Tri-Health draft. We call the 
bill ETHA. And ETHA, in conjunction with the House's proposal 
to cover all low-income people under the Medicaid program up to 
133 percent of the Federal poverty level, is a significant step 
towards reducing the number of uninsured people with HIV in our 
country.
    As you know, ETHA, this bill, addresses a cruel irony in 
the current Medicaid system. Under current Medicaid rules, 
people must become disabled by AIDS before they can receive 
access to Medicaid. This is care that could have prevented them 
from becoming so ill in the first place. In other words, 
Medicaid won't help you unless you have full blown AIDS. And as 
you know, if someone tests positive for HIV, it could be a 
number of years before they have full blown AIDS, so it makes 
much more sense to help those people once they test positive, 
to try to stave off the full blown AIDS. And it is an irony 
that you couldn't do it.
    So what ETHA does, it gives States the option to provide 
people living with HIV access to Medicaid before they become 
disabled by AIDS. President Obama repeatedly in his quest for 
President said that he supports it; when he was in the Senate, 
he cosponsored the bill. And I just want to ask you if I can 
continue to count on the administration to continue to support 
ETHA? And will you work with the States to take up this option 
if it is included in the final reform package?
    Secretary Sebelius. Yes.
    Mr. Engel. Thank you. That is the answer I was looking for.
    And secondly, the second priority is home infusion. And we 
know that some delivery system changes need to be part of our 
health reform package. And this legislation, the second piece, 
addresses an anomaly in the Medicare program that forces 
patients into hospitals and nursing homes to receive their 
multi-week infusion therapy when the same care could be 
delivered safely in the patient's home where the patient 
prefers to be without standing, results in lower costs and 
virtually no risk of health care acquired infections.
    So I believe that it makes no sense that Medicare pay pays 
for all costs associated with infusion therapy when it is 
provided in far more costly hospital and nursing home settings 
but will not pay for the cost of home infusion.
    For decades, private health insurance has covered home 
infusion therapy. It is used extensively by Medicare Advantage 
plans. Medicaid programs cover it, but Medicare fee-for-service 
stands alone in the failure to cover the services, equipment, 
and supplies needed for home infusion therapy.
    So my bill, which is the Medicare Home Infusion Therapy 
Coverage Act, I have introduced with 92 Members of Congress, I 
have introduced it with my Republican colleague Tim Murphy, and 
20 members of the Energy and Commerce Committee are sponsors. 
So I am going to ask you the same question: Can I have your 
commitment that your staff will work with me and Chairman 
Waxman's staff on meaningful legislation to close the Medicare 
home infusion benefit gap?
    Secretary Sebelius. We will certainly look forward to 
working with you and seeing what can be done about this area.
    Mr. Engel. I thank you, and returning back my time 1 minute 
and 17 seconds, I want it duly noted, Mr. Chairman, to give 
someone else a chance.
    Mr. Pallone. It is duly noted.
    The gentlewoman from Tennessee, Mrs. Blackburn.
    Mrs. Blackburn. Thank you so much, Mr. Chairman.
    And Madam Secretary, thank you very much for taking your 
time to be here. I understand you have to go to the White House 
for a taping. And I would hope that----
    Secretary Sebelius. With the Attorney General, but----
    Mrs. Blackburn. I am sorry then, I was misinformed.
    But I would certainly hope that you will be able to return 
and answer the questions that those on the committee have about 
the health care plan. Could you give us a commitment to answer 
these before the markup?
    Mr. Pallone. Let me--Mrs. Blackburn, I am not going to take 
away from your time; I will give you an extra minute or so. I 
know that members are interested in getting timely responses, 
but we are not--we don't have the opportunity at this point to 
say that the Secretary is going to come back. So what I am 
going to ask is that members submit their questions as quickly 
as possible, and I would ask the Secretary to respond to those 
questions as quickly as possible.
    Mr. Terry. Will the gentleman yield?
    Mr. Pallone. No. I want to get through this.
    Mr. Terry. So are you telling the witness not to answer the 
questions? Parliamentary inquiry, are you telling the witness 
not to answer that question?
    Mr. Pallone. No. I thought I said the opposite.
    Mr. Terry. No, you didn't. You told her not to answer is 
the way I interpret it.
    Mr. Pallone. Let me start over again. Mrs. Blackburn has 
the time. We are going to start again.
    Mrs. Blackburn. I would like to reclaim my time, Mr. 
Chairman, as soon as you finish your speech.
    Mr. Pallone. What I am saying is we are not asking the 
Secretary to come back at this time. We are asking----
    Mr. Shadegg. Mr. Chairman, point of order.
    Mr. Pallone. Yes.
    Mr. Shadegg. The Secretary is here to speak on the single 
most important piece of legislation, most far-reaching piece of 
legislation in my 15 years in the United States Congress. There 
are at least four members here, at least four, maybe five or 
more, who have not had an opportunity to question her.
    Mr. Terry. And have been here since the beginning.
    Mr. Shadegg. And would like to be able to do so. We fully 
understand her schedule. She has important things to do. That 
is perfectly all right.
    But I think it would be reasonable for this committee, 
given the scope of the legislation that it is moving, to ask 
the Secretary to come back sometime before this bill moves 
through full committee.
    Mr. Pallone. What I am saying to you, and I will repeat 
again, is the following: The Secretary is here to give the 
administration's response to the discussion draft. I am not 
asking her to commit at this time to come back because, first 
of all, I don't know her schedule and I don't know whether that 
is possible.
    Mrs. Blackburn can ask, but I don't want her to feel that 
she has to commit to this at this time because I don't know her 
schedule.
    Mr. Walden. Point of order, Mr. Chairman.
    Mr. Pallone. I will now ask Mrs. Blackburn to continue.
    Mr. Shadegg. I think we are on my point of order.
    Mr. Pallone. And when sheis done, we are going to have to 
ask the Secretary to leave because she has to leave.
    So I will go back to Mrs. Blackburn. We will start the 
clock again. It is the gentlewoman's time.
    Mrs. Blackburn. And thank you, Mr. Chairman.
    And Madam Secretary, I hope that we will be able to resolve 
this.
    You know, when my constituents talk to me about this issue, 
they are fearful of what may be included in this plan. And 
coming from Tennessee, and you having been a Governor, I think 
you can understand that.
    And when they hear remarks about it being deficit-neutral, 
not increasing the debt; you have made statements that it would 
be paid for; you have talked about reducing the itemized 
deductions, my constituents are very, very concerned about how 
this would be paid for.
    The other members of this committee have constituents who 
are equally concerned about this. Of course, our concern in 
Tennessee finds its nexus in the problems that existed with 
TennCare. I know Governors have many times gone to school on 
what happened with TennCare and used that as an example of what 
they did not want to do.
    I would like to have a response from you. You can submit it 
to me in writing. You can begin the response here, because I do 
have more questions, on what you would see as the lessons 
learned and what you would not want to do that was from the 
TennCare template. What were the lessons that you learned in 
looking to that? Do you realize that you can't provide gold-
plated, all health care for free for everybody? Do you realize 
that a public option which is government-run, government-
financed, does not work in competition with the private option? 
That is one question I have to present to you.
    The second one is Medicare Advantage. And I know you have a 
heart for dealing with health care for seniors, and I 
appreciate that. My constituents--I have 56,000 seniors in 
Tennessee that are on Medicare Advantage. They very much want 
to keep those options, and I would like to hear from you what 
you envision a Medicare Advantage program looking like once the 
Obama plan goes into place, how you see that being delivered, 
what you think the options are going to be.
    It is of concern that those options are going to be 
restricted. And, again, when individuals--when members of this 
committee sit here, when we hear from our constituents the 
panic that they feel, especially from seniors who say, look, I 
have got--I am seeing this being taken away.
    Mr. Pallone. If the gentlewoman would hold for a second.
    Mrs. Blackburn. My mike is not being touched.
    Mr. Pallone. Now it is OK.
    Mrs. Blackburn. But seniors are very fearful that they have 
paid into a system; this was a part of their retirement 
security, a part of their savings, if you will, because it was 
money that the government took first right of refusal on their 
paycheck, took that money out. Now you have got somebody in 
their 70s; they have got their doctors set. They have got their 
Medicare Advantage set. They have their system in place, and 
they are seeing this savings devalued and finding out now it is 
all going to be a one-size-fits-all program. And this causes 
tremendous concern from them. So, your response as to what 
Medicare Advantage would look like would be appreciated.
    Secretary Sebelius. Congresswoman, I would be happy to 
answer both of those questions. I can't do it now in person; as 
you said earlier, you wanted to address the question and have 
me respond, and I will do that promptly.
    Mrs. Blackburn. Thank you. I appreciate that.
    And at this time I will yield the balance of my time, if I 
can, Mr. Chairman.
    Mr. Pallone. I couldn't hear you. Who is she yielding to? 
Mr. Pitts.
    Mr. Pitts. Thank you, Madam Secretary.
    Section 222 of the bill states that there is an amount that 
is going to be appropriated to the Secretary for the purposes 
of starting up the government plan. And that number is, quote, 
to be supplied in the text of the bill.
    Do you have any idea how much it will cost you to start up 
this government-run plan?
    Secretary Sebelius. No, sir, I do not.
    Mr. Pitts. You mentioned the President's repeated promise 
that the health reform bill will be deficit neutral. Are there 
any other deal breakers for the administration? Does the 
legislation have to include a government plan? Does it have to 
include an individual mandate? Does it have to include an 
employer mandate? Can it increase taxes on families making 
under $250,000 per year, for example?
    Secretary Sebelius. Sir, I think that the President's 
principles are that the plan needs to lower costs for everyone, 
needs to improve quality of care, needs to provide coverage for 
all Americans. And around those principles, that he--and be 
paid for within the period of time. Those are the fundamental 
principles that he has articulated. And he has, during the 
course of the discussion, had various proposals on some of 
those areas.
    I need to mention that I misspoke earlier to the 
Congressman; proposal that he had for the itemized deduction 
return is for families making 250 or more--$250,000 or more. I 
was corrected, and I will be happy to provide that additional 
information.
    Mr. Pallone. The gentleman's time--or the gentlewoman's 
time has expired.
    Now, again, I am just going to repeat. I know you have to 
leave. Members will get back to you as quickly as possible with 
written questions, and we would ask, Madam Secretary, that you 
try to respond to those as quickly as possible.
    Secretary Sebelius. Very quickly.
    Mr. Pallone. And thank you so much for being here today. We 
appreciate your time. Thank you.
    Now, let me explain. We are going to adjourn the full 
committee, and then the subcommittee reconvenes, the Health 
Subcommittee reconvenes at 1:00, and we have three panels for 
the rest of the day.
    Mr. Walden. Point of order.
    Mr. Deal. Point of order.
    Mr. Pallone. Mr. Deal.
    Mr. Deal. Mr. Chairman, with all due respect to the 
Secretary, this was billed as a legislative hearing on a draft.
    Mr. Pallone. Yes.
    Mr. Deal. We have heard the Secretary say that she did not 
participate in that draft preparation, nor has she apparently, 
as she said, had the opportunity to read it, which is one of 
the limitations that we all labor under in this time frame.
    I would simply urge you to urge our full chairman of the 
full committee that it would be almost mandated, I think, that 
she return to answer questions when we move to a legislative 
proposal. We are talking about a draft. But here, when it moves 
to a legislative proposal, that we be allowed the opportunity 
to ask and to have answered questions.
    You made the statement that she was speaking on behalf of 
the Obama administration as it relates to the draft. I know 
that she has done so in general terms, but I think there are 
some specifics that we should have the opportunity to ask 
specifics about. I would urge you to urge our chairman to ask 
her to return to this committee. I think it is due diligence 
for all of us to have the opportunity to explore these 
questions in person with her.
    Mr. Pallone. Well, let me just say I can't make that 
commitment, Mr. Deal, and for various reasons. I think a part 
of it is the fact that we have a draft, and obviously, there 
are going to be changes to that based on your input, the input 
from both sides of the aisle.
    And we really asked her here today to comment on what the 
administration thought about the draft. There has never--the 
bill is never going to be exactly what the President wants or 
doesn't want. But I just can't make that commitment. So I 
appreciate your asking, but I can't.
    Mr. Shadegg. Mr. Chairman, you are saying you can't commit 
to ask?
    Mr. Pallone. I can't commit the administration----
    Mr. Shadegg. No. His request is that you ask the full 
chairman.
    Mr. Pallone. Look, she has been here. She has testified. 
You can ask her questions. I am going to leave it at that. And 
we are going to adjourn and start the subcommittee hearing at 
1:00.
    Mr. Shadegg. There are 12 Republicans who have not even had 
a chance to speak and ask her questions.
    Mr. Pallone. Members were told that she was going to leave 
at 12:00.
    Mr. Shadegg. We understand that. We are simply asking that 
she come back on a piece of major legislation.
    Mr. Pallone. I can't make that commitment at this time.
    Mr. Shadegg. So you are refusing to allow us to ask 
questions?
    Mr. Pallone. I can't make that commitment, and we are going 
to adjourn at this time.
    Mr. Shadegg. Can you at least commit to ask the chairman?
    Mr. Terry. Parliamentary inquiry. I request a recorded 
vote.
    Mr. Pallone. Look, I am going to certainly express your 
views, but I can't commit the Secretary to anything at this 
time. I am going to express the views.
    Mr. Terry. I request a recorded vote on a motion to 
adjourn. We can ask for a recorded vote.
    Mr. Pallone. You can make that request. All those in favor 
on the motion to adjourn. Let me just ask.
    Mr. Walden. We already have a motion before us, which is a 
motion to adjourn. The chairman has entered that motion.
    Mr. Pallone. I think what we will do at this time, we had a 
vote, and it was defeated, to adjourn. So at this time, we are 
just going to recess.
    Mr. Terry. We asked for a recorded vote.
    [Recess at 12:13 p.m.]
    Mr. Waxman. Before we go to the hearing in the Health 
Subcommittee, I would like to reconvene the full committee, 
which had an opportunity to hear from Secretary of HHS 
Sebelius. And not all Members were able to ask her questions or 
explore all the concerns that they had. So I would like to 
suggest that we will ask her to respond in writing to any 
questions that any Member wishes to submit. We will request 
that she respond in a timely manner so that Members can receive 
her responses before we go to markup in our committee. We will 
urge her to do that. We can't force her to do that, but we will 
urge it.
    And I understand some Members may wish to meet with her, 
and of course I don't know her schedule, but I think it is 
always helpful to have people available to meet with Members.
    So without objection, what we will do is hold the record 
open for responses from the Secretary to written questions from 
the members of our committee. And we would urge the Secretary 
to respond for the record before we get to the markup in this 
committee. Without objection, that will be the order.
    So that the subcommittee can now meet and further have a 
hearing on the issue, I would like to ask that the full 
committee now be adjourned. And without objection, that will be 
the order.
    [Whereupon, at 1:10 p.m., the committee was adjourned.]
    [Material submitted for inclusion in the record follows:]







    COMPREHENSIVE HEALTH CARE REFORM DISCUSSION DRAFT--DAY 2, PART 2

                              ----------                              


                         TUESDAY, JUNE 24, 2009

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 1:15 p.m., in 
Room 2123, Rayburn House Office Building, Hon. Frank Pallone, 
Jr., [chairman of the subcommittee] presiding.
    Present: Representatives Pallone, Dingell, Gordon, Eshoo, 
Engel, Schakowsky, Weiner, Matheson, Gonzalez, Castor, 
Sarbanes, Green, Space, Sutton, Waxman [ex officio], Whitfield, 
Shadegg, Buyer, Pitts, Myrick, Blackburn, and Gingrey.
    Also present: Representative Hill.
    Staff Present: Karen Nelson, Deputy Committee Staff 
Director for Health; Andy Schneider, Chief Health Counsel; 
Purvee Kampf, Counsel; Jack Ebeler, Senior Advisor on Health 
Policy; Robert Clark, Policy Advisor; Tim Gronniger, 
Professional Staff Member; Stephen Cha, Professional Staff 
Member; Allison Corr, Special Assistant; Alvin Banks, Special 
Assistant; Jon Donenberg, Fellow; Camille Sealy, Fellow; Karen 
Lightfoot, Minority Communications Director/Senior Policy 
Advisor; Caren Auchman, Minority Communications Associate; 
Lindsay Vidal, Minority Special Assistant; Early Green, 
Minority Chief Clerk; Jen Berenholz, Minority Deputy Clerk; and 
Miriam Edelman, Minority Special Assistant.
    Mr. Waxman. And I want to call on Mr. Pallone to convene 
the subcommittee so that we can get a further record from 
witnesses on the health care issue.
    Mr. Pallone. The hearing of the Health Subcommittee is 
reconvened. And we are now going to our next panel which is the 
Panel on Single-Payer Health Care. And I would like to start by 
introducing each of the witnesses.
    Beginning on my left is Dr. Sidney M. Wolfe, who is 
Director of Health Research Group at Public Citizen. And then 
we have Dr. Steffie Woolhandler, who is Associate Professor of 
Medicine at Harvard Medical School and Co-Founder of Physicians 
for a National Health Program. And, finally, Dr. John C. 
Goodman, who is President and CEO of the National Center for 
Policy Analysis.

STATEMENTS OF SIDNEY M. WOLFE, M.D., DIRECTOR, HEALTH RESEARCH 
 GROUP AT PUBLIC CITIZEN; STEFFIE WOOLHANDLER, M.D., ASSOCIATE 
  PROFESSOR OF MEDICINE, HARVARD MEDICAL SCHOOL, CO-FOUNDER, 
PHYSICIANS FOR A NATIONAL HEALTH PROGRAM; AND JOHN C. GOODMAN, 
 PH.D., PRESIDENT AND CEO, NATIONAL CENTER FOR POLICY ANALYSIS

    Mr. Pallone. And I think you know how we proceed, but I 
will mention that we ask you to give us a 5-minute, 
approximately 5-minute opening statements. So your full 
testimony is submitted for the record, and when you are done we 
will have questions from the subcommittee.
    And I will mention again that, because of the importance of 
this issue, we are having full committee members participate. 
They will be after the subcommittee members, but they will 
participate with their questions as well. And we will start 
with Dr. Wolfe.
    Mr. Buyer. Mr. Chairman, may I ask unanimous consent to 
speak out of order for 1 minute?
    Mr. Pallone. Sure.
    Mr. Buyer. I want to thank you. What I want to do is I want 
to extend my apology to the Secretary. In the last hearing 
during my questions to the Secretary, I had stated that the 
State of Kansas Medicaid program had received a D rating when 
she was the Governor of the State. According to the health 
reform dot org Web site run by the Department of Health and 
Human Services, she was given--a D rating had been given to the 
U.S. health care system. And I meant to ask the Secretary 
whether the Kansas Medicaid program merited a D rating.
    I misspoke and created the impression that while she was 
Governor that she specifically--her program had been rated a D. 
That is wrong. And with that I extend my deepest and sincerest 
apologies to her for creating such an impression. And for that 
I apologize personally to the Secretary.
    Mr. Pallone. Well, thank you. I thank the gentleman.
    Dr. Wolfe.

               STATEMENT OF SIDNEY M. WOLFE, M.D.

    Dr. Wolfe. Thank you. What if you picked up the morning 
paper tomorrow and saw the following headline: 50 People Died 
Yesterday Because They Lacked Health Insurance? The next day 
the same headline, and the next as well.
    This is the average number of people in the United States 
who, according to a 2004 report from the National Academy of 
Sciences, die each day; more than 18,000 a year, because they 
lack health insurance.
    How should we respond to this unacceptable and embarrassing 
finding? Not by saying, as President Obama has said, that if we 
were starting now from scratch we would have a single payer, 
but it is too disruptive. Or as the health insurance industry 
said last week, having the public option that is just an option 
would be too ``devastating''. What could be more disruptive and 
devastating than being one of 45 million people who are 
uninsured, from whose ranks come 18,000 people who die each 
year because of that dangerous status?
    The real question is why should we tolerate the fragmented, 
highly profitable, administratively wasteful private health 
insurance industry any longer?
    In this regard, the public is way ahead of either President 
Obama or most people in the Congress in its distrust of the 
health insurance industry.
    In a recent national Harris poll last fall, the following 
question was asked: Which of these industries do you think are 
generally honest and trustworthy so that you normally believe a 
statement by a company in that industry? Only 1 in 14 people, 
or 17 percent, thought that the health insurance industry was 
honest and trustworthy. The only industries that were worse 
than the health insurance industry were HMOs, 7 percent; oil, 4 
percent; and tobacco, 3 percent.
    The Congress, on the other hand, trusts the health 
insurance industry and feels compelled to come up with a 
solution that avoids a big fight with them, not only writing 
them into the legislation, but assuring further growth of that 
industry. The Congress wants to believe that the health 
insurance and pharmaceutical industries will be good citizens 
and voluntarily lower their prices to save some of the money 
that is necessary to fund health insurance.
    Several weeks ago, the collective forces of the health 
industry promised that they could voluntarily save $2 trillion 
over the next 10 years. But the amount that can be saved over 
the next 10 years by just eliminating the health insurance 
industry and the $400 billion of excessive administrative costs 
it causes every year is $4 trillion, in one fell swoop. This 
would be enough to finance health care for all, without the 
additional revenues the Congress and the administration are 
desperately seeking.
    As an example of administrative waste, over the last 30 
years or so, there may have been two to three times more 
doctors and nurses, pretty much in proportion to the growth of 
the population. But over the same interval of time, there are 
30--30--times more health administrators. These people are not 
doctors. They are not nurses. They are not pharmacists. They 
are not providing care. Many of them are being paid to deny 
care. So they are fighting with the doctors, with the 
hospitals, to see how few bills can be paid. That is how the 
health insurance industry thrives, by denying care, paying out 
as little as it can.
    There is no question that we have a fragmented health 
insurance industry and it thrives on being fragmented, avoiding 
any kind of serious centralized examination or control which 
could affect--improve quality, costs and everything.
    The drug companies make much more money with this insurance 
fragmentation because there is no price control. The insurance 
companies make much more money because they can push away 
people who aren't going to be profitable, let public programs 
take care of those patients who are ``unprofitable''.
    What the President and the Congress are really 
realistically advocating, since there is absolutely no 
possibility of having enough money to cover all people in this 
country as long as the private for-profit health insurance 
industry is allowed to exist, is more incremental reform, not 
national health insurance.
    It is now 44 years since Medicare and Medicaid. In the 
interim there have been many experiments in this country and 
abroad to try and provide universal health coverage. Other 
countries have uniformly rejected the private for-profit 
insurance industry and have adopted national health insurance.
    There are little experiments going on in Germany and 
Australia, but mainly it is national health insurance. Is 
everyone else wrong and only the United States is right?
    A recent study by OECD, which is the Europe-based 
Organization for Economic Cooperation and Development, provided 
health insurance data from its 30 member countries, including 
Europe, the United States and others. The latest data showed 
that 27 of the 30 countries had health insurance coverage for 
more than 96 percent of the population, with only Germany 
having any non-public coverage, 10.3.
    The other three that didn't have 96 percent coverage were 
Mexico, with 60.4 percent; Turkey, with 67.2 percent; and the 
United States, with 84.9 percent, of which 27.4 percent was 
public coverage.
    In Canada back in 1970, they were spending the same 
percentage of their gross national product as we were on 
health. They also had millions of uninsured people and many of 
the same insurance companies, such as BlueCross BlueShield. 
They decided to just get rid of the health insurance industry. 
They had experimented with it in Saskatchewan ten years earlier 
and it had worked so well they couldn't wait to do it 
nationally. So where there is a will there is a way.
    There is no way we are ever going to get to having good 
health insurance for everyone as long as there is a health 
insurance industry in the way of obstructing care.
    One more recent experiment abroad includes Taiwan, where in 
1995 they said we don't like the fact that 40 percent of our 
population are uninsured. They passed essentially a single-
payer plan, and within a few years, 90 to 95 percent of people 
were covered.
    In the U.S. we have had experiments as well, with seven 
States having instituted various versions of the public-private 
combination that this legislation seeks to provide. In none of 
these States has this worked. Once several years had elapsed 
with little improvement in insurance coverage, it was back 
pretty much to where it started, despite initial enthusiasm and 
short-lived decreases in uninsured.
    So as we consider what to do, which experiments do we 
follow? The ones that were successful, all of which for 
practical purposes eliminated the private insurance industry, 
or the failed U.S. State examples, all of which were built on 
this industry?
    If instead of saying that a single-payer program is not 
politically possible, the President and the Congress need to 
say it is not only politically possible, politically feasible, 
but it is the only practical way national health insurance will 
ever happen. And anything short of that is essentially throwing 
tens of billions of dollars at the insurance industry. And if 
you are afraid of the insurance industry, then you are afraid 
of doing the right thing, which is having everybody in and 
nobody out.
    [The prepared statement of Dr. Wolfe follows:]





    Mr. Pallone. Dr. Woolhandler.

             STATEMENT OF STEFFIE WOOLHANDLER, M.D.

    Dr. Woolhandler. Members of the committee and Mr. Chairman, 
I am Steffie Woolhandler, a primary care doctor in Cambridge, 
Massachusetts, and associate professor of medicine at Harvard. 
I also co-founded Physicians for a National Health Program, and 
our 16,000 physician members support nonprofit single-payer 
national health insurance because of overwhelming evidence that 
lesser reforms, even with robust public plan option, lesser 
reforms will fail.
    Private insurance is a defective product. Unfortunately, 
the tri-committee plan would keep private insurers in the 
driver's seat and, indeed, require Americans to buy their 
shoddy products. Once failure to buy health insurance is a 
Federal offense, what comes next? A Ford Pinto in every garage, 
lead-painted toys for every child, melamine chow for every 
puppy?
    Even middle-class families with supposedly good coverage 
are just one serious illness away from financial ruin. My 
colleagues and I recently found that medical bills and illness 
contribute to 62 percent of all personal bankruptcies, a 50 
percent increase since 2001. Strikingly, three-quarters of the 
medically bankrupt had health insurance when they first got 
sick. In case after case, the insurance families bought in good 
faith failed them when they needed it most. Some were 
bankrupted by copayments and deductibles and loopholes that 
allowed their insurer to deny coverage. Others got too sick to 
work, leaving them unemployed and uninsured. And insurance 
regulations like those in the tri-committee bill cannot--
cannot--fix these problems.
    We in Massachusetts have seen in action a plan virtually 
identical to the one you are considering. In my State, beating 
your wife, communicating a terrorist threat, or being uninsured 
all carry $1,000 fines. Yet despite these steep penalties, most 
of the new coverage in our State has come from expanding the 
Medicaid-like programs at great public expense.
    According to the State's disclosure to its bondholders, our 
health reform has cost $5,000 annually for each newly insured 
adult. That is equivalent to over $200 billion annually to 
cover all Americans with this style of program, or about $2 
trillion if you want to do it over 10 years.
    But even such vast expenditures haven't made care 
affordable for middle-class families in Massachusetts. If I 
were to lose my Harvard coverage, I would be forced to lay out 
$4,800 for a policy with a $2,000 deductible before the policy 
paid a penny, and a 20 percent copayment after that.
    The skimpy, overpriced, private coverage like this left one 
in six Massachusetts residents unable to pay their medical 
bills last year. One in six unable to pay their medical bills.
    Meanwhile, rising costs have forced our legislature to rob 
Peter to pay Paul. Funding cuts have decimated safety-net 
hospitals and clinics. Today the State announced that health 
reform funding would be cut by $115 million as of July 1. Only 
115 million. And our State Treasurer Cahill opines that 
Massachusetts could no longer afford reform. That is in today's 
Boston Globe.
    As research I published in the New England Journal of 
Medicine showed, a single-payer reform could save about $400 
billion annually by shrinking health care bureaucracy enough to 
cover the uninsured, and to provide first-dollar coverage for 
all Americans. A single-payer system would also include 
effective cost containment mechanisms, like bulk purchasing and 
global budgeting. As a result everyone would be covered, with 
no net increase in U.S. health spending.
    But these savings aren't available, are not available 
unless we go all the way to single payer. Adding a public 
insurance plan option cannot fix the flaws in Massachusetts to 
our reform. A public plan might cut private insurer profits, 
which is why private insurance companies hate it, but their 
profits account for only about 3 percent of the money 
squandered in bureaucracy. Far more goes for marketing, to 
attract healthy profitable members, and demarketing, to avoid 
the sick. And tens of billions are spent on the armies of 
insurance administrators who fight over payment, and their 
counterparts at hospitals and doctors' offices. All of these 
would be retained in the public plan option. And overhead for 
even the most efficient competitive public plan would be far 
higher than Medicare's, which automatically enrolls seniors 
when they turn 65, disenrolls them only at death, deducts 
premiums automatically from Social Security checks, et cetera.
    Unfortunately, competition in health insurance involves a 
race to the bottom, not the top. Competition in health care is 
a race to the bottom and a competing public plan would be 
pushed to the bottom. Insurers compete by not paying for care, 
by denying payment and shifting costs onto patients or other 
payers. These bad behaviors confer a decisive competitive 
advantage. A public plan option would either emulate them, 
becoming a clone of private insurance, or simply go under.
    A kinder, gentler, public plan option would quickly fail in 
the marketplace, saddled with the sickest, most expensive 
patients, whose high costs would drive premiums to 
uncompetitive levels.
    In contrast, the single-payer reform would radically 
simplify the payment system and redirect the vast savings to 
care. Hospitals could be paid like a fire department, receiving 
a single monthly check for their entire budget, eliminating 
most billing. Physicians; billing would be similarly 
simplified.
    Eight decades of experience teaches that private insurers 
cannot control cost or provide American families with the 
coverage they need. A government-run clone of private insurer, 
a government-run clone of private insurers called a public plan 
option cannot fix these flaws. Only single-payer insurance can. 
Thank you.
    Mr. Pallone. Thank you.
    [The prepared statement of Dr. Woolhandler follows:]





    
    Mr. Pallone. Dr. Goodman.

                  STATEMENT OF JOHN C. GOODMAN

    Mr. Goodman. Thank you, Mr. Chairman, members of the 
committee. Every single health care system in the world today 
faces three fundamental problems: cost, quality, and access. In 
our own country, health care spending is rising at twice the 
rate of growth of income, and has been doing so for 40 years. 
If that continues, clearly health care will crowd out 
everything else that we care about.
    But we are not worse in this respect than other developed 
countries. Over the last 40 years the real rate of growth of 
health care spending per capita in the United States has been 
just slightly below the OECD average. We have quality problems 
in this country. But despite those problems, we appear to, 
overall, deliver a higher level of quality than just about any 
other country. We are number one in the world, for example, in 
survival of cancer patients.
    We have access problems in this country, but I think we do 
better than just about any other country with a heterogeneous 
population. The U.S. population gets more preventive care by 
far than Canadians, for example. Americans get more mammograms, 
more Pap smears, more PSA tests, more colonoscopies, by quite a 
considerable margin than the Canadians do.
    Low-income white Americans appear to be in better health 
than low-income white Canadians. The minority population of the 
United States seems to do better in our health care than the 
Inuits or the Crees in Canada, or the Aborigines in Australia, 
or the Maori of New Zealand.
    Now, what about the proposals being considered by Congress 
right now? What will they do for the problems of cost, quality 
and access? When Peter Orszag was head of the Congressional 
Budget Office last year, he examined all of the major proposals 
that can Candidate Barack Obama was making to lower health care 
costs, preventive medicine, coordinated care, electronic 
medical records, evidence-based medicine and so forth. And what 
the CBO concluded was that none of these proposals would make 
any significant difference in rising health care costs.
    On the other hand, if we spend an additional $150 billion a 
year on health care, that almost certainly will contribute to 
health care inflation, making the problem of cost worse, not 
better.
    What about the problem of quality? Well, there is nothing 
that I have seen in any of the proposals being seriously 
discussed that would appear to make any significant difference 
in the quality of care that Americans receive.
    But on the other hand, if we create an artificial market in 
which insurance companies are forced to community rate their 
products to millions of people and do so annually, they will 
very quickly discover that they want to seek to attract the 
healthy and avoid the sick. And once enrollment occurs, they 
will seek to overprovide to the healthy and underprovide to the 
sick. That is good if you are healthy. It is not going to be 
good if you are sick.
    So we are setting in place an artificial market in which 
the incentives to underprovide are going to be very strong. And 
the more competitive that market is, the more insurers will be 
inclined to act on those financial incentives.
    What about access? Well, again, we do have access problems 
in this country. No doubt about it. But we are not going to 
solve those problems by putting millions of people into 
Medicaid and encouraging private--people with private plans to 
drop their private coverage and enroll in Medicaid, as a number 
of the proposals now would do. Basically that is what 
Massachusetts did. Massachusetts cut its uninsured rate in 
half, and it did so by putting thousands of people into 
Medicaid and thousands more into private plans that are paying 
Medicaid rates. And those people are finding they have 
difficulty in obtaining access to care.
    A study just last month concluded that the wait to see a 
new doctor in Boston is more than twice as long as it is in any 
other U.S. city. And for Massachusetts as a whole, the number 
of people who go to hospital emergency rooms today for non-
emergency care is as great as it was 3 years ago, before the 
Massachusetts health care plan was started. Medicaid is not a 
solution for the problems of the uninsured.
    The cancer studies show that in terms of delays in 
treatment and delays in detection, being on Medicaid is only 
marginally better than being uninsured. And when people drop 
private coverage to join Medicaid, they are leaving a plan 
which allows them to see almost any physician, go to almost any 
facility, get care fairly promptly, and go into a system where 
there are long delays and where there are much fewer choices.
    So the real danger, Mr. Chairman, is that we are about to 
pass legislation that will not only not lower the cost of care, 
but will make it higher; that will not improve quality, and may 
actually cause quality of care to go down; and may even make 
health care less accessible for millions of people. Thank you.
    Mr. Pallone. Thank you, Dr. Goodman.
    [The prepared statement of Mr. Goodman follows:]





    Mr. Pallone. Thank all of you.
    Now we will take questions. We will give you questions from 
individual panel members. We have 5 minutes each, and I will 
start with myself.
    And this is about the public option. As you know--and this 
is to Dr. Wolfe or Dr. Woolhandler, or both of you--as you 
know, the discussion draft would create a public option to 
compete with private plans to offer coverage within the new 
health insurance exchange. Uninsured Americans would choose to 
enroll in any of the plans in the exchange, either public or 
private, and there has been concern expressed in some quarters 
that this public option would inevitably evolve into a single-
payer system.
    For example, last Friday, when the discussion draft was 
released, Scott Sirota, the head of BlueCross and BlueShield 
Association warned--and I will quote--that the proposed 
creation of a government-run health plan would jeopardize the 
coverage of 160 million people who receive their benefits 
through their employer today.
    An independent analysis by the Lewin Group estimates that 
tens of millions of people would shift to a government plan, 
dismantling the private market that is free to innovate without 
the political pressures that often stifle efforts to innovate 
in government programs like Medicare.
    Now, we are going to have BlueCross BlueShield and the 
Levin Group here tomorrow. But what I wanted to ask you today 
is whether you think Sirota is right. Will the public option 
strangle the private health insurance industry and become a 
single-payer system?
    I will start with Dr. Wolfe and Dr. Woolhandler.
    Dr. Wolfe. We have heard the same things that you have 
heard, Congressman Pallone, that somehow or other the public 
option is really a Trojan horse or a stalking horse for the 
single payer. What that would mean would be that if a public 
option were to pass, alongside with the private, that it would 
allow the public option to be as good as it can be. And 
essentially, if that were the case--which I don't think is 
going to happen--it might in fact lead to single payer.
    I think there is zero possibility that anything that anyone 
is remotely considering as the public option would lead to a 
single-payer program. I think that it is more likely that it 
would give bad word or bad reputation to a public option 
because it would be so emasculated. I mean, at this point, I 
would say that the chances are 50/50 that either the public 
option would be completely scuttled--which I think is possible, 
President Obama said yesterday he wouldn't be opposed to 
signing a bill even it if didn't have that--or it would be so 
emasculated that it won't be competitive as it should be with 
the private plan. So I just don't think that that is realistic 
at all. I think that this is sort of scare tactics from the 
right, which includes the entire health insurance industry.
    Mr. Pallone. And Dr. Woolhandler, because I want to get to 
another question.
    Dr. Woolhandler. A public plan option is not single payer, 
nor would it lead to a single payer. As you have envisaged it 
in the tri-committee report, it is going to be an identical 
clone of private health insurance with a public label on it. 
And that still might be OK if competition and health care were 
about giving people care. But competition health insurance is 
about not giving people care, about competing to enroll a lot 
of people and not cover them. And if you don't behave like 
that, if you don't misbehave like that, you go out of business 
in a competitive market.
    So a private insurance clone with public label is not going 
to solve this problem. It is really irrelevant to the problem 
of access to care. And I appreciate the private insurance 
industry doesn't want it. They don't want any new competitors. 
But they are wrong when they say that what is here in this bill 
is going to lead to single payer. That is not true.
    Mr. Pallone. Well, I am probably going to say something 
that you won't want to hear. But I am beginning to feel more 
and more that, since I am getting so much opposition from the 
insurance industry that the public option is going to hurt 
them, and so much opposition from single payers that the public 
option won't work, that I actually now believe that we have a 
great discussion draft because neither group likes it. But that 
is not a question. That is just my comment.
    I wanted to ask Dr. Woolhandler, on the bankruptcy issue, I 
know you did this important study on bankruptcies and health 
insurance, and as you testified this afternoon, your study 
found that medical bills and illnesses contribute to over 60 
percent of all personal bankruptcies. Three-quarters of people 
with these medical bankruptcies have insurance at the start of 
their illness. It was a real eye-opener for me.
    In the discussion draft, we have consumer protections that 
would prevent the abuses of the past, practices like medical 
underwriting and preexisting conditions exclusion and 
rescissions which deny or take away coverage just when it is 
needed most. So I am happy with these consumer protections in 
our discussion draft.
    And I wanted to know, you know, whether you thought the 
House discussion draft addresses some of these critical 
consumer protections adequately, based on your research.
    Dr. Woolhandler. There is nothing in the draft that would 
have protected families from bankruptcy. The average family in 
medical bankruptcy had unpaid medical bills of about $17,000. 
And in your draft you would allow people to have out-of-pocket 
expenses of about $10,000 per family per year. So in less than 
2 years, if you had a serious illness, you could accumulate 
$17,000 in out-of-pocket expenses that bankrupted families in 
our study.
    So the protections you have, maybe they are better than no 
protections, but based on the actual circumstances that drove 
people to bankruptcy in our study, no, the bill would not 
protect people from bankruptcy.
    Mr. Pallone. OK. I know we are not going to agree on 
everything, but I do think that it is important that these 
insurance abuses be eliminated, and we are certainly making an 
effort in that regard. Thank you very much.
    The gentleman from Indiana, Mr. Buyer.
    Mr. Buyer. Thank you very much.
    Dr. Goodman, the legislation mandates a massive expansion 
of the Medicaid program that some believe could lead to well 
over 20 million Americans becoming enrolled, then, into the 
Medicaid program. First of all, I would like to know your 
thoughts about this as a proposal. And do you believe that 
there will be a similar crowd-out effect as is currently being 
seen in the SCHIP program?
    Dr. Goodman. Well, I do. And I think that is what is 
intended; that when you make something available for free, even 
if the quality is not as good, people will tend to drop the 
high-priced alternative. That is what happened in SCHIP. That 
is what happened in TennCare in Tennessee. That is what 
happened in Hawaii. So we have quite a number of examples of 
people dropping private coverage to take advantage of public 
plans.
    What happens in Medicaid is that it is really an inferior 
insurance plan. It pays, in many places, 40 percent below what 
the private market is paying. And so the Medicaid patient is 
the last patient the doctor wants to see at the end of the day. 
So you have increasingly long waits to see doctors, difficulty 
finding new doctors that will even see Medicaid patients, and 
pretty poor results when it comes to serious health care like 
cancer care.
    Mr. Buyer. And in those cases that you just discussed, 
where the crowd-out effect had occurred within the SCHIP 
program, what was the impact upon insurance premiums because of 
the crowd-out? Did they increase or decrease?
    Dr. Goodman. I don't know what the effect has been on 
insurance premiums. On the crowd-out, the Congressional Budget 
Office estimated that the bill that Congress passed in January, 
that would put 4 million new children into SCHIP, as many as 
half those children would leave private coverage in order to 
enroll in that coverage.
    Mr. Pallone. Dr. Goodman, I am told your microphone may not 
be on. Is it?
    Dr. Goodman. Can you hear me now?
    Mr. Pallone. I was more concerned about the transcription. 
OK. Thank you.
    Dr. Goodman. When those children had private insurance they 
could see almost any doctor, go to almost any facility in the 
area where they live. Once they go into Medicaid they could see 
far fewer physicians, go to fewer facilities, and their choices 
are more limited and their wait for care is longer.
    Mr. Buyer. There have been some comments with regard to--
that a public option plan would be able to compete on a level 
playing field with private insurance. Are you familiar at all 
at the tax revenues that are paid into the States and the 
Federal Government because of the insurances, the tax on their 
revenues? I mean, I guess if we were to have a public plan that 
would compete equally with private plans, my question would be, 
would we need to exclude these companies from State and Federal 
taxes in order for us to be able to compete on a level playing 
field?
    Dr. Goodman. What a level playing field means to me is that 
the public plan doesn't get any advantages. It cannot do what 
Medicare now does and use the monopoly buying power of the 
State to push the rates it pays down below 30 percent below 
market. It can't use the criminal law to enforce its contracts 
when everybody has to use the civil law. And it can't avoid the 
payment of taxes on revenues. And it is allowed to go bankrupt. 
But if you protect it the way Medicare is protected, having 
protections that private insurance does not have, then that is 
not a level playing field.
    Mr. Buyer. And that public option with regard to the 
coverage of health would be far greater than perhaps a private 
plan, would it not?
    Dr. Goodman. Well, I don't know. I wouldn't object to 
competition if it is a real level playing field. If it is a 
real level playing field, you just create a corporation; you 
can call it a corporation, let it sink or swim on its own, and 
I don't think it would much matter. But if it has advantages 
that Medicare now has over private insurers, it would matter a 
lot. And when you hear these estimates from Lewin and others, 
they are assuming it would have the advantages that Medicare 
has that private insurers do not.
    Mr. Buyer. It is hard for me to imagine this competition, 
to create a public option and say that it will be on an equal 
plane with private insurance. And the reason I say that is I am 
sitting here with my colleague, John Shadegg--and Joe Barton 
was here. There were five of us that worked really hard when we 
were creating the Medicare drug discount card program, and then 
our analysis into the Medicare Part D, and we were trying to 
create choice and competition in the marketplace. At the same 
time, my Democrat colleagues were questioning whether or not 
that would be ever be successful. In particular, the Chairman, 
Henry Waxman, was very critical of what we were doing, and 
wanted a government position in there.
    But in the end, we went pro-market forces and were able to 
reduce the price. As a matter of fact, we got all the estimates 
all wrong. In the end, we were able to save tens and billions 
and billions of dollars. And now trying to provide that same 
analysis into this one, to me, it creates a heterodox. And you 
are taking doctrine which people know and understand, and 
giving it a completely different definition. And so we are 
screwing up words, languages, and it just doesn't fit. I yield 
back.
    Dr. Goodman. May I answer that?
    Mr. Pallone. Was it a question? Go ahead.
    Before you go, let me just mention we are going to have--
well, we have three votes pending. I will hear from a couple 
more members and then we will recess. But go ahead, Doctor.
    Dr. Goodman. Part B competition I think is working well, 
better than anyone predicted that it would work. But that is 
different than what we are now talking about. What most people 
don't realize is that Medicare is, almost everywhere, 
administered by BlueCross. Now, do we really think that 
BlueCross administering Medicare is any more efficient than 
BlueCross administering other plans? No, of course not.
    So why is it that Medicare has an advantage? It is because 
of advantages that are created by government, by law. So a 
level playing field would mean that anything administered by 
BlueCross plays by the same rules. And then I think it really 
wouldn't matter whether we call it public or not.
    Mr. Pallone. Thank you. Chairman Dingell. Questions?
    Mr. Dingell. Not at this time, Mr. Chairman. Thank you.
    Mr. Pallone. Ms. Eshoo?
    Ms. Eshoo. Thank you, Mr. Chairman, for holding these 
series of hearings. And to all of the witnesses, I respect and 
admire the work that you have done and your testimony here 
today. There are great passions around single payer. I know 
that from some people in my own district, others in California, 
and certainly people across the country.
    Let me ask you about something that I think important to 
the American people. In fact, I think they kind of have it in 
their DNA. Nobody likes--no American, I don't think, really 
likes a one-size-fits-all. They really like to have choice. So 
I know that--I mean, single payer doesn't provide that.
    But I am asking you very sincerely, do you believe that 
this would--do you think that single payer could in any way 
preserve choice for patients? Because as I understand single 
payer, it is just--it is the one system that is paid by one 
outfit, the Federal Government, and that is it.
    Dr. Woolhandler. OK. Well, from the patient's point of 
view----
    Ms. Eshoo. And we have learned a lot from--and I was here, 
I was here for the health care debate in 1993-1994. And if 
there was anything that I heard from my constituents it was, 
don't force me into a plan. If I have what I have and I like 
what I have, that is what I want to stay with.
    Dr. Woolhandler. Well, the choice that patients care about 
is that they are able to choose any doctor or hospital they 
want. And of course, that kind of choice is enhanced and 
expanded in single payer. In a single-payer system you go to 
any doctor, you go to any hospital. So that is the choice 
patients care about. Once they know the bill is going to get 
paid, they don't care about how the insurance person is. They 
care about the doctor and the hospital.
    From the doctors' point of view, the choice we want is to 
be able to do what is best for our patients and not have to ask 
permission from some private insurance bureaucrat or be told we 
can only refer patient X to doctor Y because of restrictions. 
So choice is actually bigger.
    The important choice, the choice of doctor is hospitals is 
bigger.
    Ms. Eshoo. What the Democrats are proposing in the bill 
does preserve some choice that matches somewhat what you just 
described. And that is that they have a choice of doctors, they 
have a choice of hospitals.
    Dr. Woolhandler. But that is actually generally not a 
characteristic of private HMO coverage in this country.
    Ms. Eshoo. Well, as it stands today. But I think that we 
have to ramp-up what we are talking about, because we are 
comparing and contrasting new ideas. We know what is broken. I 
mean, we don't need panels of people and all kinds of hearings 
to reiterate what is broken. We are looking at how to fix this 
thing.
    So, you know, again, I mean I admire your work. I really 
think that if we were starting from scratch, from total scratch 
in the country, probably what you all described today is what 
would be built. But we are not starting from scratch, and that 
is why I think a public option is so important.
    Can you tell the committee how you think a single-payer 
system would affect innovation in health care, which I think is 
so important because we constantly have to be pushing the edges 
of the envelope out in our country on this? It is what makes 
the best part of caring for people in our country, the high end 
of it, something that is admired by people in different parts 
of the world.
    So can you enlighten us on that and how you think your 
proposal would do that?
    Dr. Wolfe. One of the things that gets focused on so much 
with single payer is that the government collects the money and 
pays the bills. Anyone can go to any doctor and hospital. But 
the very important element that doesn't get talked about very 
much is that you have a single data system. So for example, in 
Ontario, they can easily look at every patient in Ontario who 
got a certain prescription drug over a 2-year period, and then 
look to see how many of them had to get hospitalized because of 
something that is suspected to be an average reaction.
    Ms. Eshoo. That is tracking the statistics. I am talking 
about innovation in medical devices and biotechnology.
    Let me ask one last question here because I only have 17 
seconds left. How do you pay for your system that you are 
advocates of?
    Dr. Woolhandler. Well, the beauty of single payer is it 
contains its only funding.
    Ms. Eshoo. How do you pay for it?
    Dr. Woolhandler. You simplify administration. Currently, 
administration----
    Ms. Eshoo. What is the savings over 10 years?
    Dr. Woolhandler. It is $400 billion a year. So that is 4 
trillion. You don't really save it because you take that same 4 
trillion and use it to cover the uninsured and plug the holes 
in coverage for people who now have these crummy private 
policies. But you don't raise total health spending by a single 
penny. You just simplify administration, capture just under 400 
billion annually by administrative simplification, and then you 
use that to provide care.
    Ms. Eshoo. Thank you, Mr. Chairman.
    Mr. Pallone. Thank you. I am going to ask Mr. Gingrey next, 
and then we will recess after him.
    Dr. Gingrey. Mr. Chairman, thank you. I am going to go 
straight to Dr. Goodman with my questions, because I don't 
think any constituents in the 11th of Georgia, or any 
stakeholders, whether they are doctors or hospitals or 
especially insurance companies, would want to hear me ask any 
questions of Dr. Wolfe or Dr. Woolhandler, based on their 
testimony. I would like to address a couple of questions, 
though, to Dr. Goodman.
    Dr. Goodman, many of my constituents fear that a 
government-run council making health coverage determination for 
a government-run insurance plan will impede or stop their 
ability to receive quality health care and eventually result in 
a government-run health care system where it is bureaucrats in 
Washington controlling their health care decisions.
    Some of my Democratic colleagues say that a government-run 
plan will only provide choice and not lead to a single-payer 
system.
    Now, my concern, of course, is that it will--and the old 
expression, if it walks like a duck and it quacks like a duck, 
you can bet that it probably is a duck. And speaking of ducks, 
you mentioned long wait times in other foreign countries like 
Canada.
    In Norway, for instance, patients can expect to wait an 
average of 133 days for a hip replacement, 63 days for cataract 
surgery, 160 days for knee replacement, 46 days for bypass 
surgery, after having been approved for the procedure.
    Well, Dr. Goodman, it seems that quality health care is not 
only the doctor you see, but the amount of time it takes to get 
through the door. In your opinion, are waiting times 
symptomatic and consistent with a government-run health care 
system?
    Dr. Goodman. Well, yes. And you get long waits because you 
make medical care free to the patient, and you limit resources. 
And so demand exceeds supply at every margin. So you wait for 
everything.
    I might point out that we are getting a waiting problem in 
our health care system, too. We are inching toward Canada 
without changing anything about how we pay for health care, and 
I am concerned about that. On the Health Board, you know, I 
have to rely on Senator Daschle and the book he wrote and what 
he said about----
    Dr. Gingrey. The book titled Critical? Is that the book?
    Dr. Goodman. The book that Senator Daschle wrote about 
health care.
    Dr. Gingrey. Critical, I think, was the name of that book.
    Dr. Goodman. Now, Senator Daschle pointed to the British 
example of the Health Board with the acronym NICE and he said, 
what do they do? They compare treatments and they compare 
costs, and they compare benefits and they look at 
effectiveness. And quite frankly, in Britain there is sort of a 
cutoff point. They don't want to spend much more than $35,000 
to save a year of life. And that means that in Britain, people 
often do not get cancer drugs that are routinely available in 
the United States and on the European Continent.
    So yes, I am very concerned about that. And I am concerned, 
not that the government is going to tell doctors what to do, 
because even in Britain it doesn't always tell doctors what to 
do, but that it will give cover to health plans that already 
have an economic incentive to underprovide to the sick anyway. 
And if the Health Board is saying, you know, that expensive 
drug is experimental and we really don't need to buy it, that 
is all the health plan would need by way of guidance in order 
to deny coverage.
    Dr. Gingrey. Well, let me reclaim my time, because I did 
want to put out some statistics which speaks to exactly what 
you are saying, because you stated in your testimony that 
health care plays a leading role in determining the outcomes 
for diseases such as cancer, diabetes and hypertension. As a 
physician, practicing 26 years, OB-GYN, I cannot agree with you 
more.
    Focus on cancer just for a moment. You mentioned that the 
5-year survival rate of women diagnosed with breast cancer in 
the United States is 90 percent, versus 79 percent for women in 
Europe. You also mentioned the United States has a better 
relative survival rate than Norway for colon, rectal and breast 
cancer, lower rates of vaccine preventable pertussis, measles, 
Hepatitis B. Given that we do live in a global economy where 
breakthroughs in medical science and technology can be shared 
with patients in other countries half a world away, I am 
curious as to your thoughts for this disparity. What is the 
difference?
    These survival rates are significantly different.
    Dr. Goodman. In the first place, there is a difference in 
diagnosis. And remember--take mammograms. American women get 
more mammograms than Canadian women do. They get more Pap 
smears than Canadian women.
    Then there is the treatment. And regardless of the state of 
medical science, people in other countries may not get the same 
treatment that we get.
    And then there is access to expensive but effective drugs. 
And in other countries, that is controlled more than it is in 
the United States. So those are three things I would point to.
    Dr. Woolhandler. I would just like to go on record as 
saying I disagree completely with what Dr. Goodman is saying. I 
don't think that is supported by the scientific evidence.
    Dr. Goodman. Well, I would like to say that I have a paper 
here with more than 100 peer-reviewed studies that we drew on 
to make these statements.
    Mr. Pallone. We are going to have to----
    Dr. Gingrey. Mr. Chairman, thank you. I realize my time has 
expired. And I appreciate Dr. Woolhandler's comment. And Dr. 
Goodman, thank you for responding to those two questions.
    And I yield back, Mr. Chairman.
    Mr. Pallone. Thank you. We have three votes and we will be 
back maybe half an hour or so. The subcommittee stands in 
recess.
    [Recess.]
    Mr. Pallone. The hearing of the Subcommittee on Health will 
reconvene. And I apologize. What did I say, we would be back in 
half an hour? I obviously misjudged that. Hopefully we will 
have some time now, though.
    And our next member for questions is the gentlewoman from 
Illinois Ms. Schakowsky.
    Ms. Schakowsky. Thank you, Mr. Chairman. I regret that I 
didn't hear all the testimony, but I am quite familiar with 
both Dr. Wolfe and Dr. Woolhandler. And I also want to refer a 
bit to Dr. Goodman's testimony which has been told to me.
    I am a supporter of a single-payer, something that has been 
used to sort of beat me over the head, because I understand 
that it is going to--I believe that the compromise that we have 
that--that the President and the bill, the draft bill, endorses 
is something that I endorse as well, because I think that it is 
an important beginning to controlling costs and to providing--
and to providing good service.
    But I do find it pretty ironic, when I say ``beaten over 
the head,'' I am talking really about the other side of the 
aisle, and people who, I can't quite figure it out, find that 
it is quite all right--and I don't know what the public 
interest rationale is--is to defend the private insurance 
industry, which has had their way with us for all these years 
without much accountability and gotten us into this mess, and 
why those of us who are single-payer advocates who are willing 
to compromise, but the other side who are all for just the 
insurance industry are not, talking about giving Americans a 
choice. And I find it not very collegial and certainly not in 
the best interest of providing health care to all Americans, 
which, after all, is the goal of the exercise, not to figure 
out how we can prop up the private insurance industry. Those of 
us who have agreed to the compromise think that they ought to 
be able to compete. But that is not the principal goal here. 
And we are willing to set up a situation where it is--you know, 
maybe it is easy enough for them to do, but not if they 
continue to do what they have been doing. They are going to 
clearly have to change their ways in order to compete. I am 
really sorry, I guess--I am not--about that, but that is the 
reality.
    I was just talking to a representative of Cook County 
Hospital, Dr. Goodman, who was telling me that in Cook County 
Hospital, which is our public hospital, the wait for 
colonoscopies, hip replacements, and certain gynecological 
services is up to 2 years. So let us be clear that there are 
certainly people waiting in line now.
    And I have to tell you, my understanding is-- you can 
correct me if I am wrong--that you said if you compare white 
patients in the United States to white patients in Canada, the 
outcomes are the same; but if you compare minority patients to 
Aborigines, we are doing better. Oh, my God. I cannot believe 
that you said that in a public hearing. We are all Americans, 
and to somehow separate out those minorities and compare them 
to Aborigines as opposed to white Americans, minority 
Americans, all Americans, Canadian Americans--Canadians, et 
cetera, that would be reasonable. The other comparisons are 
offensive. And I don't know if you want to comment on that or 
defend yourself on that.
    Mr. Goodman. I am not sure you heard my testimony. I said 
we have access problems. And there have been lots of studies 
that show that----
    Ms. Schakowsky. Did you make that comparison?
    Mr. Goodman. These problems are more severe for minorities 
in the United States than the white population. But it is also 
true in Canada, it is also true in New Zealand, it is also true 
in Australia. And if you compare our progress to theirs, we are 
ahead of them. We are doing better than they are doing.
    Ms. Schakowsky. Well, let me ask about this. Dr. Wolfe and 
Dr. Woolhandler, Dr. Goodman has testified that, again, if you 
compare whites to whites, that we are--it is about even. But I 
wondered if you could actually talk to us about how we are 
doing compared internationally to other countries that actually 
do provide health care for all of their citizens.
    Dr. Wolfe. Well, in my testimony I referred to what 
percentage of people in the 30 OECD countries have insurance. 
And as I said, for 27 of the 30, it was over 96 percent. But in 
the same report, which just came out a few months ago, they 
also asked the question: How many people in various countries 
have an unmet care need? And that is sort of what they are 
talking about. Unmet care need was defined as unfilled 
prescriptions or missed medications; medical problems; didn't 
visit a doctor; missed tests, treatment or follow-up. And here 
the comparisons are really striking.
    In the United States, for people who were below average 
income, below average income, over half of them had an unmet 
care problem, 52 percent; whereas, in Canada, it was 18 
percent, just about a third as much. And even for the people 
with--that was below average income. For people with above 
average income, again, it was three times more likely in the 
United States to have an unmet care problem.
    When you look at these seven countries----
    Ms. Schakowsky. So what you found contradicts what Dr. 
Goodman just said, that we are doing better.
    Dr. Wolfe. That is right. OECD--and this is generally 
agreed upon, and the United States is one of 30 countries that 
belong to it. They produce very interesting data not only on 
health, but other measures, and they put these out frequently. 
These are valid comparisons, interestingly, and they really go 
against what Dr. Goodman said earlier, a couple hours ago, that 
there are more access problems here, there--that there are more 
access problems in other countries than here. There are more 
access problems whether you are above average income or below 
average income in the United States than in other countries. 
And obviously one of the reasons is that people are all 
insured, and they don't get thrown out of emergency rooms as 
people frequently do in the United States, violating the 
patient dumping law.
    Mr. Pallone. We are going to have to move on.
    Mr. Shimkus.
    Mr. Shimkus. Mr. Chairman, can I defer and come back in the 
next Republican round so I can listen? Can I just defer, 
whoever is next on the list?
    Mr. Pallone. You want Mr. Shadegg to go first? Sure.
    Mr. Shadegg.
    Mr. Shadegg. Thank you, Mr. Chairman.
    Mr. Goodman, do you agree with the statement of Mr. Wolfe 
that there are frequent violations of the laws requiring the 
treatment of patients at hospital emergency rooms in the United 
States? And are you aware of any studies that show that?
    Mr. Goodman. I am not, but----
    Mr. Shadegg. I don't think your microphone is on.
    Mr. Goodman. No, I am not. But I do concede we have an 
access problem, and I think the waiting in hospital emergency 
rooms in this country is atrocious. We had in Dallas a man who 
waited 19 hours and died before he ever got care. So I don't 
know if any law was violated, but I don't think that should be 
happening.
    Dr. Wolfe. If I could respond.
    Mr. Shadegg. I am sorry, my time is limited.
    I would agree with that. Can you tell me, since he 
challenged you on the point made earlier, would you reiterate 
the point made earlier and explain to me or contrast for me 
waiting times or waiting periods in the United States under the 
current system versus those experienced in England or Canada?
    Mr. Goodman. Well, see, what I think is happening in our 
hospital emergency rooms is exactly what happens in Toronto and 
exactly what happens in London. We are rationing care here just 
like they are rationing care in other countries. And to talk 
about everybody having access to care just because they are 
paper insured is nonsense. The reality is that lots of people 
aren't getting care they need when they need it in a timely way 
around the world. And I think that if you look at the data, we 
do a reasonable job with a heterogeneous population compared to 
other countries. We could do a lot better, but let us not 
pretend that they are way ahead of us, because they are not.
    Mr. Shadegg. Let me make a statement. I am unaware of 
waiting periods in the United States at any facility, emergency 
room or otherwise, of months. And I am very much aware of 
waiting periods in Canada for various procedures that go more 
than a month. That is not a question; that is my statement.
    What is your suggestion or what would you do as opposed 
to--I presume you do not favor a public plan?
    Mr. Goodman. No, I don't.
    Mr. Shadegg. What would you suggest we do rather than 
moving to a public plan?
    Mr. Goodman. I think we ought to focus with the problem we 
began with, and that is the uninsured. What should we be doing 
for them? Right now, if they buy their own insurance, they get 
no tax relief whatsoever. Right now, if your employer--your 
employer is not allowed to buy for you insurance that you can 
take with you when you leave a place of employment. It is 
illegal in every State to buy personal portable insurance, 
which is the only kind of insurance that people can take with 
them in and out of the labor market and from job to job.
    Mr. Shadegg. You are familiar with the legislation that I 
introduced that would allow individuals to buy health insurance 
that was qualified under a Federal law, and then written to 
comply with one State's law and then be sold in multiple 
States?
    Mr. Goodman. I am, and I think that is a good idea.
    Mr. Shadegg. And would that bring down the cost of 
insurance?
    Mr. Goodman. I think it would.
    Mr. Shadegg. And would that reduce the number of uninsured?
    Mr. Goodman. I think it would.
    Mr. Shadegg. What would be the best mechanism you think for 
making insurance portable for those Americans who do not have 
health insurance? And would it include a refundable tax credit 
as I have proposed and others such as Congressman Ryan and 
Senator Coburn?
    Mr. Goodman. The Coburn bill is a wonderful bill, but even 
without going that far, we need to give tax relief to people 
who buy their own insurance. We need to allow employers to buy 
the kind of insurance that people can take with them and is 
individually and personally owned. And we need to get rid of a 
lot of these State regulations which force up the price of 
insurance and price way too many people out of the market.
    Mr. Shadegg. That last point is exactly what we were doing 
with my legislation that would let you buy a policy essentially 
filed in 1 State and then sold in the other 49.
    Mr. Goodman. That would be the practical effect of it. Yes.
    Mr. Shadegg. It would be the practical effect of reducing 
those mandates and thereby bringing down the cost of health 
insurance?
    Mr. Goodman. That is right.
    Mr. Shadegg. You and I have talked about refundable tax 
credits and about the outrage of a current American law which 
says that if you get tax--if you get health insurance through 
your employer, it is pretax, but if you buy it on your own, it 
is taxed. We have been talking about that for how many years 
now, John?
    Mr. Goodman. At least two decades.
    Mr. Shadegg. It seems to me----
    Mr. Goodman. And it is just as bad now as it was two 
decades ago.
    Mr. Shadegg. If we just changed that law and said we are 
going to allow all Americans who want to buy health insurance 
to do so on the same tax-favored basis as businesses can do, 
that would create dramatically more competition in the health 
insurance industry, wouldn't it?
    Mr. Goodman. Well, but, more importantly, it would allow 
people who are on their own to have tax relief and would 
encourage them to buy insurance which they are not now buying.
    Mr. Shadegg. If we coupled that with a refundable tax 
credit for those who can't afford health insurance, which is 
what I would propose doing, we would both bring down the cost 
of health insurance for all Americans and drive up quality; 
would we not?
    Mr. Goodman. That would be the most important thing, most 
important change in the health care system: Give every American 
a refundable tax credit. Let it be the same for everybody. And 
in the latest Coburn bill I think it is $5,700 for a family. So 
the first $5,700 is effectively paid for by the government for 
everybody. And then additional insurance comes, after tax, out 
of our own pockets. It would radically change the kind of 
insurance we have. It would change everyone's incentives. 
Nothing would--that I can think of that has been proposed 
recently would have a bigger impact on the health care system.
    Mr. Shadegg. The Republican-proposed refundable tax credit 
for health care has been on the table for years by Senators, 
like Senator Tom Coburn, and I, who have been advocating it. 
That would have solved the problem of America's uninsured a 
long time ago; Would it not?
    Mr. Goodman. It would go a long way toward it.
    Mr. Shadegg. Thank you very much.
    I thank you, Mr. Chairman, for your indulgence.
    Mr. Pallone. Mr. Weiner.
    Mr. Weiner. Thank you, Mr. Chairman.
    Is there consensus of the three of you on the panel that 
the administrative costs for private insurance claims is much 
higher than what it is for the Medicare system? We will start 
with you, Mr. Goodman.
    Mr. Goodman. There probably isn't a consensus here, because 
the statistics that you heard earlier count the private 
insurers' costs of collecting premiums, but they ignore the 
government's cost of raising taxes. If you want to make a fair 
comparison, you have to compare apples with apples and oranges 
with oranges.
    Mr. Weiner. So the administrative costs, you mean the IRS?
    Mr. Goodman. Yes.
    Mr. Weiner. If you back out the IRS for the purpose of this 
conversation, then it is obviously--is there any disagreement 
that the Medicare system is much more administratively 
efficient than private insurance?
    Mr. Goodman. Well, if you mean by backing out the IRS, we 
ignore the cost of getting public funds, but we count the cost 
of getting private funds, then, yes, Medicare would be cheaper.
    Mr. Weiner. Is there anything that we can learn from how 
Medicare does things administratively? Is there an obvious 
place that we can find that that efficiency is found? Dr. 
Woolhander, would you have a sense of is there something in 
that? I know, for example, that insurance companies benefit to 
some degree monetarily from delays and inertia. Right? If they 
don't pay, for example, a doctor, reimburse a doctor or a 
hospital for a 30- or 60-day period of time, they make money on 
the money that they are not allocating. There are things like 
that.
    But are there other elements that we can learn if we wanted 
to teach the private insurance companies? Which is what 
President Obama said the other day in his press conference, he 
thought it might be instructive for the private guys to copy 
some of the things that the public model does. Is there any one 
or two things that jumps out at you that makes Medicare more 
efficient?
    Dr. Woolhandler. There are a lot of things, but you 
couldn't transplant them to private insurance, because private 
insurance makes their money by not paying the bill, by 
collecting lots of premiums and not paying. So there is lots of 
expenses they have that are essential to their competitive 
strategy. So they want to be very, very careful to recruit 
healthy people.
    Mr. Weiner. I understand that, but you are answering a 
different question. I understand they are not going to want to 
do it. I am asking you, if you were to say, here are two or 
three things that Medicare does that they do more efficiently 
than private insurance, like are there a couple that may come 
to mind that might inform the committee's deliberations here?
    Dr. Woolhandler. Medicare is universal, and it does use the 
IRS to collect money and the Social Security System, which is a 
very efficient way to do it because those things exist already 
anyway, and they are not going to disappear or get any smaller.
    Mr. Weiner. So their building apparatus is much more 
efficient.
    Dr. Woolhandler. They are collecting of--the equivalent of 
premiums is much more efficient. Also, Medicare doesn't do any 
cherry-picking. They don't try to attract healthy people and 
keep sick people out. They can't. It would be illegal. They 
take everyone. So they don't have any so-called marketing 
expenses, which is really about recruiting healthy people and 
keeping sick people out.
    Mr. Weiner. Dr. Wolfe, let me ask you this question. 
Doctor, feel free to weigh in when he is done. The argument 
made against single-payer--and I don't know how persuasive it 
is, and, frankly, I plan on offering single-payer as an option 
here when we mark up the bill. But the argument that is made is 
there are a lot of people for whom their present insurance plan 
is satisfactory. They say that they are satisfied with it, they 
like the doctor relationship, they don't mind getting the 
bills. They like what they have chosen.
    And a political argument is made that essentially says 
don't, when you are trying to do something this big and 
difficult, pursue what Dr. Goodman has been pushing; try to 
solve the problem without creating the big tumult around people 
who don't generally see there would be a problem. That is a 
pretty persuasive argument on a political level; I mean, to say 
to 120-, 130-, 140 million people, we are not going to touch 
your thing that you have.
    How do you respond as an advocate for single-payer for the 
idea that while it might be more efficient for the reasons you 
stated in your testimony, we may be permitting the perfect to 
be the enemy of the good by creating an untenable political 
dynamic? Why don't you give us your response for that.
    Dr. Wolfe. I think the main response is that people would 
be concerned if you thought they were going to disrupt the 
relationship they had with their doctor, with their dentist, 
with their physical therapist, with their hospital. And the 
single-payer is looking only at how the money is collected and 
how the bills are paid. There is no reason why anyone who is 
going to Dr. A would not be allowed to go to Dr. A if there was 
a single-payer system. In fact, they might also want to go to 
Dr. B, who they would have liked to go before.
    Mr. Weiner. Because, in your vision of the single-payer, a 
doctor would be compelled to participate; otherwise, they 
wouldn't be able to be a doctor in the United States because 
they would be opting out so many patients?
    Dr. Wolfe. Right. In Canada and lots of other countries, if 
you are going to receive money for delivering medical care, you 
can't discriminate against this or that kind of patient, so 
that, if anything, the doctor-patient relationship would be 
enhanced instead of disrupted. A patient could go to a doctor 
that they couldn't have gone to before because that doctor 
wasn't in their pool. There is no such thing as your limited 
pool of doctors or hospitals, for that matter, you can go to.
    So in terms of--the disruption is really a disruption of 
the health insurance industry, not of the doctors, not of the 
patients. I mean, the reason why 60 percent of the doctors in 
Massachusetts in a study published a couple years ago support 
single-payer is that they are getting sick and tired of 
spending so much time in their offices fighting with insurance 
companies to pay bills, hiring people that are not delivering 
medical care, but are just sort of engaging in phone or e-mail 
or fax wars. So I think that if the focus is the patient, then 
it is less disruptive.
    Mr. Weiner. I thank you. And my time has expired. I would 
just caution you, Dr. Wolfe, that what you are answering is a 
substantive question, and mine was a political one. Someone who 
has Oxford who then is going to go to a single-payer is going 
to lose their Oxford whether they get the same doctor or not. 
That is the rhetorical challenge that we have as advocates for 
a better system. But I appreciate the candor of your answer.
    Thank you, Mr. Chairman.
    Mr. Pallone. Thank you.
    I am just going to ask Members, I know we each have 5 
minutes, but this is the first of three panels. Just try to at 
least end your questions within the 5 minutes. I don't have a 
problem if the panelists' answers go beyond the 5, but I want 
our questions or comments to end at the 5 minutes, otherwise we 
are going to be here until 8:00 or 9:00 tonight.
    Next is Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman.
    There are a couple ways that Members could come to these 
hearings. This is a very important issue. And I think we all 
come in all the seriousness that we should.
    You know, first, just on this rush to move, I have talked 
about in the energy bill having a discussion draft that people 
can't really talk about because we know the discussion draft 
will not be the bill. It is not going to be it. So when we end 
up marking the bill, we are going to get a bill on a Friday, 
just like the energy bill, which will have 300 more pages that 
my staff will try to e-mail me at home that they hope that I 
will read and go over to be prepared for a markup.
    So this process is--the health care is broken, this 
legislative process. Now, we can do it in this committee. We 
did it in FDA reform. We really did. Democrats worked with us, 
we compromised, we got a good bill. We got a bill that passed 
out on a voice vote. Major reform in the Food and Drug 
Administration. And I think people are--you win some, you lose 
some. Overall we are pretty happy. We didn't have that in 
energy, and we are going to have a Texas death match fight on 
the floor come Friday. We are not going to have it here, and so 
we are going to have another Texas death match fight whenever 
this moves to the floor. And it is just too important of an 
issue to do that.
    So I have always been struck by why don't we move--I mean, 
there is an incremental process, and people understand that, 
and call our bluff. Let us get insurance to more people. Let us 
try associated health plans. Let us try giving people tax 
incentives. Prove us wrong that a private system doesn't work, 
and then the public option might be the default. Maybe a one-
payer might be the default.
    I was in Chicago at the American Society of Plastics, and I 
talked to a legislative luncheon with some of my colleagues. 
One of the guys there whose spouse was attending sold medical 
technology, and he had just come back from Canada. This 
hospital was excited to buy their second MRI, and they are 
going to reduce their wait list from 8 months to 4 months for 
an MRI. I am not making this up. We all know, there are horror 
stories on both sides. So my plea is for us to try to move in a 
way that we can try to cover people before we bring what I 
believe is the heavy hand of government.
    Let me go to questions. Let us talk about this, Mr. 
Goodman, first, and I will let people chime in. I am not really 
trying to incentivize one side or the other. Usually I do that, 
but not here. Let us talk about this Medicare thing, and let us 
address--every time politicians talk about saving the 
government money, what is the first thing off our lips? Waste, 
fraud, and abuse. And where do they point that this waste, 
fraud, and abuse is? Medicare and Medicaid. And my friend from 
New York talked about the cost of this. Shouldn't the cost of 
waste, fraud, and abuse be part of this calculation if we are 
going to compare private insurance with a government-backed 
product?
    Mr. Goodman. Well, it should be. And in my opinion, the 
thing that Dr. Woolhandler praises about Medicare and Medicaid 
is, in fact, one of its faults. It spends too little on the 
administration. You ought to spend some resources watching 
where the dollars go. And apparently there is an enormous 
amount of fraud in Medicaid and Medicare, and you are not going 
to get rid of it if you don't spend some resources to find out 
where the dollars are going.
    Mr. Shimkus. And the percentages of like 30 percent claims, 
that are paying claims that shouldn't be paid. So 10 percent. I 
can't even read my notes anymore. But there is a credible cost, 
if you are going to claim you are going to save money on waste, 
fraud, and abuse, that it ought to go into. That would be good 
money to go after, the return on the investment.
    Let me just finish with this in my time, and I want to be 
respectful to the Chairman. The Massachusetts example just 
recently released, what are they doing? They are going to raise 
their costs, they are going to cut services, they are going to 
reduce their beneficiaries. That was just announced today. What 
does it make us feel like that is not where we are going to be 
if we move to a one-payer system or a public option?
    Dr. Woolhandler. The one aspect of Massachusetts that is 
very prominent, and it is actually in this bill, in the tri-
committee bill that we haven't discussed much----
    Mr. Shimkus. The draft language. There is no bill. A bill 
is a bill when you actually drop it and it gets a number.
    Dr. Woolhandler. The tri-committee draft includes an 
individual mandate, just like Massachusetts, which is, of 
course, what the private insurance industry wanted. They said 
that was their number one thing that they wanted was an 
individual mandate. And it is here in this bill called 
``individual responsibility.''
    Mr. Shimkus. But Massachusetts is cutting benefits, raising 
premiums, and reducing--cutting service.
    Dr. Woolhandler. Absolutely. Absolutely. Because it is not 
affordable what they have done. And the individual mandate 
piece hasn't worked. It has been very punitive, and it is here 
in the tri-committee draft. And it is a complete gift to the 
private health insurance industry, just as it was in 
Massachusetts, because it is saying that the government is 
going to make it illegal not to buy private insurance. And that 
is actually something that needs to be discussed and is really 
totally caving in to the insurance industry no matter what else 
is in this bill.
    Mr. Pallone. Mr. Deal.
    Mr. Deal. I would like to follow up, Dr. Wolfe, on 
something that you said about how your world of a single-payer 
would work. And I believe you said it in response to an earlier 
question that, in a single-payer world, physicians would either 
be in the system accepting the payments that the system 
dictates that they are entitled to, or else they would not be 
able to practice, period. Is that correct?
    Dr. Wolfe. Well, they can practice privately and collect 
money from patients. There is nothing to stop that. In the 
United Kingdom the so-called Harley Street physicians are 
physicians who aren't part of the national health service. They 
practice. They have expensive practices for patients who can 
pay them.
    The only point I was making is that the Canadian system, 
which is called Medicare for everyone in the country, is one 
that if a physician wants to take care of patients who don't 
have money to go to a private doctor, then that physician needs 
to participate.
    The physicians in Canada actually make reasonably large 
amounts of money with the kinds of prices that are placed on 
the services by the government. So it is not--it is restrictive 
only to the sense that if someone really wants to practice 
medicine for someone other than a group of very wealthy people, 
they participate in the program. Again, they are in private 
practice; they are not working for the government, they are 
just getting paid by the government.
    Mr. Deal. One of the concerns that we currently have is 
doctors who will not take Medicare patients simply because 
reimbursement rates they consider are not adequate.
    Under the proposal that we are looking at, the public 
option plan, as I understand it, keys reimbursements to 
Medicare reimbursement rates. Now, one of two things is going 
to happen. Either the public option plan is not going to be 
able to get any doctors to sign up to participate without 
coercion to do so, or the private plans are going to decide 
that the only way they can compete with the government is to 
ratchet down their reimbursements to the Medicare levels; and, 
therefore, the private insurance market providers are going to 
have the same complaints that they currently have in our 
Medicare reimbursement system.
    Dr. Goodman, maybe I could ask you to comment on that.
    Mr. Goodman. Well, I think you are exactly right, except I 
don't think it will be all one way or the other. With that kind 
of system, what we will gravitate to is a public system in 
which most people will be enrolled, and the doctors will be 
paid below-market rates. And then there will be a private 
system, just like they have in the United Kingdom, or some 
version of that, and anyone who has the money will buy better 
coverage, and they will be seen first by the doctors, and they 
won't wait as long. And Britain has a two-tier system, and what 
you are pointing toward would be a two-tiered system for the 
United States.
    Dr. Wolfe. Could I just respond briefly to that? Which is, 
one of the reasons that we are opposed to this public-private 
option is that it does cause some of the exact things you are 
talking about. Why should it be that a given doctor should not 
get the same amount of money for seeing patient A versus 
patient B versus patient C versus patient D? In other words, 
what I am saying is that under a single-payer system, the 
doctor could see any patient they want; the patient could go to 
any doctor they want without the fear that this doctor won't 
see them because they are not getting paid as much as they 
would be paid if they had some other insurance.
    It is bewildering to a doctor and their staff to have to 
look at a patient and say, do they have this plan or plan 
number 10 or plan number 20? And if they have that, does it 
cover this or that or whatever? It is just an unbelievably 
complicated matrix, as opposed to just saying you go to the 
doctor, and whenever you are or whoever you are, the doctor 
gets reimbursed the same amount. I think that that kind of 
twofold system that is possibly built into the draft bill that 
we are discussing isn't a good idea. But it is not the only 
reason the draft bill is not a good idea.
    Mr. Deal. We agree on that last statement.
    Dr. Woolhandler. I would just have to say as a practicing 
physician in Massachusetts not only do I take Medicare and 
welcome it, but essentially every doctor in the State of 
Massachusetts takes Medicare. And, you know, none of us are 
going to the poorhouse. So I know there are people who can 
command even higher payments than Medicare pays, but Medicare 
payment is generally compatible with a pretty good standard of 
living for the medical profession. So I wouldn't worry too much 
about that issue, personally, coming from Massachusetts.
    Mr. Deal. Well, coming from Georgia, I can tell you 
firsthand that we are having physicians who will refuse to 
continue to treat long-term patients that they have had for 
many, many years when those patients become Medicare-eligible 
simply because of the reimbursement rates, and they consider 
them to be inadequate. And my State at least, I think, is 
experiencing that kind of problem currently, and I just don't 
want to see us magnify that problem.
    I believe my time is up. Thank you, Mr. Chairman.
    Mr. Pallone. Thank you.
    Dr. Burgess.
    Dr. Burgess. Thank you, Mr. Chairman. You had no choice but 
to come to me, and I appreciate the time. And just for the 
record, I always saw Medicare patients in my practice in 
Louisville, Texas, because my mother told me I had to, and it 
made it very simple to follow that rule.
    Dr. Goodman, Dr. Wolfe testified just a moment ago that, in 
Canada, the doctor-patient relationship is enhanced by having a 
single-payer system. Is that your opinion also?
    Mr. Goodman. No. No. No, it is not. I think in general 
third-party payment undermines the doctor-patient relationship, 
and that the ideal relationship is for the patient to control 
the dollars, and that is why I have advocated for many years 
the health savings account. I would like to see patients 
control a third or fourth of all the dollars. And for chronic 
patients, they can control even more than that.
    And we are doing this in Medicaid, by the way. We have a 
cash and counseling pilot program under way in more than half 
the States where the Medicaid homebound disabled control their 
dollars. They can hire and fire the people who provide them 
with services. There is 98 percent satisfaction. Well, there 
isn't any health care system in the world where you get 98 
percent satisfaction.
    So we know that health care can be more satisfying, and we 
can meet the needs of patients in a better way if we reduce the 
role of the third-party payer, whether it is government or 
private.
    Dr. Burgess. And I actually agree with that as well, and I 
have often wondered why we don't construct a system where it is 
possible for an individual to have more of a longitudinal 
relationship with their insurance company. If an insurance 
company or a Medicare system is a necessary evil, why would we 
not construct one where there is some sensitivity to the 
purchaser on the part of the seller just like there would be in 
any other transaction?
    We heard just a moment ago from the gentleman from New York 
about there being a policy versus a political question. I also 
wonder if the back door into the policy that is desired, which 
may be a single-payer system, is to not involve ourselves in 
political incrementalism at this point in order to achieve that 
desired goal.
    Dr. Wolfe, I wonder, do you see that as being part of the 
trajectory or part of the desired outcome of the--I realize it 
is not a bill, but the draft that we have in front of us this 
afternoon?
    Dr. Wolfe. I think I alluded a little bit to this earlier, 
but I think that we now have essentially 44 years since the 
last health insurance was passed, Medicare and Medicaid. And 
many people hoped, and I think sincerely, that somehow during 
the 44 years we would incrementally be able to cover more 
people with health insurance, and it just hasn't happened. I 
mean, we have the same insurance companies, some new ones that 
are more HMOs and so forth than there were back then, but I 
think the incrementalism just hasn't worked, and particularly 
compounded by the economic problems of the last year or two, 
things are getting tougher and tougher. I would expect that the 
number of uninsured will rapidly go over 50 million, it is 
close to that now, if we had numbers from 2009.
    So I don't see--back to your question directly. I don't see 
anything in this draft bill, as we are correctly talking, it is 
a draft bill. It is. And there is a lot of distance between 
here and, if anything--I say ``if anything'' seriously--is 
going to come to the floor. But I don't think there is anything 
that is in the draft bill that, to me, could be rationally 
viewed as a stalking horse as a way towards a single-payer. If 
anything, one could argue that it is away from a single-payer. 
Because if it is changed and comes to the floor with some form 
of a public partnership with the private, it is going to be so 
bad that, if anything, it will move away from the single-payer 
rather than towards it.
    Dr. Burgess. Like Ranking Member Deal, I do agree on that 
last point.
    Let me just ask you a question, because my time is going to 
run out. There has been some allusions to Canada versus the 
United States. My understanding, correct me if I am wrong, the 
Canadian system, their health care system, is on a budget. 
Their Parliament passes a budget every year, just as we do, and 
their health care expenses are going to be budgeted. Ours, in 
this country, we have the largest single-payer system in the 
world. It is called Medicare and Medicaid. We don't budget for 
that; we just simply say, send us your bills, and we are going 
to pay them, and we will draw down the Federal Treasury or 
expand the deficit in order to do that.
    Do you think we should look more at Canada's budgetary 
system as a way to controlling some of our costs in our public 
system, in our Medicare and Medicaid system?
    Dr. Wolfe. Well, one of the advantages of having a single-
payer, single-insurer collector of money is that you can more 
easily do what is called in Canada global budgeting. So for a 
given hospital, for instance, instead of counting every----
    Dr. Burgess. But you have already got 50 percent.
    Dr. Wolfe. But I am saying they are not doing it.
    Mr. Pallone. Can I just ask Dr. Wolfe to answer the 
question, because the time has expired.
    Dr. Wolfe. The answer to the question is in Canada global 
budgeting is a good idea. We could benefit from it here. I 
don't think that Medicare has been run as efficiently as it 
could be. The administrative costs are certainly low, and there 
have been some forms of price control on everything other than 
prescription drugs. So I think we could learn from that. But 
Medicare has now been around for 44 years, and, if anything, 
for a bunch of reasons it is getting worse than it was at the 
beginning. So we need to go back to some of the original 
principles of Medicare.
    Dr. Burgess. Some of our distributional issues would become 
greater, though, with a budgetary constriction.
    Mr. Pallone. Dr. Burgess, you are a minute over. You can't 
ask any more questions. We have got to move on. Thank you.
    Let me thank all of you. We appreciate it, and I think it 
was a good discussion. I am sorry that you were interrupted so 
long with the votes.
    Mr. Pallone. Let us ask the next panel to come forward, 
please. This panel is on State, local, and tribal views. I ask 
our panelists to be seated.
    Now, let me just warn everyone that you are seated out of 
order, so I am not going to ask anybody to change, but I am 
going to call Members to speak on the order that I have here. 
So let me introduce everyone.
    First is Honorable Michael Leavitt, who is former Secretary 
of U.S. Department of Health and Human Services. Thank you for 
being with us. I know you can't stay the whole time, but that 
is fine. We have you first.
    Second is my good friend, the Honorable Joseph Vitale, who 
is chairman of the Committee on Health, Human Services and 
Senior Citizens of the New Jersey State Senate, who his 
district is in my congressional district, and he has been here 
before, and we appreciate your coming today as Senator Vitale.
    Then I have W. Ron Allen, who is the chairman of the 
Jamestown S'Klallam Tribe.
    And then we have the Honorable Jay Webber, who is a State 
assemblyman from my State of New Jersey. Welcome.
    And then is Dr. Raymond S. Scheppach, who is the executive 
director of the National Governors Association.
    Then we have Robert S. Freeman, who is deputy executive 
director of CenCal Health, California Association of Health 
Insuring Organizations.
    And finally is Ron Pollack, who is executive director of 
Families USA, again, a frequent visitor to this subcommittee.
    So we will start with the Secretary Leavitt. Thank you for 
being here.
    Let me mention again, I think you have probably heard it 
enough times, but 5 minutes. We ask you to speak for 5 minutes. 
Keep it to that. Your written testimony will become part of the 
record. And, of course, after you are finished, we will have 
questions from the panel.
    Secretary Leavitt.

   STATEMENTS OF MICHAEL O. LEAVITT, FORMER SECRETARY, U.S. 
    DEPARTMENT OF HEALTH AND HUMAN SERVICES; JOSEPH VITALE, 
   CHAIRMAN, COMMITTEE ON HEALTH, HUMAN SERVICES, AND SENIOR 
  CITIZENS, NEW JERSEY STATE SENATE; W. RON ALLEN, CHAIRMAN, 
JAMESTOWN S'KLALLAM TRIBE; JAY WEBBER, STATE ASSEMBLY, STATE OF 
 NEW JERSEY; RAYMOND C. SCHEPPACH, PH.D., EXECUTIVE DIRECTOR, 
   NATIONAL GOVERNORS ASSOCIATION; ROBERT S. FREEMAN, DEPUTY 
 EXECUTIVE DIRECTOR, CENCAL HEALTH, CALIFORNIA ASSOCIATION OF 
   HEALTH INSURING ORGANIZATIONS; AND RON POLLACK, EXECUTIVE 
                     DIRECTOR, FAMILIES USA

                STATEMENT OF MICHAEL O. LEAVITT

    Mr. Leavitt. Thank you, Mr. Chairman. And thank you for 
your acknowledgement of my inability to stay the whole time. 
But I am pleased to be here.
    My formal statement, I will summarize it by saying I have 
listed 10 things in this draft that I believe could be unifying 
principles, I have listed 10 things that I believe are serious 
problems, and 10 ways I think those could be resolved. So the 
committee will have access to that. And to the extent that you 
have questions for me, I would be happy to respond to them 
either in writing or later publicly.
    I was intrigued, however, by conversation in the earlier 
panel, and I would like to take my time to respond to the 
question of Medicare's efficiency. I suspect I am the only, or 
at least one of the only, people in this room who has actually 
overseen Medicare, and I would like to answer the question as 
to its relative efficiency, if I could.
    If the question is does Medicare issue checks on a more 
efficient basis than anyone else, I think it is important to 
answer that: Yes, Medicare issues checks more efficiently than 
anyone else on the planet. And we should, because Medicare 
issues about 1 billion of them a year.
    The problem isn't its administrative efficiency. The 
problem is what it pays and how it pays it.
    Medicare has three fundamental problems, in my assessment. 
The first I call silo syndrome. Silo syndrome is a function 
that everything is paid without coordination. So it isn't how 
efficiently it pays; it is the fact that it pays the wrong 
things and pays too many things, and does not require any level 
of coordination.
    If we were to impose on, say, the automobile industry the 
process of finance in the health care industry, you would walk 
into a car dealership and you would say, I want to buy a car. 
The dealer would say, we can see you do. Pick one out, and we 
will send you the bills later. And a few months later or weeks 
later, you would get one from the chassis maker, you would get 
one from the tire manufacturer, you would get one from the 
dashboard people, one from the windshield, and one from the 
dealer. And the dealer would say, you were in the showroom for 
a while, then you went to the salesman's office, and then there 
was that $21.97 cup of coffee you thought you were getting 
because you thought you were thirsty.
    The point is that if there was a steering wheel that was 
$800, the manufacturer of the car under the current system 
would say, we can't afford that because we have got to deliver 
it for $23,000.
    In the health care system, if the crutch's provider in a 
knee operation says, we want $400 for the crutches, we just 
provide it. There is no coordination.
    So it is not the fact that we are able to issue checks 
efficiently; it is that all of the care is siloed and 
uncoordinated, and that runs up the costs. So what might look 
like efficiency, I would suggest to you, is not.
    The second problem with Medicare is that it has what I call 
chronic more. Everything is oriented to more.
    And the third point I would say is that it is quality 
indifferent.
    So it isn't efficient because it can issue more checks than 
anyone on the planet. It is inefficient because it is siloed, 
because it is quality indifferent, and because every incentive 
leads to more. And I suspect you will see that reflected in my 
testimony as to why I oppose and why I hope our country will 
not go to a public option plan. For us to adopt a system that 
has moved our country financially toward what I believe will be 
its most devastating financial crisis and then put more people 
in it is like suggesting that we are going to cure obesity with 
a perpetual regimen of double calories.
    That is not the solution, and I have listed in my testimony 
a series of suggestions on how I believe this bill could 
unifying, how the bill could become a bipartisan proposal, and 
I am very hopeful that that can occur. This country badly needs 
for every American to have access to insurance. We desperately 
need to reform the system. And I hope very much that this will 
be a moment where we can do so on a bipartisan basis. Thank 
you.
    Mr. Pallone. Thank you, Mr. Secretary.
    [The information follows:]





    Mr. Pallone. Senator Vitale.

                   STATEMENT OF JOSEPH VITALE

    Mr. Vitale. Thank you, Chairman Pallone and members of the 
committee. I am Joe Vitale. I chair the Senate Health Committee 
in New Jersey, and pleased to be here again. I was here a 
couple years ago when we were debating the reauthorization of 
SCHIP and what it meant to my State and to the millions of 
parents and children who we are now blessed to cover under that 
program.
    I wanted to highlight some of the sentinel points of New 
Jersey's journey toward health care reform as well as my 
personal view as a State legislator, a leader in health care 
reform, and as a small business owner as well, to discuss the 
access to affordable and dependable health care for not just 
the 1.3 million uninsured New Jerseyans, but the remaining 45-
some million Americans.
    New Jersey has learned many lessons as we grappled with the 
complexity of reform over the past several years. Our State's 
reform efforts will benefit the proposals being discussed here 
in Washington now.
    When SCHIP was first adopted in 1998, New Jersey initially 
offered enrollment for children whose family income did not 
exceed 200 percent of the Federal poverty level. Shortly 
thereafter, we increased eligibility to 350 percent of Federal 
poverty for those kids, recognizing that we needed to do more, 
that New Jersey was an expensive place to be low-income, and we 
needed to get those kids insured because the parents couldn't 
afford the insurance on their own or through their employer.
    In addition to expanding affordable access to kids, we also 
began to welcome parents into our program through a waiver by 
CMS whose families' income did not exceed 150 percent of the 
Federal poverty level. These legislative initiatives became the 
foundation upon which we in New Jersey have begun to build a 
framework for providing universal, portable, affordable, and 
sustainable health care access to New Jersey's remaining 1.3 
million uninsured.
    Our efforts began nearly 3 years ago with the formation of 
a working group comprised of 22 policy experts representing a 
wide variety of experience and professional background. I 
believed then, as I do today, that New Jersey could not have 
enacted our most recent reforms without taking the necessary 
time to painstakingly understand the complexity of reform's 
impact on the diverse group of stakeholders health care 
encompasses.
    Our working group met for 2\1/2\ hours every week, worked 
on a daily basis with staff to process the input from those 
sessions, and traveled the country from San Francisco to 
Chicago to Washington to meet with other States actively 
reforming their systems. We shared the reform efforts each of 
us were undertaking and met with national policy groups with 
expertise in health care access, quality, cost modeling, 
efficiency, and insurance reform. It was through those efforts 
that we were able to offer a thorough and well-planned 
legislative proposal that enjoyed overwhelming bipartisan 
support approval moving from announcement to passage into our 
law in a short 4 months.
    Our most recent initiative accomplished much. It increased 
eligibility for more working parents whose income did not 
exceed 200 percent of the Federal poverty level. We established 
a buy-in program for children whose families' income exceeded 
our SCHIP cap of 350. This program was created after 
negotiating with two of our State's leading health plans, who 
agreed to offer an excellent benefit design at a very low 
price. This program does not use any State or Federal dollars.
    We implemented a kids first mandate that required all 
eligible children to enroll in either a free or very low-cost 
health insurance program in our State. It required the 
Department of Treasury to include a check-off on all State 
income taxes, tax returns that seeks information on filers 
regarding the health insurance status of household dependents. 
This provision enabled New Jersey to be the first State in the 
Nation to utilize the express enrollment process approved here 
in Washington and CHIPRA. It also directed our State Department 
of Human Services to design a cost-effective and thorough 
enrollment outreach program, and to design a minimum hardship 
exclusion or premium hardship exclusion that does not allow an 
enrollee to jump out of coverage, that provides for an income 
set-aside that can lower their premium to an affordable level, 
but also maintains them in coverage and not out of coverage.
    It also instituted a number of reforms so individuals or 
employer market that made those policies more affordable will 
dedicate a larger percentage of collected premiums to the 
actual provision of care.
    I am proud of what we have accomplished in New Jersey. We 
have been one of the most progressive States in offering 
expanded access to hundreds of thousands of children and 
working parents, and we are currently well on our way toward 
comprehensive and transformational reform. But, as you know all 
too well, States can only do so much. We have limited finances. 
We have limited political will. And with States having 
different programs at different levels for children and for 
parents in some States, it becomes just undependable and 
unreliable.
    We in New Jersey, though we are proud of the work we have 
done and the great steps and strides we have made to insure 
hundreds of thousands of kids and many parents in our State, we 
need the Federal Government. We need your leadership and the 
leadership of your colleagues and the President to make sure 
that the remaining 1.3 million who are uninsured today and 
those who will become uninsured have access to the same kind of 
health care that we all enjoy; that they will have the same 
kind of card that we all have. And, in some cases, I know we 
all take for granted maybe the health care that we do have, but 
for them, they wake up every day with the fear that they will 
get sick, their kids will get sick, they won't have the ability 
to pay. And a national program that brings together in a large 
group those millions of Americans who need our help is well 
justified and well needed. And I want to thank you for the 
effort.
    Mr. Pallone. Thank you, Senator.
    [The prepared statement of Mr. Vitale follows:]





    Mr. Pallone. And thank you for waiting, all of you, 
actually. I know you have been here since early this morning. 
So I appreciate it.
    Next is Mr. Allen.

                   STATEMENT OF W. RON ALLEN

    Mr. Allen. Thank you, Mr. Chairman. My name is Ron Allen. I 
am the Chair and CEO for the Jamestown S'Klallam Tribe located 
up in Northwest Washington. And I am also an officer at the 
National Congress of American Indians. And my testimony 
presented to you and the committee is on behalf of our 
organization that represents and advocates for all Indian 
Nations from Alaska to Florida, representing over 560 Indian 
Nations and communities and 4 million people.
    As I listened to the dialogue all day today, we find it 
interesting. When we talk about the unmet needs of health care, 
no one knows that more than Indian Country. I was listening to 
some interesting comments this morning about how America is 
high represented in cancer recovery rates and diabetes recovery 
rates, et cetera. Well, in Indian Country we have the highest 
level of cancer rates and deaths and diabetes crisis, 
tuberculosis exposure, et cetera, than any other ethnic group 
or any other sector of our society. And it reflects the 
incredible unmet needs in our Indian communities.
    But what we do believe is that this initiative that is 
being advanced by the Congress and by the administration is an 
important one. We agree that the idea of addressing and 
reducing costs and providing competent care and affordability 
and quality is something we all look forward to, and that the 
Indian tribes across America concur that that has to happen.
    We want to remind the Congress, it seems like every time a 
key piece of legislation that emerges, that the tribal 
governments are a part of the American political family, and 
that we are governments, and that we are very unique in America 
as governments and as employers, as governments and our 
businesses that are important to the revenue generation for our 
essential services, including health care in our communities. 
And any legislation that is advanced to address a subject 
matter as this must include our government.
    So we appreciate what is being advanced in all the 
different components of this proposed bill, but we do want to 
point out there is a number of issues that we are concerned 
about, and that we would urge you as the committee and as the 
Congress to consider these specific conditions that are 
essential for the services to be provided to the Indian 
communities because of our unique conditions and how services 
are provided to the American Indian, Alaskan Native peoples 
across the Nation.
    We need the legislation to exempt American Indians and 
Alaskan Natives from mandates and penalties. We need this 
legislation to exempt tribal governments from the employee-
employer penalties. It is essential that the American Indians, 
Alaskan Natives should be eligible for those insurance 
subsidies, and that the portability component is also essential 
for our people as well. It explicitly states that the Indian 
Health Service and the tribes are essential community providers 
so that is clear that that is how the services are being 
provided.
    And another key component that we are concerned about is 
making sure that it is clear that the health care services that 
are provided to the Indian people, that they are exempt as 
income. The IRS wants to identify these resources as taxable 
income, and for the Indian communities we have paid for it. 
They are reflected in our treaties and the commitments of this 
Nation. This Nation is great because of the commitment of the 
Indian communities across the Nation, and so, therefore, that 
as prepaid health care, they should not be taxed for services 
that have been long overdue from this Nation to our 
communities.
    So these aren't just a wish list. They are critically 
important to make it effective to fulfill what we believe is 
the unmet need for our communities consistent with a lot of 
sectors of America.
    The Health Care Improvement Act is important, and it does 
need to be passed and addressed, but it is not--this does not 
replace that bill, that legislation, that is fundamental for 
Indian Country and is so important for all of us.
    There are many other points I could address, but I think 
that I have highlighted the main issues. Our testimony has 
identified a long list of issues and recommendations that we 
have made to you, and we look forward to working with you, the 
committee members, the staff, and the President, on making this 
happen to raise the level of health care for all people, 
including American Indians and Alaskan Natives.
    Thank you, Mr. Chair.
    Mr. Pallone. Thank you, Mr. Allen.
    [The information follows:]





    Mr. Pallone. Next is Assemblyman Webber. Thank you for 
being here as well.

                    STATEMENT OF JAY WEBBER

    Mr. Webber. Thank you, Chairman. And I would like to thank 
the committee for the invitation.
    My name is Jay Webber. I represent the 26th legislative 
district in the New Jersey State Assembly. I am here actually 
like Senator Vitale; I think we both take great pride in our 
State, but we have different views of the state of health care 
in our State. And one of the reasons that we are in such 
desperate need of reform in New Jersey is some of the things 
that we have done in the past.
    My message to the committee, if I can leave one, is please 
don't do to the Nation what New Jersey has done to itself. We 
embarked on a series of reforms in 1992 with the intent of 
improving access to health care and health care insurance for 
our citizens. Many of the policies we put in place have been 
discussed already in the committee today, things like 
guaranteed issue, community rating. There were a series of 
mandated coverages that have continued to be piled on. And even 
as recently as this year, the legislature and the Governor 
raised the minimum loss ratios for insurance companies in our 
small-employer and individual markets.
    These reforms, so-called, have created what I would call a 
toxic mix for destroying the health insurance market in the 
State. Actually, one commentator called New Jersey the poster 
child for how to destroy the health insurance market. And the 
results have been rather predictable: Costs for health 
insurance in New Jersey have skyrocketed to the point where 
today the average premium for families on the individual market 
is as much as twice the national average. Small employers find 
themselves not being able to afford to provide insurance to 
their employees anymore. And consumers have fewer choices as 
fewer insurance companies write policies in the State.
    The reforms in 1992 did not result in a reduction in the 
number of uninsured. Quite the contrary. Whereas in 1992 we had 
13.9 percent of our population uninsured, after these reforms 
the uninsured population stands today at about 15.8 percent.
    I have a lot more statistics in my written testimony to the 
subcommittee, but there is one story I would like to relate to 
you. A constituent wrote in to me just after the bill that 
Senator Vitale discussed earlier--just after that bill was 
passed. A man named Fred, he is a CPA, his wife is quite ill 
with a lot of doctors bills. Very content with his coverage 
that his employer was able to provide him, but after the bill 
that the senator discussed was passed, and the minimum loss 
ratios were put into place, the insurance company stopped 
writing insurance in New Jersey, and Fred lost his insurance 
coverage. His employer could no longer afford to purchase it.
    There are stories like that being played out across the 
State as our attempts to reform the system wind up doing more 
harm than good. There are solutions that I advocate vigorously 
and many members of the legislature do advocate in New Jersey, 
the most prominent of which would be to allow New Jerseyans to 
purchase health insurance across State lines. Increasing 
competition and consumer choice will provide less expensive and 
higher quality health care to New Jerseyans. It will lower 
their premiums. And one study by University of Minnesota 
economists estimated that as many as 700,000 New Jerseyans 
would be able to afford to buy health insurance if they simply 
were allowed to purchase health insurance across State lines. 
That is 700,000 or almost 50 percent of the uninsured 
population in the State wiped off the uninsured rolls without 
spending a taxpayer dime. I think that is a significant reform 
that we should try.
    There is great enthusiasm for that measure; and I have 
gotten unsolicited letters, e-mails all across the State, not 
just from constituents in my district, urging the legislature 
to go forward with it. I just think it is no longer acceptable 
to trap New Jerseyans in a State and in a system that they want 
to leave. We have New Jerseyans who are looking to purchase 
health insurance out of State, would do it if they could, and 
insurers who would sell them insurance if they were allowed to 
come in and sell policies free of the underwriting rules and 
the coverage mandates that New Jersey puts on them, but we 
stand in their way with regulations and laws that block those 
transactions.
    I discussed with a colleague of mine on the floor of the 
assembly why they opposed the Health Care Choice Act that I 
have sponsored in New Jersey, and the answer was quite simple, 
and it was rather disturbing. And the answer that I got was, we 
need their lives. We can't have New Jerseyans who would buy 
cheaper health insurance across State lines who might be 
uninsured today. We can't have them leaving the State because 
we want to do single payer, and we need their lives to 
subsidize the sicker and the older in the State.
    I disagree with that approach; and it is disturbing to me 
that after--you know, more than 20 years after Ronald Reagan 
went to the Brandenburg Gate and told the Soviet Union to tear 
down that wall in Berlin, that New Jersey continues to put up 
walls to trap its citizens in a system that is failing them and 
that they want to leave.
    So if that is the enduring lesson that I can bring to you 
today, that is what I am trying to do. Again, I would 
respectfully request that the members of the committee and 
Congress not repeat the mistakes that New Jersey has made on a 
national level.
    Thank you, Mr. Chairman.
    Mr. Pallone. Thank you, Assemblyman.
    [The prepared statement of Mr. Webber follows:]





    Mr. Pallone. Dr. Scheppach--I had to ask how to pronounce 
it.

            STATEMENT OF RAYMOND C. SCHEPPACH, PH.D.

    Mr. Scheppach. Thank you, Mr. Chairman. I appreciate the 
opportunity to appear before you today on behalf of the 
Nation's Governors.
    I will very quickly focus on six issues, the first with 
respect to the insurance reforms.
    Although we agree that the Federal Government probably 
should set the market rules with respect to guaranteed issue 
and renewability, we think the rate bands in the bill are too 
narrow. They should be broader so that States have the ability 
to go above those particular minimums.
    We are also very concerned that a lot of the State 
insurance reform is being preempted essentially by the Health 
Choices Administration in the bill. We think that States do a 
relatively good job of protecting consumers, but we think that 
the bill is going to add a lot of confusion with respect to who 
does regulation and who does enforcement. Is it the State, is 
it the Department of Labor, is it the independent agency or the 
Department of Human Services?
    Finally, I think there is going to be a real challenge in 
setting of market rules outside the exchange to be consistent 
with the ones in the exchange, because different rules would 
likely perpetuate the risk selection and fragmentation that 
exists in the marketplace today. With respect to the health 
insurance exchanges, it seems that the draft bill creates a 
super independent agency, the Health Choices Administration, to 
make just about every decision with respect to exchanges. There 
does not seem to be any clear advantage for States to design 
and administer the exchanges, and yet they have the expertise 
and capability and I think it is very important that the other 
subsidized population needs to be well coordinated with 
Medicaid.
    The bottom line is, given the rigidity of the 
administrative rules here, I question at this time whether a 
substantial number of States would actually opt in to the 
system.
    With respect to the Medicaid expansion, while governors 
differ somewhat on the Medicaid expansion, my sense is that 
they would question the necessity of increasing the eligibility 
of childless adults and parents over 100 percent of poverty. It 
seems that these individuals could be made directly eligible 
for the other subsidy and receive their benefits through the 
exchange.
    Governors do, however, very much appreciate the fact that 
the committee is willing to have the Federal Government pay 100 
percent of the expansion. The phased-in mandate to increase 
reimbursement rates for primary care physicians give States 
pause, but we do realize that it is a very, very small 
percentage of the total reimbursement rate.
    Governors do support the choice for individuals to move out 
of Medicaid into the exchange. However, we would not support 
requiring States to provide the wraparound benefit. This would 
also include the CHIP population. The problem is that the 
wraparound benefit is administratively difficult, and 
maintaining the additional benefits may weaken the negotiating 
power of the exchange in receiving the most competitive prices.
    With respect to the dual eligibles, there is a number of 
provisions in the bill that we do think strengthen the 
integration of the dual eligibles, so governors are generally 
supportive of those provisions. And, also, with respect to the 
drug benefit rebates and a number of the provisions there, 
governors support that as well.
    Just one final comment on the transition, that if and when 
this bill passes it is going to be a huge implementation role 
for States and others; and, therefore, I think that the bill 
should include specific provisions about some up-front money 
for States to build capacity to implement as well as certain 
certifications when the insurance reforms are done and what 
other components are willing to be administered.
    Clearly, you have got to coordinate the individual mandate, 
the other subsidized population, as well as the employer 
mandate in the bill.
    Thank you for the opportunity to testify. I look forward to 
working with the committee as you move the bill forward.
    Mr. Pallone. Thank you.
    [The prepared statement of Mr. Scheppach follows:]





    Mr. Pallone. Mr. Freeman.

                 STATEMENT OF ROBERT S. FREEMAN

    Mr. Freeman. Mr. Chairman, members of the committee, my 
name is Robert Freeman; and I am here to represent five 
publicly run health plans that administer the Medicaid, SCHIP, 
and other programs for low-income individuals. We currently 
serve 9 and soon to be 11 California counties, and our group is 
the California Association of Health Insuring Organizations.
    Today, I hope to provide a local perspective of what is 
currently being accomplished by our publicly sponsored health 
plans in California. I do so in the hopes that it may serve 
this committee as it addresses the massive task of national 
health care reform.
    I would like to briefly describe how our health plans 
operate. I hope that it will further discussion by policy 
makers in relation to the health care delivery administration 
at the local level as opposed--I mean, in addition to the State 
and national level.
    County organized health systems are one of two public plan 
models in California, and we have been in existence for over 25 
years. My plan, CenCal Health, was the first, beginning 
operations in 1983. Since that time, four other county 
organized health systems have been established in California 
and one in Minnesota. These five plans have built on their 
success and will soon be effectively providing access to high-
quality health care to over 880,000 individuals. That is larger 
than 25 State Medicaid programs.
    Our governing boards consist of local government officials, 
physicians, hospital administrators, plan members and other 
health providers. We are independent of county government and 
function as a business. Although we are public entities, we 
have no guarantee of perpetuity so, like a business, if we 
don't do our jobs well, we can go away. We also operate full-
risk contracts with the State of California, necessitating 
efficiency and innovation.
    We are cost-effective. In relation to CenCal Health, 92 
cents out of every dollar goes to the direct provision of 
health care services.
    Further, the California legislative analysts, which is 
similar to the Congressional Budget Office, has stated that 
county organized health systems annually save the State of 
California $150 million over what it was would otherwise spend 
on its Medicaid program. As public entities, all governing 
board meetings are public, and board decisions are made in an 
open and transparent environment.
    Our plans also have broad-based provider networks. We found 
the policy of broad-based provider networks to be very 
effective in both providing member choice and building 
community support.
    Speaking of my own plan, we have approximately 90,000 
members and have 289 primary care physicians, 1,200 
specialists, 9 hospitals, and 113 pharmacies who serve our 
population in two counties.
    We also believe that our broad-based provider policies have 
contributed to the high quality of care we provide to our 
members. The State of California has a series of indicators 
that annually measures to assess access to care and quality of 
care levels, mostly preventive. County organized health systems 
are consistently high performers in relation to these measures. 
We also score well in biannual consumer satisfaction surveys.
    With this in mind, we believe that the public health plan 
concept currently works at the local level in relation to our 
plans. Further, in relation to the SCHIP program in California, 
public plans compete with private plans effectively and fairly, 
with neither private nor public model working from a 
disadvantage.
    In the areas of Medicaid expansion and creating vehicles 
who serve currently uninsured, we are in favor of both 
concepts. Expanding the Medicaid programs is an existing means 
to provide health coverage to currently uninsured individuals. 
The infrastructure to provide the care already exists, as do 
significant State and Federal standards, requirements, and 
regulations to protect members, providers, and others.
    The health insurance exchange concept outlined in the draft 
legislation seeks to create a fair and reasonable means of 
providing access to care and quality of care and choice. We do 
suggest that extra care be given to ensure the development of a 
health exchange will do no harm to existing health care 
programs and safety nets in our communities that currently work 
well. Our association believes the transparency provisions in 
the draft legislation are essential to build and maintain 
public trust in the delivery system.
    I will conclude my remarks by requesting the committee to 
take a good look at local delivery of health care options in 
relation to national health care reform. We believe including 
such a local component would promote community involvement, 
investment, and enthusiasm in national health care delivery as 
all health care delivery is local.
    Thank you for your time.
    Mr. Pallone. Thank you, Mr. Freeman.
    [The prepared statement of Mr. Freeman follows:]





    Mr. Pallone. Mr. Pollack.

                    STATEMENT OF RON POLLACK

    Mr. Pollack. Thank you, Mr. Chairman. Thank you and members 
of the committee for your prodigious patience. Very much 
appreciated.
    I want to thank you for the draft bill that has been 
offered. We think it goes in the right direction for a number 
of reasons. I was asked by the staff to focus my remarks on the 
changes with respect to the Medicaid program, and so I will 
focus my comments on that.
    As you know, Medicaid provides coverage today for almost 60 
million low-income people, approximately half of whom are 
children; and we think that Medicaid is the right vehicle to 
provide coverage for the poor. Medicaid provides certain things 
that simply don't exist today in the private marketplace that I 
think are absolutely critical for low-income populations.
    A recent article in Health Affairs pinpointed how important 
it is to provide cost-sharing protections for low-income 
people; and if they don't have those cost-sharing protections, 
it means they are unlikely to get the services that they need.
    Well, Medicaid rises to that challenge. Medicaid does not 
require premiums or enrollment fees. Copayments for individual 
services are limited normally to nominal amounts. Certain kinds 
of services are exempt from cost sharing, things like 
preventive care for children, emergency services, pregnancy 
related services; and certain populations also are exempted 
from cost sharing: foster children, hospice patients, women in 
Medicaid, breast or cervical programs. These are very important 
protections that simply do not exist in the private sector.
    But, over and above that, Medicaid provides certain kinds 
of services. For example, for children, early and periodic 
screening, diagnosis, and treatment was very important so that 
children get preventive care and any diagnosis that shows that 
something needs to be taken care of does get treated. 
Transportation is provided to doctors' offices for appointments 
and to community health centers. There are appeals rights that 
are very important that do not exist in any similar robust 
fashion in the private sector.
    There aren't insurance market problems like you have in the 
private sector, kinds of problems that would be corrected over 
time with the bill that you have introduced.
    Medicaid provides good health outcomes. As the Kaiser 
Commission on Medicaid and the Uninsured reported in May of 
this year, those in Medicaid are less likely to lack a usual 
source of care. Obviously, that is true, compared to the 
uninsured, but it is also true compared to those with private 
insurance. They are more likely to have a doctor's appointment 
in the last year. They do not have an unmet health need with 
the same frequency as those who are uninsured and those that 
have private insurance. Low-income women are more likely to 
have a pap test in the past 2 years.
    So Medicaid does provide very significant services for this 
important population, and it does so while costing 
approximately 20 percent less to cover people in Medicaid than 
it would cost if they purchased coverage in the private market.
    Now, building on Medicaid and strengthening the eligibility 
standards is something that I believe is close to consensus 
agreement. There was huge support for this from the various 
stakeholders: American health insurance plans, Blue Cross/Blue 
Shield, American Medical Association, American Hospital 
Association, AARP, NFIB, Chamber of Commerce, Business 
Roundtable. We all reached agreement about the importance of 
doing this.
    And one of your favored colleagues of the past, Billy 
Tauzin, and we at Families USA have agreed that it is very 
important to extend eligibility, as this draft bill does, to 
133 percent of the Federal poverty level.
    So I want to concentrate on why I think that measure is so 
important. We have huge differences today between different 
populations, children, their parents, and other adults who do 
not have dependent children. For children, due to the 
confluence of the Children's Health Insurance Program and 
Medicaid, in almost every State children are eligible for 
coverage if their income standards are below, family standard 
is below 200 percent of poverty. And in some States, as you 
know, Mr. Chairman, some States have exceeded that.
    However, for parents, in only 16 States and the District of 
Columbia does the eligibility standard even reach the Federal 
poverty level, which, mind you, for a family of three is only 
$18,310. Indeed, the median income eligibility standard among 
the 50 States, as you will see in the chart at the end of my 
testimony, is only 67 percent of the Federal poverty level, 
roughly $12,300 for a family of three.
    Mr. Pallone. Mr. Pollack, you are a minute over. If you 
could summarize.
    Mr. Pollack. I apologize. I would just say I think this 
would be very helpful if we did extend eligibility, 
irrespective of family status; and I am glad that the committee 
appears to want to go in that direction and pay for those 
costs. Thank you.
    Mr. Pallone. Thank you.
    [The prepared statement of Mr. Pollack follows:]





    Mr. Pallone. I want to thank all of the panelists.
    Now we are going to go to questions, and we are going to 
start with Ms. Schakowsky.
    Ms. Schakowsky. I appreciate your beginning with me, Mr. 
Chairman. I really have just one question.
    Mr. Freeman, I wanted to, first of all, thank you for 
flying from California to testify this evening. And I really 
want to thank all of you. I was in the State legislature in 
1993 and testified at a very similar panel about what the State 
of Illinois was doing. So it is a little bit deja vu for me 
too.
    I want to congratulate your county and the other California 
counties that operate health plans and for providing a public 
option for families enrolled in Medicaid and the CHIP program.
    I wanted to ask you about a provision in the discussion 
draft that is intended to reduce waste and increase value for 
Medicaid taxpayers, for the taxpayer dollars that your State 
and the Federal Government is paying. The provision would 
require that all Medicaid-managed care plans have a medical 
loss ratio of at least 85 percent. You have already testified 
that your plan's medical loss ratio is a pretty remarkable 92 
percent. So I think everybody understands that that means--85 
percent, it would mean that of every Medicaid dollar that is 
paid to the plan, at least 85 cents are used to pay for health 
care services furnished by hospitals and doctors and other 
providers. No more than 15 cents on the dollar could be used 
for marketing administration or, in the case of private, for-
profit plans, payouts to shareholders.
    So do you believe that it is reasonable for taxpayers to 
expect that any well-managed plan, whether public or private, 
have a medical loss ratio of at least 85 percent? We have heard 
from some that that is somehow unreasonable, so I would like to 
hear what you say about that.
    Mr. Freeman. Well, I will just respond from our own 
experience.
    First of all, the California CHIP program has that 
requirement. So every plan----
    Ms. Schakowsky. Same requirement?
    Mr. Freeman. Yes, same requirement. And as for our plan and 
our sister plans, none of our plans have had an issue of 
meeting that requirement on a consolidated basis. It has never 
been an issue for us.
    Ms. Schakowsky. You looked like you wanted to say 
something. Do you have that at all? Do you have a requirement 
on loss ratio?
    Mr. Vitale. Yes, thank you, Congresswoman. We just changed 
our medical loss ratio in New Jersey from 75/25 to 80/20, which 
means that more money will be directed toward providers and the 
care that they provide to reimbursement with regard to doctors 
and hospitals.
    It is something that works in our State. It hadn't been 
changed in years. So we took an incremental step. We had 
discussed 85/15, but we settled at 80/20, which literally puts 
millions of dollars more into the providers' side of the 
equation and a little less money into the profit side of the 
insurance industry.
    It did not cause any disruption in the insurance industry 
market. A couple of small companies closed and moved out, but 
that was unrelated to the 80/20 change. It is just that more 
money is now spent on the provider side, then less in the 
pockets.
    Ms. Schakowsky. Does anyone else want to comment on that? 
Yes.
    Mr. Webber. I just take a very different view from Senator 
Vitale on the issue. And in fact, Guardian, which is a not a 
small provider, the representative was in my office last week 
saying the 80 percent loss ratio made us leave the State. They 
simply couldn't be profitable in New Jersey after the loss 
ratio went to 80 percent.
    And that is actually what caused the constituent that I 
referred to during my testimony to lose his coverage. The 
insurance company told him flat out that because New Jersey is 
going to impose an 80 percent loss ratio and because they are 
going to make us write in the individual market, which is not 
profitable for insurers in the State, we are going to pull out 
of New Jersey and you are going to lose your coverage.
    So there is a difference of opinion from the legislators in 
New Jersey as to whether this 80 percent loss ratio is a good 
thing.
    Mr. Scheppach. The only comment I would make is that we are 
dealing with three separate populations in Medicaid. You have 
got the women and children, you have got the disabled, and you 
have got the long-term care. I am just saying that the mix 
there, because the disabled and long-term care are more 
intensive in terms of managing, if it is done correctly, 
integrating the services. So States that have an unusual 
percentage of that might have more difficulty meeting that than 
other States.
    Mr. Vitale. I just wanted to follow up on my colleague's 
response to you. I appreciate your years in the State 
legislature and understanding the nuances of that business.
    When I spoke with the Department of Banking and Insurance 
and I learned that Guardian and a small company left, their 
letter to the Department had nothing to do with the MLR, with 
the medical loss ratio. In fact, it had to do with other 
reasons.
    You know, there are--most every--well, actually, every 
insurance company who writes in New Jersey already has a higher 
MLR by practice. We put it--we codified it into law. They 
don't.
    There isn't one company that is going to leave that State. 
They are profitable. Some of it is difficult, just like any 
other business. But for those who are in that State, whether it 
is Horizon or it is Blue or it is anyone else, they are doing 
just fine. They would always like more.
    And when a lobbyist or a representative from an insurance 
company will come to my office and complain to me that they are 
going to make less this year, well, that is just what they do. 
They will want to put the fear into any legislator that, if 
something changes, if the dynamic in the insurance industry 
changes, if they are made to pay more to providers and put less 
in their pocket, then the sky is going to fall and the world 
will end for them; and none of that has happened.
    Ms. Schakowsky. Thank you very much.
    Mr. Pallone. The gentleman from Georgia, Mr. Gingrey.
    Dr. Gingrey. Mr. Chairman, I am not quite ready. If you 
could come back to me, or if I am the only one I will get 
ready.
    Mr. Pallone. Sure.
    Mr. Shadegg, do you have questions?
    Mr. Shadegg. I do, Mr. Chairman. Thank you very much. I 
would like to ask each of the witnesses a set of three brief 
questions. I would like just a quick answer to them, if I 
could.
    First would be, do you have a copy of the tri-committee 
discussion draft? Yes or no. When did you receive it, and have 
you had a chance to read the entire bill?
    Mr. Allen, do you have a copy?
    Mr. Allen. Yes, we do have a copy. We received it Friday. 
We have reviewed it as best we can over the weekend.
    Mr. Shadegg. I understand the ``we''. I like the pronoun. 
Have you read the bill personally?
    Mr. Allen. No, I have not.
    Mr. Shadegg. Mr. Vitale?
    Mr. Vitale. We have received a copy in our office, and we 
have not reviewed it yet. Thank you.
    Mr. Webber. I have got an answer to only one of your 
questions, the first one. No.
    Mr. Shadegg. You don't have a copy of the bill? You were 
not provided a copy of the bill?
    Mr. Webber. No.
    Mr. Shadegg. OK. Doctor.
    Mr. Scheppach. Yes, I have a copy of the bill. I received 
it Friday; and, yes, I have read the entire bill.
    Mr. Shadegg. Thank you. You are the first.
    Mr. Freeman.
    Mr. Freeman. Yes, we received the bill. We received it 
Friday around noon California time. And I have read--I think I 
am on Page 115.
    Mr. Shadegg. Out of?
    Mr. Freeman. 852.
    Mr. Shadegg. Thank you.
    Mr. Pollack.
    Mr. Pollack. I did receive the bill on Friday. I have read 
portions of the bill. Our staff has read the entire bill.
    Mr. Shadegg. Thank you very much.
    Assemblyman Webber, I appreciate your testimony. I was able 
to watch it from my office. I do appreciate your efforts on 
behalf of consumers; and I, as you know, share your interest in 
allowing the across State purchase of health insurance so that 
we could bring some competition to the market and bring down 
cost.
    But I guess we are looking at a broader debate here. We are 
looking at the government becoming vastly more involved in the 
insurance sector and, quite frankly, getting the government or 
giving the government a much larger role kind of between 
patients and their doctors.
    You made a plea in your testimony for not--for the Congress 
not to do what has been done in New Jersey. I presume that is a 
reference to the 1992 legislation in New Jersey and also to 
guaranteed issue and community rating. Can you expand on that?
    Mr. Webber. Well, again, the health insurance market is not 
healthy in New Jersey. In fact, it is very sick. We had at many 
as 28 insurers writing policies in the State back in the early 
'90s; and due to these reforms undercutting their ability to 
underwrite effectively and efficiently, mandating coverages, 
putting in minimum loss ratios that are not profitable, we are 
down to about only five companies that really write policies on 
the individual market to any great degree. So consumer choice 
has been virtually eliminated, certainly diminished in the 
State.
    And, Congressman, I am eager to take on the challenge of 
health care reform at the State level; and we have talked about 
this many times, actually. If we had the opportunity to get at 
it and allow New Jerseyans to get out of State and create a 
system in which they could really shop for policies that suit 
them, instead of the policies that the politicians in Trenton 
think are suitable for them, I think we would go a long way to 
making health care and the delivery of health care better in 
New Jersey, and then we can get at the rest of the uninsureds.
    Mr. Shadegg. Mr. Pollack seems to be concerned, and I think 
justifiably so, about uninsured Americans, about those people 
who do not have health insurance coverage at all. If we 
provided everyone in New Jersey and indeed everyone in America 
who does not have insurance right now and who cannot afford to 
buy health insurance right now with a refundable tax credit, 
that is, cash from the Federal Government to go buy a health 
insurance policy of their own, do you believe that would take 
care of, number one, their health insurance needs? And, number 
two, would it benefit them to let them make those choices? Or 
is it better to put them in some form of, I guess, a Medicare 
program or a program like the tri-committee draft?
    Mr. Webber. No, I think there is broad consensus that 
people want more control over their health care decisions. 
Certainly the refundable tax credit would help. But I have to 
tell you that, as I understand it, the range for a family would 
be around $5,000; and in New Jersey that is not even going to 
buy half of the average premium for a family. So New Jersey 
would need a little more reform.
    If we had the opportunity, for example, to buy health 
insurance policies across State lines and got a tax credit to 
purchase that, then we could really start to eliminate the 
uninsureds from the rolls.
    Mr. Shadegg. Many of us have advocated not only a 
refundable tax credit but the creation of more insurance pools, 
allowing more pooling mechanisms so people would have more 
choices and obviously creating a level playing field in terms 
of taxes so people could buy health insurance on the same tax 
basis that a company can. Would you support those reforms? And 
do you think those would help the people of New Jersey?
    Mr. Webber. Well, absolutely; and that is why I am eager 
for the States to get a shot at this and really take our cut, 
not in the way that New Jersey has tried it but in the way New 
Jersey can try it going forward. And association group plans 
like you are talking about, certainly, after health care choice 
and interstate purchase of health insurance, would be one of 
the top things we would want to do.
    Mr. Shadegg. Thank you very much for your work in this 
area. And I think Mr. Chairman, I concluded my last question 
within the 5 minutes.
    Mr. Pallone. And I certainly appreciate that.
    Mrs. Capps, our Vice Chair.
    Mrs. Capps. Thank you, Mr. Chairman; and I thank you all 
for your patience and your testimony today.
    I particularly want to thank and welcome my constituent, 
Mr. Robert Freeman. The program that he described, CenCal, and 
the counties that I represent in Congress, I can attest to the 
fact that you, since its beginning, which I was a part of as a 
community member and also one who worked in public health 
nursing in the school districts, that it is very successful, 
very effective, and now has grown to include two counties and 
is part of, as you describe, the alternative ways of delivering 
Medicaid, which we know as MediCal, and Healthy Families in 
California.
    Now, I want to give you a chance to expand further but ask 
you some--two or three questions. One of the complaints that we 
are hearing from many who oppose a public plan option is that 
it would we weed out unfairly, they say, private competitors. 
Can you elaborate on how CenCal competes and does business 
alongside of private entities for the Healthy Families Program, 
which is how we term the SCHIP in California? Are there still 
private plans offering coverage? And how do you get along with 
one another?
    Mr. Freeman. Thank you, Mrs. Capps.
    Sure, in the California SCHIP program it is called Healthy 
Families. It is set up as a competitive model where they have 
the States divided into regions and in those regions counties 
where you would have multiple plans compete for the Healthy 
Families business, usually three or four health plans in a 
designated area. And in those areas where, like in Santa 
Barbara and San Luis Obispo counties where we are from, we are 
a public plan and we compete with private insurers, as well as 
those other areas of the State that have public plans.
    And in the 10 years that the Healthy Families Program has 
been going, the competition between the public and private 
models has been, we think, effective. It has been friendly. It 
has been, I think, successful in providing choice and in giving 
options for those subscribers as to which health plan they 
would like to join.
    Recently, actually, we have had a couple of the private 
plans pull out of our area because--I don't know their reasons. 
I am assuming the business situation changed. But--so now we 
are one of only--instead of four plans, we are one of two plans 
in both Santa Barbara and San Luis Obispo counties. And we do 
think one of the advantages of our plan is because we are 
created by--of the community, we can't exit the market place. 
We wouldn't. Our mission is to serve our service area.
    But, in general, I think the competition has--it has done 
as it was intended to do at the time.
    Mrs. Capps. Actually, I described San Luis Obispo County 
where the number of private providers has dwindled in large 
part because of the lack of providers. It is a very rural area, 
and the reimbursement rate being so low, and that there really 
is a monopoly in the private sector. So this really is the only 
choice that families eligible for Healthy Families can choose.
    My second question, does the county organized health 
system, as you have experienced it, have bipartisan support 
both within our county and the State? It is not particularly 
seen as a partisan program, is it? Does it enjoy broad-based 
support; I am asking.
    Mr. Freeman. It does. All of our plans enjoy, I think, 
bipartisan support at both the local and State level. I think 
anytime you have a public program that delivers what the 
policymakers intend it to do and is very watchful and efficient 
with taxpayer monies, I think that is something that either--no 
matter what your party affiliation, that is good public policy. 
And our assemblymen and State senators and county supervisors 
of both parties and over time have been supportive, because 
they do see it is a community run plan where the community 
actually--the health care community gets together to solve 
problems.
    Mrs. Capps. And I know the State appreciates it, because 
you have saved a great deal of money and provide also very 
individualized services to your constituents.
    Mr. Freeman. We do our best, and we think we have been 
successful.
    Mrs. Capps. And you do have representation on your board, 
all of those sectors. I have talked with many of them.
    Finally, can you tell us how you contract with providers, 
and especially with safety net providers in the community?
    Mr. Freeman. Sure. Safety net providers make up--first of 
all, we contract with all the safety net providers in our 
community; and we consider that county clinics, community 
health clinics, all the hospitals. We have all the hospitals. 
And we also, which is fairly unique for a Medicaid plan, we do 
cover long-term care. So we contract with all the skilled 
nursing facilities. And we think that it has been--it is very 
effective.
    We know that--it is important to us that these safety net 
providers stay healthy, because they do see a large portion of 
our membership. They are open at times when our members can get 
to them.
    And we have also been very mindful that some of these, 
especially some of these skilled nursing facilities, really are 
watching every penny. So we do our best to make sure they get 
paid as quickly as possible; and at times in the past we have 
literally cut checks early so they can meet payroll and so 
forth, because it is in our interest for them to survive. They 
are part of our community, they are partners with us, and it is 
certainly in our interest to make sure they are as viable as 
possible.
    Mrs. Capps. Thank you. Thank you, Mr. Chairman.
    Mr. Pallone. Thank you.
    Mr. Pitts.
    Mr. Pitts. Thank you, Mr. Chairman.
    I would like to thank the panel for your testimony, 
especially thank Assemblyman Webber for your comments.
    I would like to ask you, Assemblyman, why does health care 
in New Jersey cost so much? Is it because of the mandates?
    Mr. Webber. There is a lot of things that drive the cost of 
insurance in New Jersey. Certainly, the underwriting rules, 
notice guaranteed issue, that is, the insurance companies have 
to take all comers, regardless of their health condition, and 
then the community rating that has been modified recently, that 
also drives up the cost of insurance for many.
    There are other New Jersey specific reasons. I mean, it is 
an expensive place to live and work and provide the medical 
care as well.
    But, in addition to those factors, we do have as many as 45 
mandated coverages for everything from mammograms to cervical 
cancer to Wilms tumor and infertility treatments, and there is 
a series of mandated coverages that also drive up the cost.
    Mr. Pitts. How has the price of health insurance increased 
since New Jersey enacted these mandates? Can you give us 
examples of the amounts of increases?
    Mr. Webber. Well, it is difficult to pin down how much each 
mandate costs and increased the cost of insurance. But the 
estimate is that for every 1 percent of increase in the health 
insurance premium that mandates cause as many as 8,000 people 
in the State lose their health coverage because their employers 
can no longer afford to provide it for them or because they can 
no longer afford to purchase it themselves. So just in the 
last, I believe, 7 years we have had over 110,000 people in the 
State join the uninsured rolls.
    At the same time, we are putting in rules and mandates. We 
have mandated over 15 coverages in the last 7 or 8 years in the 
State. So we can continue to increase the costs even as people 
find it more and more unaffordable to purchase health insurance 
in New Jersey. And I just think that is backwards. We need to 
start looking for ways we can provide more efficiently health 
insurance to our constituents.
    Mr. Pitts. In your testimony, you mention that your 
legislation maintains your State's core consumer protections. 
What are those protections?
    Mr. Webber. The legislation would require out-of-State 
insurance companies to come in and be certified by the State 
Department of Banking and Insurance, the New Jersey DOBI. In 
order to do that, they would submit themselves to jurisdiction 
to be sued in the State of New Jersey; and if there were 
complaints or appeals, they would have to submit themselves to 
the jurisdiction of the Department of Banking and Insurance to 
rectify those problems.
    So a New Jerseyan who would purchase, say, a policy from 
Colorado wouldn't be going to Boulder to fight with the 
insurance company. They could go to Trenton or the local 
Department of Banking and Insurance representative.
    I think that strikes the right balance. It gives New 
Jerseyans the opportunity to purchase health insurance that 
meets their needs in terms of the mandated coverages and the 
underwriting rules that might be written in another State, but 
it maintains protection for New Jersey consumers and allows 
them to deal with their insurance companies in their home 
State.
    Mr. Pitts. And do you think that a public plan like the one 
in the discussion draft before us will lead to crowding out of 
the private insurance market?
    Mr. Webber. Well, again, I haven't seen the bill. But I 
think, just intuitively, when there is a government plan 
available, subsidized by the taxpayers, without any real profit 
motive or incentive, there are going to be private companies 
who will dump their employees into what we call New Jersey 
Family Care, or whatever alternative government program is 
available, especially as those income levels rise for 
eligibility in New Jersey.
    Now we have 350 percent of poverty. There are going to be 
employers who recognize that they can still have their 
employees covered by insurance and not have to pay for it 
themselves. I think intuitively, yes, they will start to crowd 
out private health insurance.
    Mr. Pallone. The gentleman's time has expired.
    I know the clock is a little weird there. I apologize for 
that. I am going to recognize myself for 5 minutes.
    This discussion about the protections, if you will, it 
really goes to the heart of a lot of what we are dealing with 
in this bill. I mean, I have to be honest with you. When I--you 
know, Members from other States are constantly telling me that 
they want to make sure that, you know, that individuals can get 
insurance regardless of pre-existing conditions.
    I mean, the proposal before us says that insurance 
companies can no longer be able to engage in discriminatory 
practices that enable them to refuse to sell or renew policies 
due to an individual's health status. They can no longer 
exclude coverage or treatments for pre-existing conditions. It 
limits the ability of insurance companies to charge higher 
rates due to health status, gender, or other factors, I mean. 
It is a very important part of the discussion draft. And 
frankly, when I--you know, I am proud of the fact that in New 
Jersey those kinds of discriminations are not allowed. OK?
    So the other thing you have to understand is that, you 
know, the Insurance Trade Association, AHIP I guess it is 
called, they have told us that they are willing to accept new 
regulations at the Federal level with limitations on their 
underwriting rating practices, no more pre-existing condition 
exclusion.
    How is it--and I have to get to three questions, so I am 
going to ask you first, Assemblyman Webber. How is it that the 
trade association thinks that we should include these 
provisions and you don't? What is the theory?
    I mean, obviously, they think they can sell insurance 
nationally. They are suggesting that these New Jersey 
provisions be put into the Federal legislation. Why are they 
advocating that?
    Mr. Webber. Well, I can't speak for the insurance industry, 
for sure. And when there is a big hammer hanging over your 
head, I think insurance companies might be willing to 
compromise more than they otherwise would.
    Let's say this. There are better ways to deal with people 
with pre-existing conditions and those we call the chronically 
uninsured or chronically uninsurable than to require guaranteed 
issue of all insurance policies.
    Mr. Pallone. And I just don't have a lot of time, and I 
want to ask Senator Vitale. I mean, my fear is just the 
opposite, that if we don't include these provisions or, as you 
suggest in New Jersey, that we simply deregulate, it would have 
major consequences. I mean, I would ask Senator Vitale to 
respond that. I mean, this is a cornerstone of what we are 
trying to do is to not allow, you know, to have these 
protections at a Federal level. You have them at the State 
level. What happens if we don't have them?
    Mr. Vitale. Well, it has been very meaningful for the 
consumers in New Jersey to have guaranteed issue, one of the 
few States that enjoys that provision. It guarantees that 
insurance companies shall write a policy and can't exclude 
someone because of pre-existing conditions. So, essentially, it 
is take all comers.
    Imagine an environment in New Jersey, as bad as it is in 
our State for those who are uninsured and every other State, 
for an insurance company to cherry-pick who it is that they 
would like to insure. Will they decide not to insure women of 
child-bearing years because they are higher risk and they are 
going to be expensive?
    Mr. Pallone. And gender is one of the things that has been 
used. Exactly.
    Mr. Vitale. That is right. And will they decide not to 
insure an older New Jerseyan, a pre-Medicare New Jerseyan 
because he or she is at higher risk of anything, heart disease, 
kidney disease, cancer? The older you get, the sicker you get. 
It is a fact of life. Will they only want to insure children?
    When you purchase insurance out of State without the 
safeguards provided in our State, they will only take those who 
are in good condition who are considered to be a good risk, 
leaving those in New Jersey who are considered to be a higher 
risk, women of child-bearing years, older men and women, out of 
the mix. And the way the insurance business works--and I don't 
need to give you this lesson--is it is about pooling risk with 
healthy lives and sick lives together and risky lives and less 
risky lives together and you come up with an average price.
    Mr. Pallone. I don't mean--I know I am going to have to cut 
you off. Regardless of the debate--and I am going to move on to 
Mr. Allen and just make a comment here. Regardless of the 
debate, though, about whether you think we should deregulate in 
New Jersey and people should go to other States--I mean, the 
bottom line is that what the discussion draft would do would be 
to basically say that insurance companies would have to apply 
these rules federally across the country. And I mean, if the 
Insurance Trade Association says it is OK, I frankly don't 
understand why it wouldn't be.
    But let me just go to Mr. Allen, very quickly, because I am 
concerned--you know, I want you to comment, if you will. The 
discussion draft raises Medicaid eligibility levels to 133 
percent of Federal poverty in every State. In addition, it 
makes available income-based subsidies for persons obtaining 
insurance coverage in the new health insurance exchange. I 
think these provisions are very important for Native Americans; 
and I just wanted you to comment on them, if you could.
    Mr. Allen. Well, without a doubt. I spend a lot of energy 
on the Travel Advisory Council for CMS with regard to Medicaid 
rates. I can't tell you specifically, you know, because I am 
not the one who actually administers it with my tribe. But we 
can get back to you in terms of, is it enough? Is it going in 
the right direction? And I think it is. Off the top of my head, 
knowing what we have been trying to do with regard to the 
recovery rates for the tribes, that it will help us immensely.
    Accessing Medicare and Medicaid has been real challenging 
for the tribes in terms of the policies they administer over 
there. So it has been difficult for us, and we are looking 
forward to our new opportunities. I can say that if this bill 
incorporates some language in there that strengthens it and 
puts provisions in there that it improves our ability to, as 
providers, whether it is through the Indian Health Service or 
the tribal clinics and hospitals, then it is definitely going 
to improve our ability to raise the level of services to all of 
our people.
    Mr. Pallone. I mean, we are trying. I mean, you probably 
know that the Indian Health Care Improvement Act, which you 
know is my bill, that I am the prime sponsor, is coming up in 
Resources tomorrow. We have been trying since the beginning of 
the year to incorporate a lot of the provisions of that, you 
know, in SCHIP and the stimulus and also protections in this 
health care reform or in Native Americans. And we will still 
try to move the other bill. But we do want to and we are really 
trying, as much as possible, to address some of the disparities 
that we know exist with Native Americans. I just wanted you to 
know that.
    Mr. Allen. I would also like to inform you, Mr. Chair, 
that, you know, times are changing for tribes in terms of how 
we provide services. So our clinics and hospitals provide 
services to both Indian and nonIndian alike now. It has 
changed. Where in the old days where we just provided services 
to the tribal citizens; and now, because of the diversity of 
our communities and the communities around us where, like my 
community, the providers actually bailed out in the community, 
so we basically took on that role. So we have a clinic right 
now where 95 percent of our patients are nonIndian.
    Mr. Pallone. I appreciate that, and I know I went over. But 
I am just concerned that--I want to make sure that the Native 
American concerns come out.
    Mr. Gingrey.
    Dr. Gingrey. Mr. Chairman, thank you for doing that.
    Mr. Chairman, you were just, I think, asking Representative 
Vitale in regard to why, in the State of New Jersey, this 
situation where there would be guaranteed access, community 
rating, all of these mandates that make it untenable for many 
insurance companies to continue to do business in the State of 
New Jersey. And the chairman said, well, gee, you know, AHIP 
says it is OK, and they are buying into that across the 
country.
    But I would suggest that they, as soon as we--if we did 
this--and I hope we do--pull out the mandate that everybody has 
to have health insurance, the mandate that they have to do it, 
and employers also have to provide it, that would be at the 
point at which AHIP would say all of a sudden no longer are we 
going to accept community rating and universal mandated 
coverage.
    So I will just throw that out there.
    Let me ask a question of Representative Webber. Your State, 
as you said in your testimony, has had massive decrease in 
insurance carriers, I think from 28 in 1992 down to seven 
insurance carriers now in the individual health insurance 
market. Do you think that a public plan like the one we are 
discussing in this draft before us, do you think it will lead 
to maybe some of these private carriers coming back into New 
Jersey or, rather, a further crowding out and lesser numbers 
participating?
    Mr. Webber. Well, I can't see any of the private insurers 
coming back just because there is a public plan now being made 
available. You know, there will be fewer lives on the private 
insurance market. I would assume--you know, bear in mind we 
might have seven companies writing policies, but if you are 
writing policies and charge $18,000 a year in premiums, you are 
really not intending to cover anyone. So we really have fewer 
than seven who are still writing policies seriously in the 
State. I don't think it is going to get any better anytime 
soon.
    Dr. Gingrey. Let me ask your colleague from New Jersey, the 
Honorable--is it Vitale? And I heard that--in fact, it is right 
here in this document--that New Jersey has in fact enrolled 
people earning as much as $295,000 a year in public coverage. 
Yet 23 percent of children below 200 percent the Federal 
poverty level are uninsured. How can that happen in the State 
of New Jersey?
    Mr. Vitale. Well, let me--I appreciate that question, but 
it is a question that has been asked and answered during budget 
hearings in New Jersey, of which I am a member, also. But it is 
a question that has a very simple answer, and the answer is 
that there were as many as three or four individuals who 
applied for coverage in New Jersey who lied on their forms when 
they applied for New Jersey family care. And it was through the 
process of an audit that we discovered that lie. And it was 
corrected. In fact, I wrote additional legislation that 
required not only that people fill out more information on 
their form in terms of their income but that Treasury do a back 
check against their wages and the filing so we know exactly 
what they are earning in the year that they are claiming they 
want to be a member of the program.
    So it was a matter of fraud on behalf of the three or four 
individuals that made big headlines. But--and, unfortunately, 
tried to give a black eye to the hundreds of thousands of 
honest New Jerseyans and parents and children who are doing the 
right thing.
    Dr. Gingrey. Reclaiming my time. I mean, I have got a sheet 
here of all the States and the average annual premiums in the 
individual market. In New Jersey, it is $5,300. And you go down 
to Wisconsin, it is $1,200. And I think we are getting some 
answers in regard to what the problem is in New Jersey.
    Mr. Pollack, in the limited amount of time I have left, let 
me just ask you this. I know you have been involved in health 
care reform for a long time. You had a lot of things to say 
about Medicare Part D and government controlling prices and 
setting prices of drugs and things like that. But your 
organization is, you know, well respected, of course, and has a 
lot of opinions on all this.
    Let me just ask you a quick question, though. Shouldn't we 
require States to ensure that low-income children are covered, 
let's say in the CHIP program, before opening up coverage to 
middle- and high-income families?
    Now, I ask that question really in a way for my colleague, 
Representative Nathan Deal, who is the ranking member, as you 
know, on the Subcommittee on Health that has a bill to that 
effect, that had an amendment when we were working on the CHIP 
program to say that if we are going to expand it, let's at 
least assure that 95 percent of those who are intended in the 
original bill between 100 and 200 percent of the Federal 
poverty level that we cover them before going up to 300 and 350 
percent. Your response.
    Mr. Pollack. Well, Congressman, I don't think it is one or 
the other. The CHIP legislation, which the President signed in 
February, is designed to accomplish what you just described, 
namely, making sure that more children who have been eligible 
for CHIP actually enroll in the program, and the States are 
actually provided financial incentives in order to do that 
work.
    Now, when you are talking about 200 percent of the Federal 
poverty level, remember, for a family of three, that is 
approximately 36, $37,000. The average cost of family health 
coverage today is approximately $13,000. So that is more than 
one-third of their income. And so if you go above 200 percent 
of poverty, you are helping people who otherwise could not 
afford to provide coverage for their children.
    And I don't think those two goals that you described are 
antithetical to one another. I think we can do and should do a 
much better job of getting kids enrolled who have been eligible 
and who are not in the program; and, at the same time, we 
should make coverage more affordable for those people who 
simply can't afford it, even though their incomes are above 200 
percent of poverty.
    Dr. Gingrey. I thank you.
    Mr. Chairman, I know that my time has expired. I appreciate 
your patience on that. Thank you, Mr. Pollack.
    Mr. Pallone. Thank you.
    The gentlewoman from Florida, Ms. Castor.
    Ms. Castor. Thank you very much, Mr. Chairman.
    Since we have some experts on local and State initiatives, 
I would like you all to address a concern I have. You know, all 
across America, local communities have stepped up to fill the 
void because they don't have anywhere else to turn.
    For example, in my hometown in Tampa, Hillsborough County, 
we have, for the past 15 years, provided an initiative where if 
you do not have health insurance from any other place, if you 
don't qualify for Medicaid or Medicare, and you are a working 
family below about 200 percent of poverty, the county has 
created a partnership with local hospitals and community health 
centers so that these folks don't end up in the emergency room 
and county government doesn't pay those very high costs out of 
property taxes, which everyone hates.
    It is very successful, and it has created a robust primary 
care system of 12 clinics, and hospitals are reimbursed and the 
doctors there are reimbursed. And now, with our health reform 
initiative, it looks like we, the Feds, now will come in and we 
will cover the cost for the people that my community were 
covering. And that is great. That is going to be great for my 
taxpayers. But I hate the thought of losing this award-winning 
local clinic system of primary care system that we have.
    And there are other communities across the country, I 
think--Oakland, California, maybe, San Antonio, Texas, others, 
plenty of others--that have these. How do we, in transition, 
ensure that these terrific initiatives on the local level 
survive?
    Mr. Vitale. Well, I think the program in Tampa is 
wonderful, and it is programs like that in New Jersey that we 
are trying to emulate. We have called them collaborative care 
models. We are working with local hospitals who are in close 
proximity to federally qualified health centers and other 
clinics to transition the uninsured, or even the insured, who 
present in an emergency department with what is really non-
emergent illnesses or injuries.
    We are required, of course, to take all comers, but those 
who present at an emergency department really don't need to be 
there. So we are working with our local hospitals. So it is a 
great model.
    I think the question, I hope, I think is, how are those 
providers, those caregivers, doctors and nurse practitioners 
and nurses reimbursed for the care they would provide?
    Ms. Castor. So is it--Dr. Scheppach, is it State leadership 
that needs to step in, because the States will have so much of 
the responsibility when we are talking about the 133 percent of 
poverty? It is going to be through Medicaid that they will be 
covered.
    Mr. Scheppach. Yes. I mean, there is a lot of programs now. 
Some States do programs with State-only dollars and a lot of 
the locals do. So there are those sort of tiered effects. This 
is probably going to be--if this bill were to pass, it is going 
to be a transition, I suspect, of 4 to 5 years before you 
transition. And I think to some extent what States would do 
would be to work with communities to ensure that they are doing 
part of the eligibility. That is feeding in. Because all the 
problems in Medicaid and SCHIP, oddly enough, is finding these 
kids and getting them, in fact, enrolled. And I think we are 
going to have the same problem with the other subsidized 
populations.
    What worries me very much about this bill, however, is that 
the entire sort of gateway or alliance is Federal. So now you 
are going to have the Federal Government in the middle of this 
doing insurance regulation for those qualified plans, and then 
you have got States outside that doing nonqualified plans. So I 
think the coordination problem is going to be greater going 
forward. I would worry about that.
    Mr. Pollack. Congresswoman, your community is well known as 
doing something that is exceptional. Obviously so many 
communities across the country don't do that. And it is one 
thing to provide primary care as community health centers do. 
Often people who get primary care may have difficulty getting 
access to a specialist.
    But your question and what Ray was just talking about, I 
think, tells us that, yes, there is going to be a transition, 
but it makes a whole lot more sense to put that lower-income 
population into Medicaid that exists rather than create the 
exchanges and overburden those exchanges which are going to 
have significant difficulty reaching out to larger portions of 
the population. Let us keep that lower-income population, at 
least for the time being, in Medicaid. Let us see how the 
exchanges function. But also, let us make sure that the 
protections that now exist uniquely in Medicaid continue to be 
provided to that low-income population.
    Mr. Freeman. If I could finish up and briefly add that, 
again, we think that all health delivery is local. And I think 
we also believe that the ability of local communities to 
address their own needs is very effective, and what has 
happened in your community is a perfect example.
    And also, when you have the local delivery, you really do--
you do encourage physicians and hospitals and other health care 
providers to really talk to each other and work towards this 
common goal of how can we make the community that we all live 
in a better place for all of their citizens.
    So we are big believers in really having whatever comes out 
of the Federal health care reform take a look at what is 
working at the local level and hopefully maintaining that.
    Ms. Castor. Good. I look forward to working with you all on 
that.
    Thank you, Mr. Chairman.
    Mr. Pallone. Thank you.
    Mr. Shimkus.
    Mr. Shimkus. Thank you, Mr. Chairman. And I have got a 
couple points I want to try to drive, but I will try to be 
quick and pretty efficient.
    Senator Vitale and Assemblyman Webber, when constituents 
have problems with the New Jersey program, do they call your 
offices? So you have--and that is probably not part of the 
calculations of the costs. We do the same thing. We have 
Medicare, Medicaid. We have, I have at least, one person full 
time to address those constituent concerns, and they are not 
easy, and they are bureaucratic. And I was just wondering, if 
we take on this as a national health care plan, guess what? We 
get it all, gang. We are going to get all the caseload calls. 
And that is why you guys support it, because then they won't be 
calling your offices. No.
    Let me--and just for the record, Medicare D is very 
successful. Medicare and Medicaid for the 60 years that it was 
here, still here, did not do what the private sector did, which 
was provide prescription drugs to people who had private 
insurance. You can't have modern medicine without prescription 
drugs. Although we have carried a system that didn't have it, 
and we fixed it, and we are under budget, provide better 
service, and the quality of service is high. And I think we can 
do that in this private sector debate, I really do, if we would 
just give it a chance.
    Let me--I want to go to Mr. Allen real quick. The Indian 
Health Service--I don't have any Indian tribes, so I am not as 
familiar--isn't it a one-payer system?
    Mr. Allen. It is referred to as a payer of last resort, so 
it requires that the tribes tap the insurance system or the 
Medicare or Medicaid, and then if there is still a gap in 
providing services to the tribal citizen, then we access the 
IHS monies.
    Mr. Shimkus. OK. Let me go to your encouragement to move 
people, I think, from the Indian Health Service to this 
insurance plan. I guess a better way to ask this is in your 
testimony, you do--you want to exempt the mandates and 
penalties from the Indian tribes; is that correct?
    Mr. Allen. Yes.
    Mr. Shimkus. Why would you want to--and we will have 
problems with that. I know there is tribal issues and 
sovereignty issues and stuff, but if we are going to do a one-
size-fits-all arena, we are going to have to do a one-size-
fits-all arena. I am not sure how we start exempting.
    One of the--and you want--in your testimony you also talk 
about you want exemption from employer mandates that should be 
exempt even for the Indian tribes that have the benefit of the 
casinos and golf courses and tourism issues; is that correct?
    Mr. Allen. Yes.
    Mr. Shimkus. And you want that exemption also to employees 
of that facility that may not be American Indians?
    Mr. Allen. Say again?
    Mr. Shimkus. Say you have an employee at a casino that is 
not an American Indian.
    Mr. Allen. Yes.
    Mr. Shimkus. And you are pushing for some exemptions of the 
mandates for the insurance provided to them.
    Mr. Allen. Yes. Our argument is that the tribal government, 
those businesses are under the umbrella of the tribal 
government, and as a tribal government, that it should be 
exempt.
    Mr. Shimkus. I got it.
    I have got one last question, and I want to try to be 
respectful of the time.
    Senator Vitale, Assemblyman Webber, what is your FMAP 
percentage? Do you know? Do you know what FMAP is? Do you know 
what your percentage is?
    Mr. Vitale. For those who are Medicaid and those childless 
adults covered in Medicaid are 33 percent of the Federal 
poverty level.
    Mr. Shimkus. But what is our share? What is the Federal 
payment?
    Mr. Vitale. Now, what is it----
    Mr. Shimkus. I think you are 50 percent. Who is California? 
Freeman?
    Mr. Freeman. I believe it is 50 percent.
    Mr. Shimkus. What would you say if there are States that 
have higher FMAP rates? Would you say that is intrinsically 
unfair and un-American that this Federal Government would allow 
some States to get a higher Federal reimbursement for Medicaid 
versus others? Senator Vitale?
    Mr. Vitale. Well, we are for----
    Mr. Shimkus. I am just talking about fairness. We are all 
citizens of the United States. The Medicaid is a Federal 
program, shared with the State. We do--we have a ratio of what 
we are going to compensate. Would you say it is fair that some 
States pay less than other States?
    Mr. Vitale. I would say that it is unfair that some States 
get less, and New Jersey is one of those States.
    Mr. Shimkus. So I will take that as yes.
    And I am going to end up with Assemblyman Webber.
    Mr. Pallone. This will have to be the last question.
    Mr. Webber. The same question. You are talking to a guy 
from a State who gets pennies back on the dollar that we send 
down to Washington. So I am not going to advocate for New 
Jersey to give money away, if that is the question.
    Mr. Shimkus. No. Should every State be given the same 
ratio?
    Mr. Webber. I don't think I am an expert.
    Mr. Shimkus. Say yes.
    Mr. Pallone. You can't tell him what to say.
    Mr. Shimkus. Let me tell you, if the bottom line is if 
Mississippi gets 76 percent return, and you are getting 50 
percent, should we change the law?
    Mr. Pallone. Don't answer the question, because he is a 
minute over. We have to try to stick to the time.
    All right. Mrs. Christensen.
    Mrs. Christensen. Thank you, Mr. Chairman. I think just a 
few brief questions.
    Mr. Allen, like Chairman Pallone, I am a member of Natural 
Resources, and there are several others of us on this Health 
Subcommittee and on the big committee, so we definitely have an 
interest in addressing the issues of the Native Americans in 
our country, and the tri-caucus, I will tell you, has taken a 
position of equity for American Indians as well as territories. 
But we haven't really addressed some of those exemptions that 
you have put in your testimony, so that is very helpful to us.
    But the urban Indians, the Indians who are not on the 
reservations, we generally have had problems in coverage and 
reaching that population. Do the recommendations in your 
testimony address the unique issues of that population, or are 
there other recommendations that you might want to add?
    Mr. Allen. The answer is, yes, we have additional 
recommendations. The provisions in the bill go a long way to 
helping fill the gap. There is a lot of very positive 
conditions in there, including access to subsidies.
    The issue for us will be that over half of our citizens of 
each of the tribes in general are outside what we call the 
service area, and they are in urban communities, et cetera. And 
if we are able to access the resources to serve them if they 
are underserved, then we can fill that gap. We can close that 
gap. That has been an historical gap for the tribes.
    This testimony is in collaboration with the National Indian 
Urban Centers, and they work very closely with us trying to 
fill that gap. But there are service centers who have been 
severely underfunded historically and don't even come close to 
providing the quality care that this bill is intended to 
address.
    Mrs. Christensen. Thank you.
    Dr. Scheppach, my Governor and Governor deJongh of the U.S. 
Virgin Islands is an active member of NGA and has signed on to 
the policy statements on health care reform, energy, and many 
of the other ones. We have a particular issue with Medicaid and 
wanting to get the cap lifted, at least begin to move in that 
direction. Does the NGA have a position on the territories if 
you support it? Are you supporting my Governor in his attempt 
to move the cap?
    Mr. Scheppach. I sure am. We do have a policy position to 
support all the territories in raising the cap. Yes.
    Mrs. Christensen. Thank you.
    Mr. Pollack, it is good to see you here. You have told us 
about some of the reports on Medicaid that show--that are 
positive, but there are also some other reports that, while, 
yes, there is increased access to services and to care, there 
is still some reports that show that the outcomes are not as 
good as they need to be. And you didn't really have a chance to 
talk about where we may need to go to improve on Medicaid, 
which I feel we definitely need to do. Medicaid patients are 
often in another line if they are not in the back of the line 
because they are Medicaid patients. The cost, as you said, of 
providing that service is lower than the private insurance 
market, but part of that is because they don't pay, and so the 
providers do not locate or they move out of poor areas. So we 
have access issues.
    You know that I have proposed that we put the Medicaid 
patients into the public plan. I am not going to necessarily 
ask you to comment on that, but do you have some suggestions as 
to how we can improve Medicaid outcomes? How can we improve 
Medicaid and make it not only just so that patients can get to 
a physician, which is often a problem, but that we can ensure 
that they have better outcomes?
    Mr. Pollack. I think one of the biggest problems that 
exists for those people on Medicaid is sometimes they have 
difficulty getting a doctor, and that is largely a function of 
the payments that are provided, that are given to providers.
    I am happy to see that in this draft bill there are some 
improvements made with respect to payments to primary care 
doctors. I think there is also, I think, hope for improvements 
because there is an experiment proposed here, a pilot program 
for medical homes. So I think those kinds of things will lead 
us in a much better direction in making care actually much more 
accessible for people on the program.
    Mrs. Christensen. My time is up, so I don't get to go back 
to the public plan issue. We will talk about that again.
    Thank you, Mr. Chairman.
    Mr. Pallone. Thank you.
    Mr. Green.
    Mr. Green. Thank you, Mr. Chairman. I just have one 
question.
    Dr. Scheppach, in your testimony, you mentioned you would 
oppose changes to Medicaid that were drawn in an unfunded 
mandate. And having served 20 years as a State legislator, I 
can relate to that. And you say States must take into 
consideration not only actual costs of including individuals on 
their roles. I understand why you oppose a Medicaid expansion 
if it is unfunded, but what about a mandate to cover the 
population the States are already supposed to be covering under 
Medicare? And I will give you an example.
    In Texas, we have approximately 900,000 uninsured children; 
600,000 are Medicaid-eligible but unenrolled, and 300,000 are 
SCHIP-eligible but unenrolled. And I would like Texas to cover 
those children, and I would like to mandate 12 months of 
continuing eligibility under both programs to do so. Texas has 
that responsibility to cover these children, but has repeatedly 
allowed these kids to drop off the SCHIP and Medicaid roles in 
order to avoid paying the State match. We cannot continue to 
allow children to remain uninsured so States can avoid paying 
their match.
    Short of federalizing Medicaid, what can we do to ensure 
States cover the individuals under Medicaid that they are 
responsible for covering? And I can understand what my 
colleague Mr. Shimkus--although as a lawyer probably the worst 
case I have ever seen of leading the witness when you say, 
``Please answer yes.'' I don't quite go that far.
    But what can we do short of federalizing Medicaid to get 
States like Texas and maybe Florida from my colleague Ms. 
Castor to cover more of the children particularly, since we 
have had SCHIP since 1997, and Medicaid for 30 years?
    Mr. Scheppach. In all seriousness, one of the problems with 
Medicaid is it is three sort of programs in one. It is women 
and kids, it is the disabled, and it is long-term care. And it 
is the long-term care that we think is the biggest problem 
because the demographics are changing and so on, and a lot of 
the dollars really go there. The women and children are 
relatively inexpensive and a good investment.
    And so the problem is, is that Medicaid now is 22, 23 
percent of the average State budget, about what all elementary 
and secondary education is. And right now, from a State 
perspective, we are looking at about 180 billion in terms of 
shortfalls over the next 3 years. So what you are seeing, and I 
think you are beginning to--Texas is a little bit better off 
than a lot of States, but it also has a problem of basically 
raising the State's share to cover those.
    I think at some point Medicaid needs to be restructured so 
that the long-term care portion of the population goes into a 
separate trust fund or so on. States, I think, understand it is 
sort of their responsibility, women and children, because it is 
also a population they have to work with in terms of welfare 
and other things. So I don't think the women and kids are a 
huge problem.
    Mr. Pollack. Mr. Green, I would say there are two things in 
response to your question. First, we obviously can do a whole 
lot better in terms of the enrollment process. It is rather 
cumbersome, and particularly the reenrollment process. After 
the year is up, and a child has been eligible, they have to 
reenroll. If they fail to do that for whatever reason, they are 
off the rolls. And there is a lot of churning in the program.
    So we can do a lot more in terms of outreach and better 
enrollment. And the CHIP legislation that passed in February 
actually, I think, provides some opportunities to make that 
happen.
    But with respect to Texas, there is a very important thing. 
One of the things we know is that children are less likely to 
enroll if their parents can't enroll with them. And in Texas 
the eligibility standard for parents is a meager 27 percent of 
the Federal poverty level. So if you have got a parent and two 
kids or two parents and one child, if that family has income in 
excess of $5,000 a year, they are ineligible. The parents are 
ineligible.
    So I think one of the things this bill does is it allows 
the parents to enroll with the children, and I think that will 
help solve the problem you are talking about.
    Mr. Green. Well, I have a concern again about the churning, 
because I know in 2003 when some tough budget decisions like 
our legislators have to make, they cut a bunch of children off 
of CHIPS. And they knew how to do it; they made them reenroll 
every 6 months. And you can quantify it very quickly to say you 
know how many kids are going to drop off because the parents 
just can't go down and stand in line at the Health and Human 
Services office. So that is the concern.
    Thank you, Mr. Chairman, for your patience.
    Mr. Pallone. Thank you. And I think that concludes the 
questions for this panel. But I want to thank you. I know it is 
late, and I know you had to wait a long time, but we really 
appreciate your input, because what you are saying at the 
State, local, and tribal level is very important in terms of 
what we are doing with this health care reform.
    Mr. Allen. Mr. Chair, could I correct one point that I said 
that was not right in the record? The Congressman from Illinois 
asked were we asking the tribal government and our casino, our 
businesses to be exempt? We are asking that our governments are 
exempt, not our businesses. So that is a distinction that I 
think he was asking for with that question, and I wasn't quite 
clear.
    Mr. Pallone. All right. Thank you for that clarification.
    And thank you all, really, for being here. Thank you.
    Mr. Pallone. And we will ask the next panel to come 
forward, and this is our panel on drug and device manufacturer 
views.
    I want to welcome all of you. I know the hour is late. It 
is already 6:00, and we may end up having votes, too, to 
interrupt us, but hopefully not. And I am changing the order a 
little bit because Mr. Gottlieb, I know, does have to leave.
    So let me first introduce Dr. Scott Gottlieb, who is a 
resident fellow at the American Enterprise Institute.
    And then to his left, I guess my right, is Thomas Miller, 
who is chief executive officer, workflow and solutions 
division, for Siemens Medical Solutions, USA.
    And then we have Kathleen Buto, who is vice president for 
health policy at Johnson & Johnson. Thank you for being here.
    And William Vaughan, senior health policy analyst for 
Consumers Union. He is no stranger to this committee.
    And finally is my friend Paul Kelly, who is vice president 
of government affairs and public policy of the National 
Association of Chain Drug Stores.
    And you know the drill: Five minutes, but your written 
testimony in complete becomes part of the record.
    And we will start with Dr. Gottlieb.

 STATEMENTS OF SCOTT GOTTLIEB, M.D., RESIDENT FELLOW, AMERICAN 
    ENTERPRISE INSTITUTE; THOMAS MILLER, CEO, WORKFLOW AND 
 SOLUTIONS DIVISION, SIEMENS MEDICAL SOLUTIONS, USA; KATHLEEN 
  BUTO, VICE PRESIDENT FOR HEALTH POLICY, JOHNSON & JOHNSON; 
WILLIAM VAUGHAN, SENIOR HEALTH POLICY ANALYST, CONSUMERS UNION; 
 AND PAUL KELLY, SENIOR VICE PRESIDENT, GOVERNMENT AFFAIRS AND 
    PUBLIC POLICY, NATIONAL ASSOCIATION OF CHAIN DRUG STORES

                  STATEMENT OF SCOTT GOTTLIEB

    Dr. Gottlieb. Thank you, Mr. Chairman. I would like to 
submit my oral statement for the record.
    I just want to pick up on some themes that were discussed 
in some of the earlier statements. It is a pleasure to be here, 
by the way. I am from the 12th Congressional District of New 
Jersey, and my parents still live there, so it is a pleasure to 
be here with you.
    There was a lot of discussion around Medicare's efficiency 
in some of the earlier testimony, and the issue of rationing 
also came up tangentially in Medicare.
    With respect to Medicare's efficiency--and I worked at the 
agency for a period of time under Dr. McClellan--one of the 
things that Medicare lacks is clinical expertise on the staff, 
and I think it has become quite apparent in recent years. If 
you look at the structure of Medicare, they have about 20 
physicians in the entire organization. If you look at private 
plans, by comparison they will have literally hundreds. And I 
think this gets to an important consideration when you talk 
about why Medicare is able to operate with less overhead. It is 
in part because they are not doing a lot of clinical review, 
for better or worse, in the context of the kinds of 
reimbursement decisions they have made and even the kinds of 
coverage decisions they make.
    Just anecdotally, they made about 165 different decisions 
with respect to cancer products since 2000 without a single 
oncologist on the staff of the organization. And why this is 
important, I think, with respect to the intersection of talking 
about Medicare's efficiency and the low overhead that they 
operate with, and then you get into discussions around 
rationing, is because it is without a doubt that we already 
engage in issues of rationing with respect to the Medicare 
program. We are doing it right now in the context of coverage 
decisions and reimbursement decisions and how we go about 
coding. And my fear is that if we expand government control 
over health care, we are going to have to do those things much 
more.
    If you look at the kinds of proposals that have been put 
forward in front of this committee, as well as the proposals in 
the Senate, and you look at some of the cost containment 
measures in those proposals, they are really not very robust. 
Comparative effectiveness, product medical records, paying for 
prevention, all those individual proposals might have merit on 
their own, but there is a reason why the Congressional Budget 
Office hasn't assigned meaningful savings to them.
    And so the fear is, of people who talk about the potential 
for rationing inside a government program, is that in the 
absence of being able to control costs with policy 
prescriptions that are embedded in these bills, ultimately the 
default case 2, 3, 4 years from now will be to have to engage 
in more robust rationing decisions inside the Medicare program 
or whatever other government scheme we come up with. And if you 
look at the draft legislation in the Senate and the House, you 
see multiple references to quasi-independent advisory 
committees that we could certainly contemplate could become 
vehicles for that sort of rationing.
    So why is this important in the context of thinking about 
Medicare structure and its efficiency and its overhead? Well, 
if one of the reasons why Medicare is efficient and operates 
with a low overhead is because they don't have a lot of 
clinical expertise, the intersection between an organization 
that is going to be called upon to engage in more decisions to 
deny access on the basis of their own clinical judgment and 
their reading of the clinical literature with an organization 
that doesn't have a lot of clinical expertise is, quite 
frankly, frightening. And it was frightening in certain 
instances, anecdotally, when I was at the organization.
    And so in my written testimony today I tried to lay out a 
couple suggestions for how we could improve that process, 
because if we are to go down a road where we will have a system 
that has to make more clinical judgments in the context of what 
they decide to reimburse people for and give people access to, 
the least we should expect is that organization is clinically 
proficient, it is rigorous, it is based on good science, it is 
a transparent process. And we have none of those things today.
    And so some of the proposals I laid out in my written 
testimony was the creation of an advisory committee structure 
on Medicare where you subject decisionmaking of that body to 
external therapeutically focused advisory committees. Certainly 
if we contemplate a public insurance plan that will be making 
similar kinds of decisions either initially or eventually, we 
should create a similar structure. I think we also need to 
contemplate what the structure is for making coverage process 
decisions, reimbursement decisions, coding decisions, and 
making clinical considerations in the context of these 
programs.
    If you look at the structure right now of Medicare, if you 
were to ask anyone in a company, or if someone in a company, 
CEO, asked one of the subordinates who works on Medicare 
coverage processes what is the process, they would be hard-
pressed to delineate that process in a clear and coherent 
fashion, certainly not with the same clarity that you would be 
able to explain the FDA review process, which is very clear, 
very structured.
    Finally, in the proposals before this committee, there is a 
proposal for the creation of a comparative effectiveness center 
agency, if you will. I think before we step into that, once 
again we need to think about the structure for how that 
information will be used. And in many contexts of government 
decisionmaking, when scientific information is being created by 
a government entity, there is very clearly delineated in 
legislation regulation what the threshold is for an actionable 
piece of data. When will a piece of data reach sufficient 
scientific rigor to be deemed actionable for a regulatory body? 
Certainly this is a case at FDA where you have a clear 
threshold for actual information in the context of the paradigm 
around P equals .05. There is no contemplation of what the 
threshold will be for actionable information on the part of any 
government organization with respect to comparative 
effectiveness information. And I think marrying the criteria 
inside CMS and any other government plan with the criteria used 
by FDA for consideration of comparative information, it 
certainly would be a step in the right direction, and I 
recently wrote a long paper on this and put it out for the 
American Enterprise Institute.
    But in summation, Mr. Chairman, I don't see a lot of 
elements in the proposal before this committee that we could 
have confidence are truly going to bend the cost curve in a way 
where we are realigning reimbursement with the kinds of 
outcomes we want to see these programs achieve. And in the 
absence of that kind of reimbursement scheme, I fear we are 
just going to have more of the kind of wasteful spending that 
we have seen under Medicare; that the marketplace for health 
care is inefficient not in spite of Medicare, but, frankly, 
because of the way Medicare pays for things. And so if we go 
down the route where an organization like Medicare----
    Mr. Pallone. I know you said you are summarizing, but you 
are a minute and a half over.
    Dr. Gottlieb. I am finishing right now--make more 
decisions, I think the least we can do is make sure it is a 
clinically rigorous process.
    Thank you, Mr. Chairman.
    Mr. Pallone. Thank you.
    [The information follows:]





    Mr. Pallone. Mr. Miller.

                   STATEMENT OF THOMAS MILLER

    Mr. Miller. Thank you, Mr. Chairman. It is an honor to be 
here. I represent Siemens Health Care. It is one of the largest 
medical technology companies on the planet. And I can only say 
to you, when I was a young medical physics student at MIT 
studying quantum electrodynamics, I thought that was hard, but 
the task in front of you folks seems to be a lot more difficult 
than that.
    In the written testimony, we talked about four what I would 
call myths surrounding medical-imaging technology, and we tried 
to dispel those myths. And the myths were, first, that medical-
imaging technology increases the cost of care. We would 
actually argue just the opposite.
    It is amazing that the phrase ``exploratory surgery'' has 
vanished from our vocabulary. It is because of imaging. It used 
to be 30 percent of appendectomies were unnecessary; we were 
cutting open healthy kids. We don't do that anymore. It used to 
be the patient coming into an ED with stroke symptoms would be 
observed, and now we use a CT scanner with clot-busting drugs 
to take care of them with potentially millions in cost savings 
for care later. And CT angiography is now being used to 
intervene in intermediate-risk chest pain patients, avoiding 
healthy patients going for angiography.
    One thing in common with all these examples. We introduced 
something that seems to be expensive, that raises costs, but 
the total cost of care actually goes down.
    The second myth that I wanted to address was that the 
financial self-interest of physicians has led to technology 
overuse: The evil physicians are just lining their pockets by 
ordering unnecessary exams. That is not true. Over 90 percent 
of imaging tests are ordered by nonradiologists, read by 
radiologists who have no financial link. In fact, medical 
imaging increases have happened also in Canada, a nation we 
have talked about a lot today, and there is no financial 
incentive to do so.
    Imaging is being used more. It is being used more because 
of the diagnostic confidence. You know, I am a physician, I 
want to know what is going on with my patients, I will order an 
image.
    Further reductions in reimbursements are the best means to 
reduce costs. We would actually argue just the opposite. Demand 
and supply in medical imaging are decoupled. By reducing 
reimbursement, you reduce supply. You do nothing to affect 
demand. And the DRA, which was implemented a couple of years 
ago, resulted in dramatic cuts, saving up to three times what 
the CBO estimated. Our business was affected by it by a 30 
percent reduction, and we ended up laying off a bunch of 
people. I hate laying off people. That wasn't pleasant.
    But last but not least, anyone that even attempts to argue 
that the use of advanced medical technology does not produce 
health care outcomes will have a fight with me. And breast 
cancer is the best example. It has been cited here before. It 
used to be a death sentence. It is not anymore. We find it 
earlier.
    So what are our suggestions and recommendations to the 
committees? First, we wish to applaud the committee on four 
things: First of all, the attempt to permanently fix the 
Medicare physician fee schedule sustainable growth rate 
formula; second, the abandonment of the Ways and Means 
Committee formula fix that would have created a separate 
expense target for radiology; the lack of a recommendation for 
radiology benefits managers. Personally, I like physicians to 
manage my care. I also wish to thank the House committees for 
not increasing utilization calculation on equipment in the 
draft from 50 to 95 percent, as some people estimate.
    Let me make one point clear. A 95 percent utilization 
assumption would result in rationing care. We finance many of 
our customers. We know what their P&Ls look like, and medical 
imaging centers will close. Access will plummet, especially in 
rural areas. Wait times will result possibly for time-critical 
care, and hospitals in their current capital constraints state 
they can't pick up the slack.
    Now, 75 percent, your recommendation, is better than 95 
percent, but there has no credible data for either number. I 
think we had better study it and figure out what the access 
impact is before we do either.
    So how do you get costs under control? What would we 
recommend? Well, you could do what Massachusetts General 
Hospital did and have physicians develop appropriateness 
guidelines. They reduced diet patient CT growth from 12 percent 
per year to 1 percent per year, despite of the fact their 
outpatient visits went up. We could get behind that.
    We have been a strong advocate for accreditation 
requirements, containing the Medicare improvements for patient 
providers back to 2008, which assures that if you don't meet 
the accreditation, you don't get paid.
    We support comparative effectiveness research. It might 
surprise you, but we do. We are a fan of our technology. We 
think it does good. But we support it only if it looks at the 
entire longitude of care, because as we have said, we believe 
in some cases the cost for imaging will go up, but the 
resulting expenses longitudinally will go down.
    And, finally, we commend other legislative efforts to fund 
medical-imaging research. Specifically, we need to find a 
diagnostic imaging test for prostate cancer to benefit men like 
mammography has benefited women. The PRIME Act in House 
Resolution 353 does exactly this.
    To conclude, medical imaging not only improves health care, 
it saves lives, and it also contributes to cost reductions in 
health care. So we should be careful of any policy that could 
reduce access.
    I thank you for the privilege of representing Siemens 
Health Care in this national dialogue and your patience.
    Mr. Pallone. Thank you, Mr. Miller.
    [The information follows:]





    Mr. Pallone. Ms. Buto.

                   STATEMENT OF KATHLEEN BUTO

    Ms. Buto. Thank you, Mr. Chairman. My name is Kathy Buto. I 
am vice president of health policy for Johnson & Johnson, and 
we really appreciate the opportunity to be here to comment on 
the discussion draft. We very much support enacting legislation 
this year to provide coverage for all Americans, and we look 
forward to working with the committee toward that end.
    By way of introduction, I want to just say that I focus on 
a broad array of health policy issues for Johnson & Johnson 
worldwide in many countries, including China and India as well 
as the United States, and I have spent much of my career on 
these issues, including 18 years with the Health Care Financing 
Administration where I was involved with implementing changes 
in Medicare and Medicaid and in efforts to pass earlier health 
care reform legislation.
    I am going to focus on really four things, and leave to you 
my written testimony on a number of other provisions that we 
support in the bill: wellness and prevention, comparative 
effectiveness research, part D of Medicare, and the public 
plan. So first wellness and prevention.
    As an employer that has focused for more than 30 years on 
improving the total health of our employees, we strongly 
support the inclusion of prevention benefits and zero cost 
sharing to promote greater wellness in the population. Our CEO, 
Bill Weldon, was invited recently to meet with President Obama 
along with other executives to describe their experiences in 
reducing risk factors in the workforce. And I will just give 
you one example. At Johnson & Johnson over a 10-year period 
beginning 1995-1999 and measuring a difference in 2007, we 
reduced smoking from 12 percent in the workforce to 4.3 
percent. And we had many results like that, which are in the 
written testimony. So we believe that this is critical. We at 
J&J have saved about $250 million over 10 years through these 
efforts.
    Now, comparative effectiveness research. We are very 
pleased that the bill includes an enterprise that will focus on 
improving the evidence physicians and patients can use to make 
treatment and care decisions. And while we have great respect 
for the Agency For Healthcare Research and Quality under 
Carolyn Clancy's leadership, we actually believe a public-
private entity provides a stronger long-term framework with 
transparency of methods and processes, inclusion of 
stakeholders, and a focus on clinical comparative effectiveness 
research. We think a public-private entity can build trust and 
collaboration, which is critical in this important area; 
leverage additional research dollars of physician and academic 
groups as well as industry; and create a broader-based 
constituency for sustainable funding resources for this 
enterprise.
    Rather than provide a single assessment of cost 
effectiveness, we believe the entity should provide information 
that allows the market to determine the relationship between 
clinical value and costs for different patients of varying 
plans. And I would include, for example, minorities and women 
who have particular issues in this kind of research.
    Now, switching to Medicare Part D. We want to commend the 
committee for taking on this difficult issue of closing the 
coverage gap or doughnut hole over time. The pharmaceutical 
industry's recent proposal to provide discounts of 50 percent 
for the majority of beneficiaries in that gap we think is going 
to complement your approach by providing immediate relief in 
reducing those costs.
    We also want to applaud the committee for allowing payments 
to be made through AIDS drug assistance programs and the Indian 
Health Service to count toward meeting the out-of-pocket 
threshold as well.
    Let me conclude by talking a bit about the public plan. We 
certainly support having a health insurance exchange that can 
provide information for the public on different options, and we 
support a number of the other changes proposed, such as 
administrative simplification and insurance reforms. We think 
these changes are going to actually make the government plan 
unnecessary, and we believe concerns about a public plan takes 
the focus off sort of job number one, which is achieving 
coverage of all Americans and identifying sustainable financing 
approaches as well as making fundamental changes in the system 
of care.
    Providers like the Mayo Clinic--and they were recently 
cited in an Atul Gawande article in the New Yorker as providing 
highest quality care at the lowest cost--have been very vocal 
about their concern that the public plan is going to use 
Medicare rates and therefore not cover actual provider costs. 
Cost shifting will ultimately lead to higher-cost private plans 
and ultimately a dominant public plan that underpays. We are 
concerned, and our industry is concerned, because systematic 
underpayment of providers will undermine the market base system 
that allows incentives to find cures for cancers, Alzheimer's, 
and other dread diseases.
    We also are concerned about government negotiation of 
pharmaceutical prices reducing the willingness of our industry 
to undertake risky and long-term investment needed to produce 
important treatments. And we also think this threatens American 
leadership in medical innovation in ways that we don't fully 
understand and would be hard to anticipate.
    The last point on this is that biologics promise to be a 
major avenue for breakthrough medicines and one we know the 
committee is considering. We have been at the forefront in the 
U.S. And other countries of supporting a regulatory pathway for 
biosimilars that assures patients safety and preserves 
incentives for life-changing and life-saving medicines. We have 
strongly supported H.R. 1548, introduced by Representative Anna 
Eshoo, which has over 100 cosponsors.
    I will leave to you the written testimony which enumerates 
a number of other provisions in the discussion draft, such as 
the Medicaid eligibility; expansion of funding for community 
health centers, which we have recently supported in a bill 
introduced by Representative Clyburn and others; as well as a 
focus on health disparities and health literacy; and a process 
to make payments between two physicians from industry more 
transparent.
    So thank you again for the opportunity, and we look forward 
to working with you.
    Mr. Pallone. Thank you.
    [The information follows:]





    Mr. Pallone. Mr. Vaughan.

                  STATEMENT OF WILLIAM VAUGHAN

    Mr. Vaughan. Thank you, Mr. Chairman and Members, for 
inviting us.
    Consumers Union is the publisher of Consumer Reports, and 
we don't just test tires and toasters; we try to help people 
with medical products. And we do strongly endorse the approach 
taken in the tri-committee draft, assuming that additional 
savings are found or progressive financing to make sure that it 
is budget-neutral and sustainable over time.
    We believe the draft is a plan that can give all Americans 
that peace of mind of health security and an affordable quality 
system. The draft bill has done an excellent job of identifying 
a number of savings, both large and small, but we hope you can 
dig deeper for some more savings to stop that Pacman that is 
gobbling up our GDP. Gotta try.
    As for PhRMA's pledge for $80 billion in savings, wow, that 
is great. Congratulations to PhRMA, but I think it was Ronald 
Reagan used to say, trust but verify. We hope that you can get 
this in legislative language in a way that CBO would score it 
for $80 billion in savings.
    We like the drafts bill trying to close the doughnut hole, 
and we really like the provisions on helping low-income people 
in Part D. We would like to see that doughnut hole closed 
faster, but that would take more money, and we suspect that 
PhRMA is likely to say, hey, we have given at the office, go 
away. But we hope you will keep pushing on that door a little 
bit.
    There should be no excuse whatsoever to reduce the pressure 
for the maximum use of generics in Part D. In fact, you might 
want to consider an amendment to get a rebate from Part D plans 
that are poor in doing generic substitution.
    There are a lot of other sources of money on the table. 
H.R. 1706, by Mr. Rush and seven others of this committee, 
would ban reverse payments from brand companies to generics to 
keep the generic off the market. Yesterday the FTC Commissioner 
said: Gee, that would save the government about $1.2 billion a 
year and consumers $3.5 billion a year. Hope you guys can do 
that one.
    We have supported Mr. Waxman's follow-on biologics, but we 
have got to find a solution. Last June--as of last June, Europe 
had approved over 10 of these, and I am assuming they have gone 
higher, and we are sitting here paralyzed. And so we hope you 
can come together and work something out, because that is 
essential.
    The June MedPac report that has just come out in talking 
about FOBs also suggested maybe take a look at reference 
pricing. Why pay more for something that doesn't bring more to 
the table than what you are already paying?
    We urge you to also support giving Medicare negotiating 
authority in Part D. Once you get a good food and drug safety 
program in place on imports, let us have reimportation or free 
trade in pharmaceuticals. And, a new idea, require rebates to 
Medicare for drug inflation in excess of population growth and 
CPI, except--except--no rebate on a new kind of drug, a new 
molecular entity that the FDA would identify. This would get 
you a handle on spending, but move the industry more towards 
really breakthrough research. If my wife sees an ad on TV for a 
fourth type of ED, she is going to throw something at the TV. I 
mean, we need lifesaving breakthrough research, and not just 
more of some of these ``me too's.''
    The other areas, we love comparative effectiveness research 
provisions in your bill. Save the consumers a ton of money. If 
you want to see how it works for consumers, the last page of my 
testimony takes a look at heartburn medicine and proton pump 
inhibitor stuff. And if you look at the science that the 
comparative effectiveness research brings, there is no 
particular difference between a $20 pill and that purple pill. 
And working with your doctor, check it out. We always say check 
with your doctor first, but why in the world would you start 
with a $200-a-month medicine when you can get a $20-a-month one 
that is just about as good?
    Finally, we endorse the physicians' payment sunshine 
provision in this bill. That is the one that would disclose how 
much drug and device companies are giving to doctors and med 
schools. We think those gifts aren't totally free. They come 
with some strings of influence, and we need to stop that.
    Thank you so much for your time.
    Mr. Pallone. Thank you, Mr. Vaughan.
    [The information follows:]





    Mr. Pallone. Mr. Kelly.

                    STATEMENT OF PAUL KELLY

    Mr. Kelly. Thank you, Chairman Pallone and Ranking Member 
Deal. National Association of Chain Drug Stores appreciates the 
opportunity to testify today.
    I am Paul Kelly, vice president of Federal Government 
affairs, and I am substituting today for Carol Kelly, our 
senior vice president, who was ill and sends her regrets. But I 
really appreciate your indulgence in allowing me to pinch hit.
    NACDS represents the Nation's chain pharmacies, whose 
40,000 pharmacies and 118,000 pharmacists fill 2.5 billion 
prescriptions a year. That is 72 percent of all prescriptions 
nationwide. Pharmacies are the face of neighborhood health 
care. There is a community pharmacy, on average, within about 2 
miles of every American.
    One of pharmacy's major contributions is helping with 
medication adherence. Simply put, adherence is taking 
medications correctly. It has major implications for patient 
health and for health costs. Nonadherence leads to long-term 
health complications that diminish the quality of life, and 
nonadherence has been estimated to cost $177 billion annually. 
I am here to make recommendations that will help prevent this 
problem from getting worse.
    Preventing it from getting worse involves preserving access 
to pharmacies. Essential to this is reforming the pharmacy-
Medicaid reimbursement system. As you know, the Deficit 
Reduction Act of 2005 would set pharmacy reimbursement for some 
generic drugs at 36 percent below cost. The issue is complex, 
but it boils down to a basic principle. This is unworkable for 
pharmacies, as it would be for any health provider. Unless 
Congress intervenes, current policies would put 20 percent of 
pharmacies at risk, most of which serve low-income individuals.
    Last year Congress blocked implementation of these severe 
Medicaid cuts until October 1, which we appreciate. We also 
appreciate that members of this subcommittee, including you, 
Chairman Pallone and Mr. Deal, remain highly cognizant of this 
issue, and we really appreciate your leadership, Mr. Pallone, 
in keeping this issue on the radar screen. We are also grateful 
that the committee draft recognizes the need to address this 
problem, and there is an AMP provision in that legislation. But 
as this legislation unfolds, we would emphasize there are 
several essential reforms that we think are needed to ensure a 
patient-centered Medicaid AMP policy.
    First, average manufacturer price, or AMP, which will be 
used as a basis for reimbursement to pharmacies, must be 
defined correctly.
    Second, AMP-based Federal upper limits should be determined 
using weighted average AMPs rather than the lower AMP. And we 
sincerely appreciate that the draft includes this provision.
    Third, Federal upper limits should be set when there are 
three sources of supply, the brand and two generics. Setting 
limits prior to that when there are two sources of supply is 
premature.
    Fourth, there is a concern that the multiplier of 130 
percent that is proposed in the draft is not sufficient to 
ensure pharmacies are reimbursed fairly.
    And, fifth, we deeply appreciate the provision in the draft 
to strike the requirement to post brand and generic AMPs on a 
public Web site until AMPs are based on an accurate definition.
    Now, regarding the cost of nonadherence and increasing the 
quality of care. We appreciate the recognition of medication 
therapy management as part of the medical home concept in the 
committee's draft. MTM, medication therapy management, is 
preventative care and includes services designed to help ensure 
drugs are used appropriately to maximize health and reduce 
adverse medication events. Pharmacist-provided MTM services 
have been shown in one study to reduce overall health care 
costs--overall costs by $12 for every dollar invested.
    Our recommendation is to enhance and expand the medication 
therapy management program in Medicare Part D, and we thank 
Congressman Ross and Congressman Murphy of this subcommittee 
for their leadership on this issue.
    We have other recommendations, including the need to 
maintain patients' access to diabetes management tools through 
their neighborhood pharmacies. Two current rules related to the 
treatment of durable medical equipment and Medicare jeopardize 
access to diabetes care and jeopardize patient health. We 
recommend that health reform legislation address this 
misapplication of these rules to pharmacies, which pharmacies 
are already licensed and highly regulated by the States. We are 
the good actors when it comes to Medicare durable medical 
equipment, and additional hurdles and costs are simply 
counterproductive. We thank Congressman Space for his 
leadership on this issue.
    In closing, part of the value of pharmacy is its ability to 
help patients stay on medication therapy. The improvement of 
lives and reduction of long-term costs is worth fighting for, 
and we look forward to working with this committee in pursuit 
of those goals.
    Thank you again for your support, Chairman Pallone, and 
look forward to answering any questions.
    Mr. Pallone. Thank you.
    [The information follows:]





    Mr. Pallone. And we are going to go to questions, and start 
with the gentlewoman from the Virgin Islands Mrs. Christensen.
    Mrs. Christensen. Thank you, Mr. Chairman. And I know the 
hour is late. I am not going to have a zillion questions. But I 
want to start with Mr. Miller.
    And, first of all, let me say that no one supports--I don't 
support, and I know you don't support--unnecessary or 
duplicative tests. That being said, though, I really appreciate 
as a physician your defense of physicians in your testimony and 
your defense of the diagnostic technologies. As you said, and I 
had made note of this before you said it, I think we have 
forgotten how far we have come from the days when you had to 
undergo anesthesia, one risk; laparotomy, another risk, to make 
these diagnoses. But my question--you said that your experience 
is really in HIT. Is that correct? Did I read that in your 
testimony?
    Mr. Miller. I have actually experience in both diagnostic 
imaging, HIT, as well as therapies.
    Mrs. Christensen. Sure. But I wanted to ask about HIT. I 
think you were very clear in your defense of the technologies. 
We have been told by many that the projected savings from HIT 
are grossly exaggerated. And I wondered if, based on your long-
time experience on HIT, if you had any thoughts on whether that 
was the case, or whether we would be realizing the savings that 
we think we are.
    Mr. Miller. The answer to the question is, unfortunately, 
it depends. If we simply say that what we will do is digitize 
all information for all patients at all times and think that 
will lead to productivity, I think we are misguided. I don't 
know about you, when I get an e-mail with a huge attachment to 
it, I still print it out. And I used to run with the largest 
health care information technology businesses in the world.
    The fact of the matter is, just like pharmaceuticals, to 
get efficiency out of health care information technology, you 
need the right information about the right patient and the 
right context of care going to the right provider at the right 
time. It is a lot different than just a big file full of data. 
If a patient is coming to me with severe chest pain, I don't 
want to know about the mole that was removed last week as the 
first thing I see in the file. I want to know whether they are 
taking medication. I want to know what contraindications for 
medications there may be. This requires a little more 
intelligence.
    So I think the potential is there. We certainly have 
customers who have realized a lot of potential. But the devil 
is in the details, and an inexpensive HIT system which simply 
takes all data, logs it, and makes it available will not change 
productivity. Productivity rhymes with activity, not with 
information.
    Mrs. Christensen. Thank you.
    Ms. Buto, we applauded J&J's wellness and prevention 
programs and also the recent proposal by PhRMA to cut the cost 
of medication during the doughnut hole by 50 percent. We also 
appreciate your support for elimination of health disparities 
in the community health centers that you stated in your 
testimony. We do have a point of departure on the public plan 
which the tri-caucus is fully supporting, and which I think 
this committee is bending over backwards to ensure that it does 
not undermine our market-based system.
    But I wanted to ask about the CER issue. I have joined with 
other Members in legislation that goes so far as defining the 
committee that will oversee it and ensuring that the membership 
on that committee, representative of all of the stakeholders, 
important to the tri-caucus as well. We directed that research 
must be done on women and racial and ethnic minorities so that 
we will really have the best science for everyone. And, 
further, we direct that the outcome of that research would only 
be used to provide clinical guidance.
    Does this address some of the concerns that you raised, or 
are there others that remain?
    Ms. Buto. It sounds like your approach really does address 
many of the concerns I have raised. And I think the other issue 
that once you dig below the surface on minorities and women and 
other subpopulations is as we get closer to personalized 
medicine, I think we are beginning to realize we need a 
different approach doing the clinical trials that actually 
helps us sort so that we can provide and be more targeted in 
the treatments we develop. And we are trying to figure out how 
to do that in a way that gets those targeted treatments that, 
again, will be better value for money in the system, but also 
will get to subpopulations, minorities, women, and others who 
will benefit. And we are still sorting through that. But I 
think that is part of the equation as well, and it sounds like 
your approach would allow for that kind of research to go on.
    Mrs. Christensen. Thank you, Mr. Chairman.
    Mr. Green [presiding]. Congressman Deal for 5 minutes.
    Mr. Deal. Thank you.
    Mr. Kelly, you are familiar, I think, with H.R. 3700 from 
last Congress that was introduced by Chairman Pallone. I 
believe you have generally been supportive of the language that 
was in that piece of legislation. What is missing from this 
draft that was in the bill Chairman Pallone introduced last 
year, 3700?
    Mr. Kelly. There are some differences. We certainly 
appreciate that the committee in its draft bill has recognized 
the importance of this issue and included improvements to the 
existing law in the bill. We also appreciate your leadership 
over the years in trying to be helpful in this issue as well.
    As I understand it, H.R. 3700 defines AMP in a way that 
reflected pharmacies' acquisition costs, which is our top 
priority and really central to this debate. The committee's 
draft currently does not include that, and that is an important 
priority of ours, and we look forward to continuing to talk to 
the committee about that. That is reflected in our written 
statement. That is one of the major issues.
    Mr. Deal. You mentioned that States should consider both 
components of reimbursement when determining what they are 
going to pay pharmacists for. What are those two components? 
And would you explain why it is important to consider both 
components?
    Mr. Kelly. Certainly. Thank you.
    Historically, pharmacies have been paid for the drug 
product itself and for dispensing the product; so reimbursement 
here and then a dispensing fee here. In Medicaid, the States on 
average reimburse the pharmacy $4.40 to dispense the products. 
All the evidence indicates that it costs the pharmacy about 
$10.50 to actually dispense a prescription drug when you 
consider all the overhead that is involved with running a 
modern pharmacy today. So it is important to make sure that 
reimbursement for the drug product is right, which is why 
getting the AMP definition is so important when it comes to 
Medicaid product reimbursement, which the Federal Government 
has sole jurisdiction over. The States control the dispensing 
fees in the Medicaid program.
    And I tell you, this committee and Congress could really 
help us quite a bit with CMS on this issue of dispensing fees. 
When DRA was passed, there was a ton of legislative history 
which indicated the expectation was and the encouragement was 
that States would allow for increased dispensing fees for 
pharmacies. Well, about a half a dozen States have submitted 
State plan amendments requesting just that, and CMS has shut 
down every single one of them. In fact, just this week the 
State of Washington submitted a State plan amendment that would 
have increased fees by a nickel, and CMS shot it down. So to 
the extent folks on the committee can be helpful in that 
regard, CMS, we would sure appreciate it.
    Mr. Deal. So the two products. One is control at the 
Federal level, that being the payment for the drug itself, 
which is the AMP issue that you alluded to, and you don't think 
this draft addresses that issue as clearly as the Pallone 
legislation did. And then the second component being the 
dispensing fee, which is a State issue by and large, is still 
left that way under this draft legislation. Is that correct?
    Mr. Kelly. There is nothing in this draft that we have seen 
that indicates any policy changes on dispensing fee. And you 
are right, there is product reimbursement, and that relates 
directly to how you define AMP and how you reimburse and 
calculate the AMP.
    Mr. Deal. I believe when we were dealing with the MMA, we 
tried to make sure that seniors had a pharmacy that was going 
to be close enough and accessible enough for them to handle 
their pharmacy needs. I don't think there is any language of a 
similar nature in this draft. Did you find anything that would 
address that issue? And, if not, is that something we should be 
concerned about?
    Mr. Kelly. We have not seen that in this draft. And you are 
right, that is a part of the Medicare drug benefit. They 
actually use the TriCare health care program access standards 
for community pharmacies, access to community pharmacies.
    Look, seniors want access to pharmacies. Most citizens want 
access to pharmacies. They want it to be convenient. That is 
very important. As I said in my testimony, there is a pharmacy 
within a couple miles of everybody, on average, in the country.
    You know, I am not sure how those access standards would 
fit into the context of this bill. It made sense for the drug 
benefit when you were creating that, but I am just not sure at 
this moment whether it would fit into the context of this 
particular bill. It came up very recently, as you know, and we 
are still kind of combing through it, quite honestly, to get a 
sense for that.
    Mr. Deal. Thank you.
    Mr. Green. Congresswoman Schakowsky for 5 minutes.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    I would like to start with Mr. Vaughan, and I welcome you. 
And I don't know if I have seen you in this role before, but 
you have been on the Hill for a long time, too.
    In your written testimony, you identified as a cost-saver 
legislation that I introduced with Representative Berry, H.R. 
684, the Medicare Prescription Drug Savings and Choice Act, 
which allows Medicare to negotiate for lower drug prices.
    I am wondering if you could talk a little bit about how 
that would reduce costs.
    Mr. Vaughan. Yes, and thank you for that cosponsorship. And 
it would probably be--you know, we have got good competition in 
generics and stuff--this would be a place where in a biologic 
that came in at one of those very, very, very high prices, if 
the Secretary could work with it a little bit, bring the price 
down--and I know it works.
    I happened to work for the Chairman of the Ways and Means 
Health Subcommittee in 1989 when the first big blockbuster 
biologic came in, EPO for folks with kidney disease. And as I 
recall, the company wanted a launch price, and the Chairman was 
saying, whoa, we are the monopoly buyer, everybody in the 
kidney program is in Medicare. And you have got a monopoly 
company. Let's negotiate. The then-Secretary didn't 
particularly want to do that, and it took a lot of press 
releases and screaming and hollering and threats of hearings 
and stuff.
    But I do really believe that that jawboning by just one, 
not just, by a subcommittee chairman on the Hill pushed the 
Secretary enough that we got that price down $3, $4 a unit. We 
should have gotten it down, 8 or 9, you know, if the Secretary 
had been a little more gung ho on it. But that company 
recovered its entire investment in that drug in 9 months, and 
is making over a billion dollars a year in profit from Medicare 
from that drug now. And we didn't do a very good job 
negotiating, but we saved billions. But it can work.
    Ms. Schakowsky. So we don't have to imagine it.
    Yes, Ms. Buto.
    Ms. Buto. Bill, I have to kind of disagree with your memory 
on this. I was at HCFA at the time. I actually did negotiate 
that price. And it was done way before the chairman got 
involved, because the company came to us saying, this is an 
ESRD drug. ESRD is a Medicare population. And we decided that--
I decided I couldn't do this alone. So I got the Inspector 
General's Office and the Office of Management and Budget to sit 
down with us, and we went through SEC filings. This was a 
company with one drug and one drug in the pipeline, and we did 
the best we could around the table to do that. I think you all 
came along; and I think rightfully so, said, you know, can't we 
maybe take another dollar off? You did that legislatively.
    Ms. Schakowsky. So you can fight that out later. But the 
point is it worked.
    Ms. Buto. My point was this: In spite of the fact that it 
was one company with one drug, we had a very difficult time 
actually doing the negotiation. That was actually my point.
    Mr. Vaughan. It is difficult, but you did get some money 
out of it. And I stand corrected. Congratulations to you for 
having started it all.
    Ms. Buto. It wasn't about money. Can I just make the point? 
It was about making sure that ESRD beneficiaries had it at the 
moment that FDA approved it. We wanted to make sure because 
there was no other market that there wasn't a huge delay before 
they could get access, and that was the reason we needed to set 
a rate. Because otherwise, Medicare waits for a year or so, and 
the rates are set in the marketplace, right?
    Mr. Vaughan. Yes.
    Ms. Buto. It was about access.
    Ms. Schakowsky. It is about access. But I think if we 
institutionalize this notion of Medicare being a negotiator, 
with the huge network that it represents, that we can do better 
than we do right now.
    Ms. Buto. I disagree that.
    Ms. Schakowsky. You don't agree with that?
    Mr. Vaughan. I do agree.
    Ms. Schakowsky. Well, don't insurance companies regularly 
negotiate for their subscribers?
    Ms. Buto. They do, and they set formularies, and my 
experience with Medicare is that it has been reluctant, shall 
we say, to set formulary restrictions on what Medicare will 
cover, because the notion is that--and we always had this 
underlying our coverage policy--is that the beneficiary 
population is very diverse and usually fairly chronically ill. 
And so to exclude certain things just to get price down----
    Ms. Schakowsky. Well, in our bill, in the bill actually 
that we are talking about, we do set a formulary in the draft 
for the public option, right?
    Oh, in my bill we actually talk about a formulary so that 
we can negotiate. I guess my time is up.
    Mr. Green [presiding]. Out of time, thank you. Congressman 
Pitts, 5 minutes.
    Mr. Pitts. Thank you, Mr. Chairman. Thank you, panel, for 
your wonderful testimony.
    Mr. Miller, you said that a large part of imaging is done 
without any association to the financial self-interest of the 
ordering physician. You also said that the increases in use of 
imaging are perhaps too often attributed to a financial 
incentive in ordering the test.
    Do you believe that one possible reason for the rise in 
imaging could be the practice of defensive medicine? Do 
physicians order tests to protect themselves from potential 
medical liability?
    Mr. Miller. I can only speculate that that could be the 
case, in some cases. I can also state that if, when we speak to 
our customers and ask them, because it is important when we 
design machines we ask them, you know, why do you order tests? 
What are you trying to look for, what are you trying to 
discover? The great majority of time they are really telling us 
we want to be able to see this disease process. We are having 
difficulty because we don't know if the patient has X versus Y.
    Now, in knowing if a patient has X versus Y before they 
treat, if that is defensive, then I can only agree with you. It 
is probably also good medicine.
    Mr. Pitts. MedPac has given us clear indication that it 
feels there is a tremendous overuse of medical imaging and that 
we should rein in the use and reimbursement of such use.
    Do you feel that there is overuse, and what do you feel is 
the appropriate way to get at that issue?
    Mr. Miller. I don't think that there is overuse, by and 
large. Are there cases of overuse that might crop up in 
someplace or another? Yes, probably. However, as I stated in my 
testimony, what we really believe and support as an industry is 
appropriate in this criteria. I do believe that we should have 
guidelines which are physician-created and physician-
administered that guide people to say, for this type of 
symptoms, this test is appropriate. For patients with this 
background of illnesses, this test is appropriate.
    Doing so may have, however, two consequences. There are 
times when a test won't be ordered because it is inappropriate. 
There are other times--and we see this just as often--that a 
patient will be subjected to a slowly increasing series of 
tests. They will come in with chronic headaches and then 
something has been going on for a long time, and an X-ray of 
the head will be ordered. An X-ray of the head will show you 
the skull. Not many headaches caused by the skull.
    So sometimes it could lead to actually an increase in the 
type of imaging that is ordered, a temporary increase in cost. 
But our argument has been and what I have tried to put forward 
is that, knowing the patient's condition precisely, 
characterizing the disease in detail before you start to treat, 
is probably the best way to save cost in health care; because 
there is nothing more expensive, more wasteful or more 
unethical than treating a patient with the wrong treatment for 
their disease or, even worse, starting the treatment for a 
disease they don't have.
    Mr. Pitts. I have just a couple of questions on the DRA. 
You mentioned in your testimony the large reductions that the 
DRA imposed to medical imaging, and that during the first year 
of implementation, that growth in imaging was reduced to only 
1.9 percent.
    What do you think the reasons were for growth in previous 
years? And do you feel that the DRA was the only factor in this 
slowing of the growth? And what was the impact of the DRA and 
the dissemination of new updated technologies to patients? What 
would be the impact on future cuts to advanced imaging 
technology, such as CT, MRI, PET, nuclear imaging, do you think 
this would--what impact?
    Mr. Miller. Well, we have an advantage that we do business 
in about 180 countries of the world, so we can look at use 
patterns not only in the United States, but in many other 
countries and see trends and see changes. The DRA had a sudden 
drop in imaging growth, which we didn't see in any other 
countries at the same time. So, in other words, it must have 
been the DRA. We didn't see it happen in Canada, we didn't see 
it happen in China. We didn't see it happen in South Africa, 
any country in Europe, et cetera. DRA happened, growth was 
reduced.
    In other countries where there has been no DRA and no 
financial linkage that would cause overuse, we have seen 
medical imaging increase year over year in almost every other 
market we are in. It is increasing in China, it is increasing 
in Australia, it is increasing in Germany. It is increasing 
everywhere, because, as I said, we are substituting more 
expensive physical and invasive tests with things that are 
noninvasive, more comfortable for the patient and, frankly, 
looked at as whole as cheaper.
    I think the DRA did cause in some parts of the country, 
some of our customers to, frankly, go out of business. I don't 
think that it resulted in a sea change in care, but we start to 
get it to limit. And therefore, what I would argue is in some 
ways--I hate to phrase it this way--we gave once at the office. 
We took a large cut in our industry and we are now at the point 
where more reimbursement cuts to the supplies of a service will 
definitely cause reduction in access.
    Mr. Pitts. Thank you. Thank you, Mr. Chairman.
    Mr. Pallone [presiding]. Thank you. Mr. Green.
    Mr. Green. Thank you, Mr. Chairman. The Chair got back. 
Otherwise I was going to recognize myself for 2 hours to 
answer--ask questions, because I know we were all having so 
much fun today. But I appreciate it, Mr. Chairman.
    Let me first ask, Mr. Miller, you mentioned in your 
testimony the large reduction that the Deficit and Reduction 
Act imposed on medical imaging, and that during the first year 
of implementation that growth in imaging was reduced by only 
1.9 percent.
    What do you think the reasons were for the growth in 
previous years, and do you feel like that the DRA was the only 
factor in slowing that growth?
    Mr. Miller. The growth was starting to slow somewhat in 
previous years. There were years in which the growth was 
faster. It started to slow even before the DRA. But the DRA was 
a quantum-step change in the growth of imaging. As I have 
stated before, I believe the growth in imaging has simply to do 
with its utility.
    One of the best examples I can give is that we will 
probably see a growth in the use of computer tomography in the 
management of chest pain. That is going to grow. And it is 
going to grow and, frankly, if it were my family members or me, 
I would want it to grow, because right now the standard of care 
in many places for chest pain is, you either sit for a long 
time to get blood tests, the blood tests determine whether your 
myocardium is dying. Or you get put in a cath lab for a very 
invasive exam. A CT-scan for chest pain has an almost 100 
percent negative predictive rate. In other words, if it doesn't 
show you have disease, you can go home.
    You are therefore avoiding two things. You are avoiding 
either sitting around the ED, or if it is late at night, 
getting checked into the hospital. Or you are avoiding a 
$10,000 catheterization. Forget about the ethical issues. And I 
believe, if people have informed me correctly, you have some 
experience with this.
    Mr. Green. I do. And I have to admit I joked a few years 
ago that I got belt and suspenders when I was diagnosed for 
having a heart problem. And it turned out, I did the catheter, 
and then they said, well, why don't we see if we can do the 
scan? And I sat there and watched it, and I felt like I was 
getting lobbied with a hospital gown on, and paying for it at 
the same time.
    But I appreciate that because I know in this bill we are 
concerned about that. I just don't want, and I don't think 
members want to cut off some of the newer technologies we can 
get that are less invasive and that actually can be cheaper 
than, for example, a catheter.
    Mr. Miller. I think that the point I want to make I can 
best make by one also very personal experience, my father; 18 
months ago my dad had a stroke. Amazingly, I was in the 
neighborhood when it happened. I showed up at the emergency 
room when he had it. The emergency room was outfitted with a 
state-of-the-art CT-scanner, from us. And they were able to 
rule out hemorrhage. He was a candidate for a clot-busting 
drug. When he came to the ED he could barely speak. Part of his 
face was paralyzed. After the drug, some hours later, he now 
speaks perfectly with his grandchildren.
    Now, I would ask you, was that expensive? Yes. But what 
would be the cost of the rehabilitative care over the rest of 
his life had that not been available? The real issue in looking 
at these costs is we must look longitudinally over the entire 
not only episode of care, but the entire sequence of care.
    Mr. Green. Let me go on, because I have questions and only 
limited time.
    Ms. Buto, I have been working on a piece of legislation, 
H.R. 1392, which removes the prompt-pay discount to extend it 
to wholesalers from the average sales price of Medicare Part B 
drugs. Most of these drugs are oncology therapies, including 
chemotherapy, and are administered in physicians' offices or in 
outpatient settings. As you know, many oncology practices have 
been reimbursed for these Part B drugs at 2 percent under the 
price they purchase the drugs because of the prompt-payment 
discount.
    One point of opposition to the bill is that some believe 
the passage of this legislation and the removal of the prompt-
pay discount will result in higher costs to the government if 
manufacturers raise drug prices, because the physicians will be 
reimbursed at the proper rate of the drugs.
    I believe the price increases in the Part B drug market are 
largely a function of the level of competition for these drugs 
rather than a result of the terms included or excluded from 
methodology. Would you agree with that? And do you believe that 
the removal of the prompt-pay discount will directly result in 
drug manufacturers raising their prices?
    Ms. Buto. I do agree with your position, and the prompt-pay 
discount is really a factor in the average sales price that 
recognizes the cost of doing business. So we really don't think 
it is a legitimate factor that should go into the average sales 
price.
    I agree with you as well that it is the competition among 
the different drugs in a class that are going to drive the 
average sales price, not removal or adding of this factor to 
the ASP.
    Mr. Pallone. Mr. Green, as you can see, the time--the 
electronic timing devices have ceased to exist.
    Mr. Green. I promise not to take my 2 hours, Mr. Chairman
    Mr. Pallone. You are almost at a minute over. From now on, 
I am going to have to tell you manually what the time is.
    Mr. Green. Oh. Can I just get one more question?
    Mr. Pallone. Sure. Go ahead.
    Mr. Green. Again, Ms. Buto, as a strong supporter of H.R. 
1548, the pathway to biosimilars is sponsored by 
Representatives Eshoo, Inslee and Barto, and I saw your 
testimony in support of the bill as well.
    I am particularly concerned with the patient safety, and 
this bill allows for clinical trials and the approval of 
biosimilars.
    Could you elaborate for the committee on why clinical 
trials for biosimilars are an important part of the approval 
process for biosimilars? And I believe it is important to allow 
innovator companies to have adequate time to make a return on 
their investment. There is no incentive for these innovator 
companies to develop these lifesaving treatments, if you don't 
allow that. Can you discuss the data exclusivity provision of 
H.R. 1548?
    Mr. Pallone. Quickly, please.
    Ms. Buto. Very quickly. And I can just say I am not an 
expert on this, but I will tell you that our clinical experts 
are available to the committee. And one of them was an official 
in the Biologic Division at the FDA.
    But briefly, the reason clinicals are so important is that 
biologics are generally protein-based compounds and they are 
not chemicals. So they are not, they can't easily be, in fact, 
they cannot be replicated. And that is why the clinical studies 
are so important.
    Our own experience is, even when we changed the bottle 
stopper on our biologic, it created an immunogenicity problem 
that created some real adverse effects. So you can make a small 
change. If you are not careful in doing the studies, you won't 
know between the innovator and the biosimilar. So it is 
important.
    Mr. Green. Thank you for your time.
    Mr. Pallone. Thank you. From now on I am going to have to--
oh, it is back up. All right. Here we go. Great. All right. 
Next is Mr. Shadegg.
    Mr. Shadegg. Thank you, Mr. Chairman. And I trust I will 
get the same indulgence.
    Mr. Miller, I want to begin with you. I have my own 
experience. I had bypass surgery, I think 7 years ago now, and 
I am a huge fan of the work that you and Ms. Buto do. I think 
it is vitally important that we fund that kind of research and 
that we fund both the development of drugs, cutting-edge drugs 
and of cutting-edge biologics.
    I believe I heard you, Mr. Miller, say that you like a 
physician to manage your health care. Was that--is that what 
you said?
    Mr. Miller. Yes, that is.
    Mr. Shadegg. And I take it you would agree with me that 
some of us who have concerns that physicians won't be able to 
manage health care if we have government-controlled single 
payer, whatever you want to call it, health care--at least if 
it put a bureaucrat between you and your physician, you would 
be concerned about that, would you not?
    Mr. Miller. I would be more than concerned.
    Mr. Shadegg. OK. Great. I believe at one point you said 
that something would cause access to plummet and especially in 
rural areas. I take it that is any limitation on technology or 
on the availability of analytic devices such as the type you 
are advocating--imaging?
    Mr. Miller. Here is the point I was trying to make. In many 
rural areas if the reimbursement rates were driven by a formula 
that insisted on a 95 percent--which is not in this draft--but 
a 95 percent utilization rate, there will be rural medical 
imaging centers that will just go out of business. I mean, we 
know this. They will go out of business. You might say, well, 
that is oK. They can just drive a little further to a hospital, 
get imaged there.
    Hospitals these days have capital constraints. They are not 
ordering extra capacity because they can't afford it. And even 
worse than that, I mean, populations are getting older. Imaging 
exams are being dominated not by the technology, but getting 
the person into the room, calmed down, on the table, 
comfortable with the exam and getting back off. There is a 
limitation to what you can do.
    And frankly, one last point. The high-tech stuff supports 
some low-tech stuff. Mammography, for example, gets supported 
by some high-tech stuff. That will also go away.
    Mr. Shadegg. I think your point is exactly right on; that 
imaging has, in fact, in the long run brought down the cost of 
health care, and I think restraints placed on imaging have been 
a mistake.
    You said that you support, and your company supports, 
comparative effectiveness research so long as it is looked at 
in the entire--I think you said longitude of care. I would 
agree with that. But my concern is if that longitude of care is 
looked at by a government bureaucrat only looking at dollars 
and cents, as opposed to a physician or a group of physicians 
looking at both cost and benefit, I am deeply concerned that 
comparative effectiveness research could, quite frankly, put 
the government in the position of devastating both drug 
development or pharmaceutical development and device 
development. If somebody is sitting in there kind of second-
guessing you guys, I don't know how it doesn't restrain your 
capital.
    Mr. Miller. We have the same fear. We have the fear that if 
it is not done right, it can simply be a way to restrain 
technology development, which would be horrible for the United 
States. We are are a net exporter of health care technology. 
That would be a huge mistake.
    However, we look at all technology we develop and ask 
ourselves a single question: Does it change the care of the 
patient in cost, quality and time? All three factors must be 
simultaneously considered. And if so, comparative effectiveness 
research can be a good thing. If not, as you imply, and in the 
way in which you imply it, I would be dead-set against it.
    Mr. Shadegg. Ms. Buto, I believe you testified very 
similarly. I believe in very carefully selected language you 
said, in the hands of physicians, in the hands of people using 
it for valuable purposes, comparative effectiveness research 
can be very good; but that if it is, in fact, used to ration 
care, as it perhaps has been done in other countries, that 
would not be good. Am I correct?
    Ms. Buto. You are correct. We have had the experience where 
treatments for which there is no alternative have been denied 
based on the application of a cost-effectiveness threshold that 
most people would admit is kind of arbitrarily set. So I do 
think it is valuable. I think in this country, people will use 
it; physicians will use it and patients will use it. So I have 
no doubt that it will--the value proposition will enter in, but 
at the right level, rather than being set at a national level 
by a national entity.
    Mr. Shadegg. You also expressed concern about government 
negotiation of drug prices. Do you fear that if we had a 
single-payer system or if we get a public plan that has the 
power of the government behind that?
    Ms. Buto. Yes. I was reading the discussion draft and there 
was government negotiation within the public plan section. That 
has great concern for us, as I say. I think our concern really 
comes from the cascade of public plan dominating, and then a 
public plan really becoming more commodity-based in its 
approach, trying to squeeze down cost by setting prices. That 
will definitely inhibit innovation.
    And again, we think this country has been a leader in 
innovation, and we want to maintain that leadership as well as 
the strong position in the economy that these biologic and 
pharmaceutical and device companies play in making our economy 
strong.
    So there are a lot of reasons, but the real fear is that 
you have a cascading effect that results in really a 
commoditization and lack of incentive for the research to go on 
to develop new treatments.
    Mr. Shadegg. I want to thank all the witnesses for their 
testimony. I want to thank the Chair for his indulgence. And I 
just want to conclude by saying, for me, the single greatest 
fear I have of either a public plan which would compete with 
and, I believe, ultimately undermine and destroy private health 
care insurance, or a single-payer insurance, is that it will 
end innovation.
    And I mean, right now we have clinical effectiveness 
research done by the government. If you put forward either a 
pharmaceutical, saying it will reduce John Shadegg's blood 
pressure, or a device that will perform a prostate cancer 
operation on him, you have got to prove that it is clinically 
effective.
    And I am all in favor of doctors or insurance companies 
being able to use comparative effectiveness to look at the cost 
effectiveness of my care. I want somebody to say look, 
Congressman, this drug will be financially much better now for 
you than that drug.
    But putting comparative effectiveness authority in the 
hands of a bureaucrat whose job it is to meet numbers criteria 
rather than to assure, first and foremost, patients' care, I 
believe is very dangerous and, I believe, for the world.
    I mean, it seems to me--I happened to just drive down here 
from New Jersey yesterday and passed Johnson and Johnson's 
headquarters. And I know that that is a central part of the 
economy of New Jersey. And I just pray that we don't do 
something that will drive capital away from the cutting-edge 
research that we have, because I am sitting here alive today 
because of the work you all have done, and I would like America 
to stay out front. And I fear that under any publicly 
government-run program, we are going to inhibit that capital, 
and we are not going to have the kind of cutting-edge medicine 
that you get when free markets invest and explore for those 
drugs or those biologics.
    Mr. Pallone. Thank you. The gentleman from Ohio, Mr. Space.
    Mr. Space. Thank you, Mr. Chairman. And I would like to 
thank the witnesses for their indulgence. I know it has been a 
very long day. And I may be the last member to question you. I 
am sure you are happy to here that.
    I come from Ohio's 18th Congressional District. It is a 
very rural district. It is, for the most part, within 
Appalachian proper. And one of the things that we suffer from 
is a lack of access.
    Mr. Kelly, I want to thank you for referencing my bill in 
your testimony, which I have had a chance to review. This bill 
is designed to exempt those pharmacists who have, in good 
faith, practiced without fraud or abuse from the surety bond 
requirements imposed by the last administration as a part of 
the Medicare DME system.
    And in our district, we have got--I have got one county 
that has one pharmacist in the entire county. We have a 
significantly higher-than-average incidence of diabetes, and 
the diabetes we do have is not being properly managed. Many of 
the people that I represent don't have the insurance to 
purchase test strips, for example, which is a very critical 
component of the management process for those who suffer from 
diabetes, Type 1 diabetes in particular.
    And I am interested in your thoughts on H.R. 1970--that we 
dropped, concerning the exemption of those pharmacists--and as 
to how it will affect those pharmacies that are really serving 
as the primary interface with much of the health consumption 
community, as well as how it may affect the ability of people 
who are either uninsured or have policies that don't provide 
significant coverage and their abilities to purchase things 
like test strips or other DMEs.
    Mr. Kelly. Certainly. I thank you, Mr. Space. And as to 
your bill, H.R. 1970, we fully endorse it and support it and 
appreciate your introducing it.
    The cost of chronic care has been chronicled a lot in this 
debate on health care reform, and it is very important to get a 
handle on chronic care. Only 50 percent of the folks with 
chronic conditions take their medications as they are 
prescribed. And that is a problem. The people who can help them 
with that are pharmacists in communities like yours and across 
the country, in every community, low income and upper income, 
across the country.
    As it relates specifically to these new requirements, the 
surety bond requirement that the last administration imposed, 
CMS actually predicted--projected, I should say--that 25,000 
DME suppliers would probably drop out of the program as a 
result of this new surety bond requirement. And this surety 
bond would apply to each and every pharmacy in a chain of 
pharmacies. And that is a big deal, not just to members of mine 
who have 6,000 pharmacies across the country, but half of our 
members have 20 or fewer stores in their chain. So we have a 
lot of small business people operating pharmacies across the 
country. That is going to be a huge expense and a huge hassle 
to them to obtain a surety bond just to continue to provide 
diabetes testing supplies and testing strips and glucose 
monitors to diabetic patients.
    In Medicare, seniors overwhelmingly obtain their diabetes 
testing supplies from their local neighborhood pharmacies. And 
they are going in there to get their insulin already.
    Mr. Space. All right. And many of these DMEs, glucose 
monitors and test strips, for example, are over-the-counter 
products. These are not prescriptive products, correct?
    Mr. Kelly. That is absolutely right. The patient is able to 
walk in and obtain that equipment from the local pharmacist. 
Our concern, as you have articulated, is that this new 
requirement and others would really hassle pharmacies out of 
this program. And that destroys continuity of care. And we are 
talking a lot in the health care reform debate about the 
importance of continuity of care. It is especially true with 
chronic conditions like diabetes. If a patient can't get their 
diabetes testing equipment at the same place where they are 
already getting their insulin, it doesn't make a lot of sense 
to us, and you are going to break that bond that is so 
important right now for good care.
    Mr. Space. Thank you, Mr. Kelly. And I yield back the 
balance of my time, all 12 seconds.
    Mr. Pallone. Thank you Mr. Space. Unfortunately for the 
panel, I still have questions to ask. Hopefully, I will be the 
last one, unless someone else shows up.
    I wanted to start with--I wanted to ask Ms. Buto a 
question; then I wanted to ask Mr. Miller. I will try to get 
both of these in in the 5 minutes or so.
    Ms. Buto, the President reported 2 days ago that the White 
House had reached a deal with pharmaceutical manufacturers to 
cut costs for seniors, with incomes up to $85,000, in the donut 
hole by 50 percent for brand-name drugs. AARP CEO Barry Rand, 
along with Senators Baucus and Dodd and representatives of the 
pharmaceutical community were involved in reaching the deal.
    We agree with the importance of rectifying this major flaw 
in the prescription drug bill that left seniors with no 
coverage between $2,700 and $4,350. And the discussion draft 
fills about $500 of this cost immediately and then phases out 
the donut hole for all Medicare beneficiaries over time. And 
the discussion draft reinstates the ability of the Federal 
Government to get the best price for prescription drugs for the 
most vulnerable low-income Medicare beneficiaries. Those 
savings are used to fill the donut hole for all Medicare 
beneficiaries.
    And my question is--and I asked AARP the same question 
yesterday--can you clarify for me, do you see this proposed 
provision in the draft as working together with the commitment 
by the pharmaceutical manufacturers, thereby filling the donut 
hole for seniors; or do you view your agreement with the White 
House in lieu of that discussion draft provision?
    Ms. Buto. First let me just clarify something and make sure 
that I have your question correct. You know, we feel that the 
50 percent discount will provide immediate relief, obviously. A 
provision that we like in the discussion draft is closing the 
donut hole over time. A provision that we don't like is 
applying Medicaid rebates to Medicare. So I don't know if that 
answered your question.
    But I want to be really clear that we do think that closing 
the donut hole over time in the immediate term, being able to 
provide these 50 percent discounts, will help a lot in making 
that more possible. We are hoping it will reduce the cost for 
the committee of getting to that closure. But we don't support 
the transfer of Medicaid rebates to Medicare.
    Mr. Pallone. OK. Well, I understand where you are coming 
from. I just wanted to make sure, because of course AARP said 
that they would like to see us go all the way in the way that 
the discussion draft proposes. And obviously I agree with the 
discussion draft. I just wanted to get your opinion on that.
    Let me get to Mr. Miller. And I am going back to the point 
that Mr. Shadegg touched on about the comparative effectiveness 
research, you know, in the context of the health reform effort. 
The discussion draft would create a permanent center for 
comparative effective research. And the purpose of the center 
is to support research to determine, and I quote, the manner in 
which diseases, disorders, and other health conditions can most 
effectively and appropriately be prevented, diagnosed, treated 
and managed clinically.
    In my opinion, it is simply about arming doctors with the 
best info possible to help them make decisions with their 
patients. It says nothing about insurance or cost 
effectiveness. In fact, the draft would prohibit the center 
from mandating coverage policies.
    But even with all that, you know, we get the attacks from--
that this research somehow is going to ration care or reduce 
access to new technology.
    So I have two questions. Do you believe that thoughtful, 
methodologically appropriate comparative effective on this 
research focused on patient outcomes will help or hurt 
patients? And secondly, Siemens, I know, is on the cutting edge 
of medical imaging technology because it is, you know, it is 
basically a revolutionary company. Won't this research simply 
validate the quality of your products?
    Mr. Miller. In both my written and oral testimony, I said I 
am for comparative effectiveness research, with a caveat. And 
the caveat was that it looks longitudinally across care, and it 
looks to validate which technologies result in ultimately, as I 
mentioned before, the lowest cost, lowest time, and the best 
quality for the entire episode of patient care.
    We engage in competitive effectiveness research all the 
time in the company. We will have people come to us and say, 
every year we have budget time, and our engineers all want to 
spend all of the money on everything. And we are big, but we 
still have limited budgets like everyone does. So we have to 
decide do we invest in this new MR, do we invest in this new 
CT, or this new ultrasound, or this new thing that no one's 
ever thought of yet?
    To do this we engage in our own form of comparative 
effectiveness research. It may be done more or less well, but 
these are exactly the same kind of questions that we actually 
ask when we decide where we invest our innovation dollars. So 
therefore, we can't be against it in truth. And plus, if all of 
the statements I made in both written and oral testimony are 
true, if I truly believe them, I have nothing to fear. In fact, 
what should happen, if I am right, is that you will end up 
spending more money on my technology because it improves 
patient outcomes. So I support it. It must be done the right 
way. The devil is in the details, but the concept is absolutely 
supportable.
    Mr. Pallone. All right. That is what I wanted to find out. 
And I appreciate it. And I think that----
    Ms. Buto. Mr. Chairman, if I could just add just one other 
point to what Mr. Miller said.
    Mr. Miller. You are not going to fight with me.
    Ms. Buto. No, no. I am not going to fight with you.
    I think the other thing, too, to talk a little bit about is 
the fact that I think the appropriate comparisons are really 
across--in dealing with the condition across the different 
modalities. One might be a device, one might be a drug, one 
might be watchful waiting. So I think people tend to think drug 
to drug, device to device.
    And the other thing that has recently come in is the 
geographic variation in the costs are actually being driven by 
variation around process of care. So more visits, more testing 
around a treatment can make a big difference. So I think, you 
know, as the committee considers this, just the complexity of 
the issues and going beyond just the notion of drug-to-drug, 
device-to-device, to get that bigger picture of what 
comparisons were really after.
    Mr. Pallone. I understand. And that certainly makes sense 
to me. I think we are done with the questions and done with the 
whole hearing. But really, thank you again. Because I think, 
again, your panel as well as the others were very helpful in 
terms of what we are trying to achieve here with health care 
reform and so we certainly appreciate it.
    You may get written questions within the next 10 days. We 
would ask you to respond to them and get back to us as quickly 
as possible.
    Now, again, as yesterday, the committee is going to 
recess--the subcommittee, I should say, is going to recess and 
reconvene tomorrow morning at 9:30 to continue our review of 
the discussion draft. So the committee stands in recess. Thank 
you.
    [Whereupon, at 7:24 p.m., the subcommittee recessed, to 
reconvene at 9:30 a.m. Thursday, June 25, 2009.]
    [Material submitted for inclusion in the record follows:]






        COMPREHENSIVE HEALTH CARE REFORM DISCUSSION DRAFT--DAY 3

                              ----------                              


                        THURSDAY, JUNE 25, 2009

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 9:35 a.m., in 
Room 2123 of the Rayburn House Office Building, Hon. Frank 
Pallone, Jr. [Chairman of the Subcommittee] presiding.
    Members present: Representatives Pallone, Dingell, Gordon, 
Eshoo, Green, DeGette, Capps, Schakowsky, Baldwin, Matheson, 
Harman, Gonzalez, Barrow, Christensen, Castor, Sarbanes, Murphy 
of Connecticut, Space, Braley, Deal, Whitfield, Shimkus, 
Shadegg, Buyer, Pitts, Murphy of Pennsylvania, Burgess, 
Blackburn, Gingrey, and Barton (ex officio).
    Staff present: Karen Nelson, Deputy Committee Staff 
Director for Health; Any Schneider, Chief Health Counsel; Jack 
Ebeler, Senior Advisor on Health Policy; Brian Cohen, Senior 
Investigator and Policy Advisor; Robert Clark, Policy Advisor; 
Tim Gronniger, Professional Staff Member; Anne Morris, 
Professional Staff Member; Stephen Cha, Professional Staff 
Member; Allison Corr, Special Assistant; Alvin Banks, Special 
Assistant; Jon Donenberg, Fellow; Karen Lightfoot, 
Communications Director, Senior Policy Advisor; Caren Auchman, 
Communications Associate; Lindsay Vidal, Special Assistant; 
Earley Green, Chief Clerk; Mitchell Smiley, Special Assistant; 
Brandon Clark; Ryan Long; Marie Fishpaw; Aarti Shah; William 
Carty; Chad Grant; Abe Frohman; Melissa Bartlett; Clay Alspach, 
and Nathan Crow.
    Mr. Pallone. The Subcommittee on Health will reconvene our 
hearing on comprehensive health care reform on the discussion 
draft, and we have actually four panels today, and we are going 
to get started. So our first panel is on Medicare payment, and 
let me introduce our two witnesses. First, on my left, is Glenn 
M. Hackbarth, who is the chair of the Medicare Payment Advisory 
Commission, better known as MedPAC. And then next to him is the 
Honorable Daniel R. Levinson, who is the Inspector General for 
the U.S. Department of Health and Human Services.
    We are starting fresh today. If you had been here at seven 
o'clock last night, it wouldn't have been as--we would have all 
looked very tired, but now we are all fresh, so--you know the 
drill. We ask you to talk about 5 minutes, and your complete 
testimony becomes part of the record, and then we will have 
questions, and so we will start with Chairman Hackbarth.

   STATEMENTS OF GLENN M. HACKBARTH, CHAIR, MEDICARE PAYMENT 
  ADVISORY COMMISSION; AND HON. DANIEL R. LEVINSON, INSPECTOR 
     GENERAL, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES

                STATEMENT OF GLENN M. HACKBARTH

    Mr. Hackbarth. Thank you, Chairman Pallone, and Ranking 
Member Deal, members of the Subcommittee. I appreciate the 
opportunity to talk about the Medicare Payment Advisory 
Commission's recommendations for improving the Medicare 
program.
    As you know, MedPAC is a non-partisan Congressional 
advisory body. Our mission is to support you, the Congress, in 
assuring Medicare beneficiaries have access to high quality 
care, while protecting the taxpayers from undue financial 
burden. MedPAC has 17 commissioners. Six of the Commissioners 
are trained as clinicians. Seven of the commissioners have 
experience either as executives or Board members of health care 
providers or health plants. Three commissioners have high level 
experience in Congressional support agencies, or CMS, and we 
have four researchers who add intellectual rigor to our work. 
And some commissioners have more than one of these credentials. 
In addition to that, we have a terrific staff, headed by Mark 
Miller, the executive director.
    I want to emphasize the credentials of the commissioners, 
to emphasize that we are from the health care system in no 
small measure. As such MedPAC commissioners recognize the 
talent and commitment of the professionals who serve within the 
health care system. We are not outsiders, critics who have no 
appreciation of the challenges of being on the front line. 
MedPAC recommendations may be right, they may be wrong. The 
issues are complex, and rarely are they clear cut. But if we 
are wrong, it isn't because we are inexperienced, or lack a 
stake in the success of the system. We also take pride in our 
ability to reach consensus on even complex and sensitive 
issues. For example, in our March 2009 report, we voted on 22 
different recommendations. On those 22 recommendations, there 
were roughly 300 yes votes and only 4 no votes, and 3 
abstentions.
    All of the MedPAC commissioners agree that Medicare is an 
indispensable part of our health care system. Not only is it 
financed care for many millions of senior citizens and disabled 
citizens, it has helped finance investments in health care 
delivery that have benefited all Americans. But we also know 
that Medicare is unsustainable in its current form. We must 
slow the increase in costs, even while maintaining or improving 
quality if care and access. We believe accomplishing that task 
will in turn require both restraint and payment increases under 
Medicare's current payment systems and a major overhaul of 
those payment systems.
    Medicare's payment systems, and, I would add, those used by 
most private payors, reward volume and complexity without 
regard to the value of the care for the patient. Moreover, 
those payment systems facilitate siloed or fragmented practice, 
whereby provides caring for the very same patient to often work 
independently of one another. When care is well integrated and 
coordinated, it is usually testimony to the professionalism of 
the clinicians involved. That coordination and integration is 
too rarely support or rewarded by our payment systems.
    The resulting fragmented approach to care is not only 
expensive, it is dangerous, especially for complex patients, of 
which there are many in the Medicare program. It is MedPAC's 
belief that we need payment reform that rewards the efficient 
use of precious resources and the integration and coordination 
of care. But it is not enough to simply change how we pay 
health care providers. We also must engage Medicare 
beneficiaries in making more cost conscious choices, or being 
sensitive to the complex nature of the decisions that must be 
made, and the limited financial means of many beneficiaries.
    It is our belief that the cost challenge facing the 
Medicare program, and indeed the country, is so great that we 
need to engage everyone, patients, provides and insurers, in 
striving for a more efficient system. In the last several 
years, MedPAC has recommended a series of changes in the 
Medicare program that we believe would help improve the 
efficiency of the care delivered, while maintaining or 
improving quality. Let me just quickly mention a few of those 
recommendations.
    First is increase payment for primary care services, and 
perhaps a different method of payment as well. Abundant 
research has shown that a strong system of primary care is a 
keystone of a well functioning health care system.
    Second, we have recommended that the Congress take a number 
of steps to increase physician and hospital collaboration, 
including gain sharing, that would encourage collaboration 
between physicians and hospitals in reducing cost and improving 
quality.
    Third, we have recommended reduced payment for hospitals 
experiencing high levels of potentially avoidable re-
admissions. As you know, about 18 to 20 percent of all Medicare 
admissions are followed by a re-admission within 30 days, at a 
cost of roughly $15 billion a year to the Medicare program.
    Next, we have recommended a pilot of bundling, whereby 
payment for hospital and physician services 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 recommended reform of the Medicare advantage 
program so that participating private plans are engaged in 
promoting high performance in our health care system, instead 
of offering plants that mimic Medicare----
    Mr. Pallone. Mr. Hackbarth, I want you to finish, but I 
just want you to know you are minute over, so----
    Mr. Hackbarth. OK. I am to the last step, Mr. Chairman. Let 
me just close with two cautionary statements. One is changing 
payment systems, and we must change them, and doing so with 
some speed is going to require more resources and broader 
discretion for CMS than it now has.
    The second caution is that, while we need to reform 
payment, it is going to take some time, and in the meantime, we 
need to continue pressure on the prices under our existing 
payment systems in the Medicare program. Thank you.
    [The prepared statement of Mr. Hackbarth follows:]





    
    Mr. Pallone. Thank you very much for what is really 
important in terms of what we are trying to accomplish here. I 
appreciate it.
    Mr. Levinson?

              STATEMENT OF HON. DANIEL R. LEVINSON

    Mr. Levinson. Good morning, Chairman Pallone, Ranking 
Member Deal, and members of the Subcommittee.
    Mr. Pallone. Your mike may not be on, or maybe it is not 
close enough. Try to move it--no, I think you have got to 
press--you have to--when the green light is on, it--green light 
on?
    Mr. Levinson. It is.
    Mr. Pallone. Now you are fine.
    Mr. Levinson. OK. Thank you. Chairman Pallone, Ranking 
Member Deal, members of the Subcommittee, good morning. I thank 
you for the opportunity to discuss the Office of Inspector 
General's work at this very important time of deliberations 
over health care reform.
    Based on our experience and expertise, our office has 
identified five principles that we believe should guide the 
development of any national health care integrity strategy. And 
consistent with these principles, OIG has developed specific 
recommendations to better safeguard Federal health care 
programs. My office has provided technical assistance, as 
requested, to staff from the Committee, and we welcome the fact 
that many of OIG's recommendations have been incorporated into 
the House Tri-Committee health reform discussion draft.
    Principle one, enrollment. Scrutinize those who want to 
participate as providers and suppliers prior to their 
enrollment in the Federal health care programs. Provider 
enrollment standards and screening should be strengthened, 
making participation in Federal health care programs a 
privilege, not a right.
    As my written testimony describes, a lack of effective 
provider and supplier screening gives dishonest and unethical 
individuals access to a system that they can easily exploit. 
Heightened screening measures for high risk items and services 
could include requiring providers to meet accreditation 
standards, requiring proof of business integrity or surety 
bonds, periodically certification and on site verification that 
conditions of participation have been met, and full disclosure 
of ownership and controlled interests.
    Principle two, payment. Establish payment methodologies 
that are reasonable and responsive to changes in the 
marketplace.
    Through extensive audits and evaluations, our office has 
determined that Medicare and Medicaid pay too much for certain 
items and services. When pricing policies are not aligned with 
the marketplace, the programs and their beneficiaries bear the 
additional cost.
    In addition to wasting health care dollars, these excessive 
payments are a lucrative target for unethical and dishonest 
individuals. These criminals can re-invest some of their profit 
in kickbacks, thus using the program's funds to perpetuate the 
fraud schemes.
    Medicare and Medicaid payments should be sufficient to 
ensure access to care without wasteful overspending. Payment 
methodology should also be responsive to changes in the 
marketplace, medical practice and technology. Although CMS has 
the authority to make certain adjustments to fee schedules and 
other payment methodologies, some changes require Congressional 
action.
    Principle three, compliance. Assist health care providers 
in adopting practices that promote compliance with program 
requirements.
    Health care providers can be our partners in ensuring the 
integrity of our health care programs by adopting measures that 
promote compliance with program requirements. The importance of 
health care compliance programs is well recognized. In some 
health care sectors, such as hospitals, compliance programs are 
widespread and often very sophisticated. New York requires 
provides and suppliers to implement an effective compliance 
programs as a condition of participation in its Medicaid 
program. Medicare Part D prescription drug plan sponsors are 
also required to have compliance programs.
    Compliance programs are an important component of a 
comprehensive integrity and strategy, and we recommend that 
providers and suppliers should be required to adopt compliance 
programs as a condition of participating in Medicare and 
Medicaid.
    Principle four, oversight. Vigilantly monitor the programs 
for evidence of fraud, waste and abuse.
    The health care system compiles an enormous amount of data 
on patients, providers and the delivery of health care items 
and services. However, Federal health care programs often fail 
to use data and technology effectively to identify improper 
claims before they are paid and to uncover fraud schemes. For 
example, Medicare should not pay a clinic for HIV infusion when 
the beneficiary has not been diagnosed with the illness, or pay 
twice for the same service.
    Better collection, monitoring and coordination of data 
would allow Medicare and Medicaid to detect these problems 
earlier and avoid making improper payments. Moreover, this 
would enhance the government's ability to detect fraud schemes 
more quickly.
    As fraud schemes evolve and migrate rapidly, access to real 
time data and the use of advance data analysis to monitor 
claims and provider characteristics are critically important. 
OIG is using innovative technology to detect and deter fraud, 
and we continue to develop our efforts to support a data driven 
anti-fraud approach. However, more must be done to ensure that 
we and other government agencies are able to access and utilize 
data effectively in the fight against health care fraud.
    Final principle, response. Respond swiftly to detected 
fraud, impose sufficient punishment to deter others, and 
promptly remedy program vulnerabilities.
    Health care fraud attracts criminals because the penalties 
are lower than those for other criminal offenses, there are low 
barriers to entry, schemes are easily replicated, and there is 
a perception of a low risk of detection. We need to alter the 
criminal's cost/benefit analysis by increasing the risk of 
swift detection and a certainty of punishment.
    As part of this strategy, law enforcement is accelerating 
our response to fraud schemes. The HHS/DOG Medical Fraud Strike 
Force model describe in my written testimony is a power anti-
fraud tool, and represents a tremendous return on investment. 
These strike forces have proven highly effective in prosecuting 
criminals, recovering payments for fraudulent claims and 
preventing fraud through a powerful sentinel effect.
    In conclusion, our experiences and results in protecting 
HHS programs and beneficiaries has applicability to the current 
discussions on health care reform. We believe that our five 
principle strategy provides the framework to identify new ways 
to protect the integrity of the programs, meet the needs of 
beneficiaries, and keep Federal health care programs solvent 
for future generations.
    We appreciate the opportunity to work with the Committee, 
and welcome your questions. Thank you.
    [The prepared statement of Mr. Levinson follows:]





    Mr. Pallone. Thank you. Thank you both. I am going to ask 
my questions of Mr. Hackbarth, but not because what you said is 
not important, Mr. Levinson. I think this whole issue of 
enforcement and fraud and abuse is really crucial.
    But I--yesterday, Mr. Hackbarth, I asked basically the same 
question of Secretary Sebelius. In other words, you know, on 
the one hand we are talking about reductions in payments for 
certain Medicare and Medicaid programs. On the other hand, we 
are talking about enhancements and, you know, actually spending 
more on other aspects of Medicare and Medicaid, for example, 
Medicare Part D, filling up the doughnut hole, and you do both. 
In other words, my understanding is that, you know, your 
recommendations, which we--many of which are incorporated in 
this discussion draft, accomplish both purposes.
    So--what I wanted to do, though, is--I think there is more 
media attention on cuts than there is on what you do to enhance 
programs, so I wanted you to talk a little bit about what 
motivates MedPAC to propose some of the reductions we are 
contemplating, you know, like the Medicare Advantage, the home 
health rebasing, productivity into payments updates and the 
rest. But why is it that MedPAC sees these as important policy 
proposals on their own terms, not because of, you know, cost 
savings?
    Mr. Hackbarth. Um-hum. Well, Mr. Chairman, we believe that 
pressure on the prices in the Medicare payment system is 
important to force the system towards more efficiency. As you 
and the other members of the Committee know, Medicare has 
administered price systems. They are set through a government 
process, as opposed to market prices.
    We believe that what we have to do with that administered 
price system is mimic, so far as possible, the sort of pressure 
that exists in a competitive marketplace. The taxpayers who 
finance the Medicare program face relentless pressure, often 
from international competition, for example, forcing the firms 
that they work for to lower their costs, day in and day out. We 
think the health care system must experience the same sort of 
pressure.
    Mr. Pallone. And then the solvency of the trust fund is 
extended, and premiums are reduced, and the program is 
maintained for future generations, so that is the ultimate 
goal?
    Mr. Hackbarth. Absolutely.
    Mr. Pallone. And let me ask you another question about--you 
know, we get this argument from some--not too many, but some 
employers and providers complain about alleged cost shifting 
from Medicare to the private sector. The argument is, like--
something like if Medicare would pay more, private plans could 
pay less, and so health care would be cheaper for employers and 
others. I don't understand how increasing Medicare payment 
rates would lead a private hospital to decrease the prices it 
charges private insurers, and--can you explain this to me? You 
know--I mean, I know I am asking you the opposite of what you 
believe, but----
    Mr. Hackbarth. Yes.
    Mr. Pallone [continuing]. I mean, what----
    Mr. Hackbarth. Yes. Well, let me start by saying that we 
believe that Medicare payment rates are adequate. We don't 
believe that they are too low. We don't believe that they 
should be increased. And we--let me focus on hospital services 
as an example of that. We look at the data in several different 
ways. We have looked at time series data, and you see there is 
a pretty consistent relationship in periods where private 
payments are generous, Medicare margins become negative. And it 
is our belief that that is because when the private payments 
are generous, hospitals have more money to spend, and they 
spend it. It is a largely not-for-profit industry. If they get 
revenue, they will spend it.
    And--then we see the same pattern when we look at 
individual hospitals, so what we have identified is a group of 
hospitals that don't have a lot of generous payment from 
private payers. They have constrained resources. Those 
institutions lower their costs and actually have a positive 
margin on Medicare business. They don't have the luxury of 
additional private money flowing into their institutions. They 
are forced to control costs, and they do control costs as a 
result.
    Mr. Pallone. And so you disagree with claims that Medicare 
is responsible for high health insurance premiums?
    Mr. Hackbarth. No. I--if institutions--clearly the rates 
paid by Medicare and private payers are different. Private 
payers pay higher rates. It does not follow from that, however, 
if you increase Medicare rates that the private rates would 
fall.
    Mr. Pallone. OK. Now, let me just--one more thing about 
access. You know, we hear about, in some parts of the country 
that, you know, Medicare enrollees say that they can't find a 
doctor willing to accept new patients. Based on your research, 
do you have any reason to believe that we have a crisis of 
access in Medicare, that--basically providers not taking 
Medicare in a significant way?
    Mr. Hackbarth. Each year we do a careful study of access 
for Medicare beneficiaries, asking both patients and 
physicians. Our most recent patient survey, which was done in 
the Fall of 2008, found that Medicare beneficiaries are most 
satisfied with their access to care than private patients, 
privately insured patients, in the 50-64 age group.
    The one area of concern that we do have is around access to 
primary care services, especially for Medicare beneficiaries 
looking for a new physician, for example, because they have 
moved. That is the area where we see Medicare beneficiaries 
reporting the most problem, but we also see privately insured 
patients in the same circumstance reporting problems as well. 
So we don't think the issue is a function of Medicare payment 
rates, but rather too few primary care physicians.
    Mr. Pallone. Which was one of the things we were trying to 
address in this discussion draft. Thank you.
    Mr. Deal.
    Mr. Deal. Mr. Hackbarth, let me follow up on one of your 
comments about your look at those hospitals that have higher 
ratios of Medicare patients and lower ratios of private paying 
patients.
    Mr. Hackbarth. Um-hum.
    Mr. Deal. And I believe your statement was that they are 
able to make a profit and, in fact, be more profitable than 
some of the ones who have lower volume of Medicare patients. 
Don't those hospitals receive dish payments, as a general rule?
    Mr. Hackbarth. Some of them may, yes.
    Mr. Deal. Does your recommendation in any way address 
whether dish payments should continue or be abolished?
    Mr. Hackbarth. We have had some discussion, Mr. Deal, about 
refocusing dish payments. We have not recommended abolishing 
them.
    Mr. Deal. OK. Mr. Levinson, the draft talks about expanding 
Medicaid coverage and providing Federal payment of 100 percent 
for some of this expansion of new populations so that the 
states don't have to pick up even their matching share in their 
Medicaid formula. If that is the case, if the Federal 
government picks up 100 percent of this cost, are you concerned 
that states will no longer have the incentive to look for the 
waste and the fraud and the abuse because they don't really 
have any stake dollars in that pot? Is that a concern, from 
your standpoint?
    Mr. Levinson. Well, it is certainly always a concern about 
what is occurring with the Federal share of Medicaid, and 
indeed, as we look for a larger share of that on the Federal 
side, it becomes of greater interest to us at the Federal 
level. It is an issue, actually, that I, as a member of the 
Recovery Act Accountability and Transparency Board, is already 
dealing with, with my colleagues on the Board, because the ARA 
does include a significant increase in the Federal share 
funding to alleviate states of some of the Medicaid burden. And 
in some of the states, particularly in the south central part 
of the United States, we are approaching a level where states 
give little, if any, contribution to Medicaid. So we are 
focusing on ensuring that there are controls in place to make 
sure that the, you know, the Medicaid dollar is protected, but 
as the Federal involvement becomes greater, the need for more 
Federal monitoring of those dollars also becomes greater.
    Mr. Deal. Because the states have been the primary 
enforcement--first line of enforcement against fraud and abuse, 
with oversight from the Federal. So you are saying that there 
may be a need for more Federal oversight?
    Mr. Levinson. That is correct. Historically the Medicaid 
Fraud Control Units, which exist in nearly every state of the 
union, have been really the first protectors, as it is, of the 
Medicaid program. We have provided oversight. In the last 
several years, though, Congress has provided additional funding 
to be more involved in the monitoring of those Medicaid dollars 
as the Federal share has increased.
    Mr. Deal. Mr. Hackbarth, in your testimony, you make 
reference, I think, to the fact that about 60 percent of 
beneficiaries now buy supplemental policies to cover part of 
their Medicare cost. That seems, to me, a little bit 
inconsistent with your conclusion that the Medicare 
reimbursement rates are adequate. I know one is from the 
provider standpoint and the other being from the patient 
standpoint.
    Do you foresee, from the patient standpoint, that if we 
model everything after the Medicare reimbursement rates and the 
Medicare model, that there is going to be a need for even more 
purchasing of supplemental insurance by the individual 
patients?
    Mr. Hackbarth. Well, as you say, Mr. Deal, there are two 
distinct issues. One is the adequacy of payments rates to 
providers, and we believe those payment rates are adequate. The 
Medicare benefit package is probably not designed the way any 
of us would design it if we were starting with a clean piece of 
paper. The design could be streamlined, and that process may 
reduce the need for beneficiaries to buy supplemental coverage. 
For example, if we were to add catastrophic coverage, a key 
missing component on Medicare, that might reduce the perceived 
need for supplemental coverage.
    Mr. Deal. OK.
    Mr. Hackbarth. We have begun looking at that redesign 
issue.
    Mr. Deal. Real quickly, you were going through your 
principles that you have recommended, and you got through most 
of them, I think. In the very short time that I have left, are 
there any of those principles that you are concerned that are 
not being addressed in this discussion draft, in particular any 
that you have great concern about?
    Mr. Hackbarth. Off the top of my head, Mr. Deal, I can't 
think of one.
    Mr. Deal. OK. Thank you, Mr. Chairman.
    Mrs. Capps. The chair now recognizes Mr. Murphy for his 
questions.
    Mr. Murphy of Connecticut. Thank you very much, Madam 
Chair, and Mr. Hackbarth, thank you so much for all the work 
that you have done guiding this Congress on this issue of 
moving away from a volume based system to a system that 
attempts to really reward outcome and performance.
    And I think--I, for one, am worried that if don't take 
advantage of this moment in time, with this health care reform 
debate, to make those changes, that we may never be able to 
make them. And so--I know Mr. Deal just asked you a general 
question about whether there were points of reform that you 
have pushed that aren't in this bill, but I wanted to ask 
specifically on this issue of payment reform.
    Mr. Hackbarth. Um-hum.
    Mr. Murphy of Connecticut. Have you taken a look at this 
bill with regard to payment reform, and how do you think it 
measures up versus what you think could be potentially done 
through this Reform Act, with regard to transforming our 
payment system?
    Mr. Hackbarth. Yes. As I indicated to Mr. Deal, I think 
that the bill's provisions on Medicare are pretty 
comprehensive, and address the major issues that MedPAC has 
raised about the Medicare program. Having said that, some of 
the provisions--let me take an example, accountable care 
organizations rebuttalling. You know, the bill provides for 
pilots of these new ideas, and, in fact, that is what MedPAC 
has recommended. These are complex ideas that will take time to 
develop and refine. So, the bill includes provisions. We 
shouldn't assume from that that, oh, it is a done deal. There 
is lots of work that needs to be done in CMS, in particular, to 
make these things a reality.
    Mr. Murphy of Connecticut. Well--and that was going to be 
my second question. You have had a lot of experience in pilot 
programs, and I think one of the things that some of us worry 
about is that it is--that there has been a lot of research done 
on, for instance, the issue of accountable care organizations 
and bundling, and I think the majority of evidence is that they 
work. That they get good outcomes, and they can reduce costs. 
And so if we are going to go into a bill that pilots these, how 
do we make sure that if the pilots turn up with the outcomes 
that pretty much every other--all other work on these payment 
reforms have done, how do we make sure that then that becomes a 
system-wide reform?
    Mr. Hackbarth. Yes. This is an issue that I think we 
discussed last time I was with the Committee. The pace at which 
we make changes, reform the Medicare payment systems, is way 
too slow, and one of the things that we have recommended is 
broader use of pilots, as opposed to demonstrations. And the 
difference, in our mind, is that under a pilot, the Secretary 
has the authority to move to implementation if the pilot 
achieves stated objectives. It doesn't have to come back 
through the legislative process. We think that is a very 
important step.
    And again, I would emphasize CMS needs more resources to do 
these things both quickly and effectively. They are operating 
on a shoestring, and the work is too important, too complex, to 
allow that to continue.
    Mr. Murphy of Connecticut. And let me ask specifically 
about this issue of accountable care organizations. And--it 
seems to me that one of the ways that you expand out to a 
system of outcome based performance is that you try to 
encourage physicians to join in and collaborate.
    Mr. Hackbarth. Right.
    Mr. Murphy of Connecticut. We have put an enormous amount 
of money in the stimulus bill into giving physicians and 
hospitals the information technology to create those 
interaction and that coordination. And I guess I would ask you 
what are the ways that we need to be looking at in order to try 
to provide some real incentives for physicians to coordinate, 
become part of multi-specialty groups, enter into cooperative 
agreements? And then should we be looking at only incentives, 
or should we be looking at something tougher than incentives to 
try to move more quickly to a system by which physicians aren't 
operating in their own independent silos?
    Mr. Hackbarth. Yes. Well, the fact that we have a 
fragmented delivery system, I believe, is the result of how we 
have paid for medical care not just in Medicare, but also in 
private insurance programs for so many years. We basically 
enabled a sort of siloed, independent practice without 
coordination. The most important step we can take is change the 
payment systems so that services are bundled together, and 
physicians of various specialties and the various types of 
providers must work together. And there is abundant evidence 
that when they do that, we not only get lower costs, we get 
better quality.
    Mr. Murphy of Connecticut. Thank you very much, Madam 
Chair.
    Mrs. Capps [presiding]. Thank you. The Chair now recognizes 
Congressman Burgess for his questions.
    Mr. Burgess. Thank you, Madam Chair. Mr. Hackbarth, always 
good to see you, and I have several questions that I am going 
to submit in writing because time is so short during these 
Q&As, and I was going to reserve all my questions, in fact, for 
the Inspector General, but I just have to pick up on a point 
that we just expressed.
    And under accountable care organization within Medicare, 
just within the Medicare system, with Medicare being an 
entirely Federal system--it is not a state system, it is a 
Federal system, so we don't have state mandates in Medicare. It 
functions across state lines.
    If we were to provide an incentive, that is a backstop on 
liability under the Federal Tort Claims Act for doctors 
practicing within the Medicare system who practice under the 
guidelines of whatever we decide the accountable care 
organization--the proper accountable care organization should 
be, would that not be the types of incentive that we could 
offer to physicians that would not require increase in 
payments, but yet would bring doctors--increase their interest 
in practicing within these accountable care organizations?
    Mr. Hackbarth. Yes. Dr. Burgess, MedPAC has not looked 
specifically at the malpractice issue. We principally focus on 
Federal issues. You know, that is our----
    Mr. Burgess. But, if I could, we could make liability a 
Federal issue within the Medicare system because defensive 
medicine does cost the Federal system additional dollars, as 
Dr. McClellan's great article from 1996 showed.
    Mr. Hackbarth. Right. And my point is that there's no 
MedPAC position on malpractice issues. As you know, though, I 
am formerly a CEO of a very large medical group, so I have lot 
of experience working with physicians, and I know how large 
malpractice looms in the minds of physicians. Because I have 
not studied the issue in detail, I don't have a specific 
recommendation, but I think addressing physician concerns about 
malpractice is a reasonable thing to do.
    Mr. Burgess. Well, one of the things that really bothers me 
about these discussion in this Committee, you have so many 
people here who have never run a medical practice, as you have, 
and as some of us have. Doctors tend to be very goal directed 
individuals. That is why the fee for service system has worked 
for so long, because you tell us what to do and what the rules 
are, and we make a living at it. I am not a big fan of 
bundling. I don't trust hospital administrators, as a general 
rule, and I would not trust them to appropriately apportion out 
the payments, so not a big fan there. But are there--there 
ought to be other ways to tap into the goal directed nature of 
America's physicians to achieve the goals that you are trying 
to get, and right now I don't think, at least from what I have 
seen, we are quite there.
    I am going to actually go to Mr. Levinson, because what you 
have talked about is so terribly important, and--let me just 
ask a question. Right now, within the discussion draft we are 
talking about, I don't think the numbers are filled in as far 
as the budget, the numbers--the dollar numbers that are going 
to be there. What do you need today in order to do your job 
more effectively?
    Mr. Levinson. Well, we certainly need the resources that we 
have been given by the Congress and by the Executive, and it is 
certainly being used, I think, in an optimum way. But as the 
mission gets larger, the need for greater resources also is 
there.
    Mr. Burgess. And I am going to interrupt you, that is an 
extremely important point, because we have increased the FMAP 
on--in the stimulus bill and some of the other things that we 
are talking about doing. Is that not going to increase the 
burden, the pressure, that is placed on you and your 
organization in order to provide the proper oversight?
    Mr. Levinson. Certainly our mission has been heading north 
for the last few years, and we are really pressed to enlist 
really the best investigators, evaluators, lawyers and auditors 
we can find to handle, you know, a much larger budget than 
historically we ever have had before.
    Mr. Burgess. And it is not just you, because my 
understanding, from talking to folks back home in the Dallas/
Fort Worth area, from--within the HHS Inspector General's shop, 
and within the Department of Justice's jurisdiction, there is 
actually a deficit of prosecutorial assets, or, actually, 
assets have been--been had to use for other things, Homeland 
Security, narcotics trafficking, and there is not the 
prosecutors to devote to the cases that you all develop, to 
bring those cases to trial.
    Mr. Levinson. That is a very important point, and sometimes 
it is overlooked how key it is to understand that the resources 
that are used to fight health care fraud really require a 
collaborative effort across several different government 
entities. And if you have the Justice Department personnel, but 
don't have the IG personnel----
    Mr. Burgess. Right.
    Mr. Levinson [continuing]. And vice versa, you really have 
a significant problem.
    Mr. Burgess. And just one last point--I will submit several 
questions in writing--on the issue that we are hearing so much 
about in McAllen, Texas, where the--McAllen appears to be an 
outlier. Many physicians from the Texas border area were in 
town yesterday. I don't represent the border area, but they 
discussed it with me. They are concerned, obviously, about the 
negative press that they have been getting over the report by 
Dr. Guande in the New Yorker magazine. Is there any special 
focus that you are putting on that area because of the 
possibility of diversion of Medicare/Medicaid dollars within 
other ancillary agencies, imaging, drugs, home health? Are--is 
the possibility that this number is skewed not because of 
practitioners in the area, but because, in fact, the--we don't 
have the resources to devote to the investigation of fraud, the 
prosecution of fraud when it is uncovered?
    Mr. Levinson. Well, there are a number of high profile 
areas that we oversee that we do need to concentrate on, 
because they do tend to be areas where fraud, waste and abuse 
tends to become a lot more serious than perhaps others. The 
durable medical equipment area, for example, especially in 
South Florida, has triggered our need to develop a strike force 
that is specifically devoted to trying to uncover and, to the 
extent possible, eliminate DME fraud in South Florida. We have 
had very good results there, actually, in being able to clean 
up many of the problems areas. I can point to other parts of 
the country where other kinds of issues have arisen that really 
require a concentrated effort by us, working with our law 
enforcement partners. I can't speak specifically to McAllen, 
Texas.
    Mr. Burgess. Are--is that on your radar screen to pull that 
into the investigative process?
    Mr. Levinson. I can only say that the entire nation is on 
our screen, because we have such an extensive jurisdictional 
requirement.
    Mr. Burgess. All right. Thank you, Mr. Chairman.
    Mrs. Capps. The Chair now recognizes Mr. Green for his 
questions.
    Mr. Green. Thank you.
    Mr. Hackbarth, in your testimony, you cited lack of care 
coordination and lack of incentive of providers to actually 
coordinate care as a cost burden, and I agree, and we have 
several coordination bills pending before our committee. One is 
the Realigning Care Act, which focuses on geriatric care 
coordination. Your testimony cites geriatrics as an area in 
which care coordination is especially necessary. Can you 
elaborate on how geriatric care coordination could help lower 
health care costs? And again, we are dealing with Medicare, but 
maybe we could also deal with whatever we create as a--in the 
national health care.
    Mr. Hackbarth. Yes. Geriatricians, as you know, tend to 
focus on elderly patients who have very complex multiple 
illnesses. And for those patients, not only is the potential 
for inappropriate, unnecessary care large, the risk to the 
patient of uncoordinated care is very large indeed. And so such 
patients really need somebody who is going to follow them at 
each step, not hand them off to specialists, and then they are 
handed to another specialist and another. They need somebody as 
that home base to integrate and coordinate the services.
    Mr. Green. And I know that is our goal, is to talk about a 
medical home, you know, where someone could--any of us--a 
number of us had elderly parents who we have had to monitor the 
number of doctor's visits simply because they also take lots of 
different medications, and there is nobody coordinating that, 
except maybe a family member.
    Mr. Hackbarth. And the problem, as you well know, Mr. 
Green, is that Medicare really doesn't pay for that activity, 
outside of the patient visit, the phone calls that need to be 
made to pull together the services of the well integrated. So 
we have made a series of recommendations to increase payment 
for primary care and the medical home, which in addition to the 
fee based payments, has a per patient sum to support that sort 
of activity.
    Mr. Green. And since we are all so concerned about the 
scoring, did MedPAC look at--by creating this benefit of 
coordinated care, could we save on the back end? Is there 
something we could quantify, say, to CBO, or someone could say, 
we--over a period of time, let us-- we think we can save 
ultimately?
    Mr. Hackbarth. Yes. Well, it is our hope, and perhaps even 
our expectation, that there would be savings. But what we have 
recommended, and what the Congress has done, is a large scale 
pilot, so that, in fact, we can hopefully document those 
savings and to have a resulting CBO score from it.
    Mr. Green. OK. And I know we have your--under current law 
we have your welcome to Medicare exam. That--do you think that 
could fit in there with what we would call a geriatric 
assessment initially, and then build on using that primary 
care?
    Mr. Hackbarth. Well, potentially, because it gives the 
physician, hopefully a strong primary care physician, an 
introductory assessment of all of the patient's problems right 
from the outset.
    Mr. Green. OK. And again, I know there is a provision in 
the bill, and a lot of us have that interest, and that is one 
of the good things about this bill that we are dealing with, 
but, again, since we are looking at scoring, say, you know--and 
it is hard to get CBO to say at the end we can save money. Not 
only save money, but almost--much more humane dealing Medicare, 
or any patient, in all honesty.
    Mr. Hackbarth. Well, what I can say, Mr. Green, is that--as 
I said in my opening comment, there is abundant evidence that 
systems that have strong primary care have lower costs and 
higher quality than systems that don't have strong primary 
care. You see that in international comparisons. You see that 
in studies within the United States that compare regions with 
one another. You see that within health systems. So there is 
lots of evidence of that sort. Whether CBO considers that 
strong enough to score is----
    Mr. Green. Well----
    Mr. Hackbarth [continuing]. A CBO issue, not a----
    Mr. Green [continuing]. Maybe by your testimony we can 
encourage CBO to look at other countries that have a primary 
care emphasis, and how that can reduce the cost. So maybe the 
bean counters can actually say, this works, and so--I 
appreciate your testimony, and hopefully we will get that in 
our response when we are--when we get that score, so--thank 
you.
    Chairman--Madam Chairman, I yield back my time.
    Mrs. Capps. Congressman Gingrey is now recognized.
    Mr. Gingrey. Madam Chairman, thank you. And I am going to 
direct my questions to Mr. Hackbarth.
    Mr. Hackbarth, one of the barriers to achieving value in 
Medicare cited in your testimony--you state that Medicare 
payment policies ``ought to exert physical pressure on 
providers.''
    Mr. Hackbarth. Um-hum.
    Mr. Gingrey. You go on to state that in a fully competitive 
market, which I am guessing infers that Medicare does not 
compete in a fully competitive market, that this physical 
pressure happens automatically in a fully competitive market. 
In the absence of such a competitive market, you suggest that 
Congress must exert this pressure by limiting payment updates 
to Medicare physician updates.
    When created Medicare Part D, Congress considered 
instituting a set payment rate in lieu of creating a 
competitive market, where competition among the pharmacy 
benefit plans might automatically keep the cost down. In the 
end, this Congress elected to go with that competitive model 
and forego payment rates set in statute, some of those that 
exist under current Medicare fee for service. The results, as 
we all now know, is that, due to the private market pressure, 
rather than government price setting, Part D premiums are much 
lower than anticipated, and drug prices have gone down.
    So, instead of exerting the physical pressure on providers 
that you suggest must be exerted due to the lack of a 
competitive market to do it automatically, I am curious as to 
your thoughts on how using a competitive bidding process, like 
what we did in Medicare Part D, might achieve the same sort of 
efficiencies you suggest are required in traditional Medicare, 
but without having to resort to restricting of payments.
    Mr. Hackbarth. Um-hum. Well, let me approach it from two 
directions, Dr. Gingrey. If we look at private insurers, and 
the private insurance marketplace, and we compare the costs of 
those programs with Medicare costs, what we see is that, on 
average, and my evidence here is from the Medicare Advantage 
Program, is that the bids submitted by the private plans are 
higher than Medicare's costs, they are not lower. Now, there 
are some plans that bid lower, but on average, the private bids 
are higher.
    So that is an opportunity for private plans to come in and 
compete and show that they can reduce costs, and by their own 
bids, they have not done that.
    Mr. Gingrey. You are talking Medicare Advantage?
    Mr. Hackbarth. Medicare Advantage.
    Mr. Gingrey. But, of course, they--Mr. Hackbarth, they do 
provide something that these three committees that have come up 
with this draft legislation, if you will, really want, and that 
is, of course, emphasis on things other than just episodic 
care, treatment of pain and suffering, but also wellness 
prevention and that sort of thing.
    Mr. Hackbarth. Yes. Some do, some don't. The private plans 
are quite variable in their structure, how they deal with 
providers, what sort of care coordination programs they have, 
and most importantly, they are quite variable in their bottom 
line results. Some are outstanding, some are not.
    Mr. Gingrey. Yes. Let me go on to another question. I thank 
you for that response. One of the foundations of your testimony 
today is that the American health care system has serious 
quality problems. You--``At the same time that Americans are 
not receiving enough of the recommended care, the care they are 
receiving may not be appropriate.'' And then you go on to cite 
the Dartmouth Center for the Evaluative Clinical Services as 
proof of a wide variation in Medicare spending and rates of 
service used.
    Just to be clear, when you say the American system, Mr. 
Hackbarth, are you referring to the American Medicare system, 
and not the entire American health care system? Am I correct in 
that assumption, given that the Dartmouth study used only 
Medicare data for its findings? We are talking about the 
American Medicare system and not the entire health care system?
    Mr. Hackbarth. Well, in fact, the Dartmouth study is done 
using Medicare data because it is the most readily available 
comprehensive database. I don't think there is any reason to 
believe that physicians are practicing different for Medicare 
patients and private patients, but my personal experience in 
working closely with physicians is that it is a matter of 
principle that they don't vary their care based on the 
insurance coverage of the patient. They treat the patient based 
on what the patient needs.
    So I think it is a reasonable inference, if you see this 
variation of Medicare, likely you have the same variation----
    Mr. Green. Well, I know my time is up, Madam Chairman, but 
I--the reason I ask you this question, Mr. Hackbarth, because 
we are going to have another panel, probably several more 
panels today, but I think there are going to be some physicians 
that are practicing in the private market that might want to 
dispute what you just said. But thank you so much for your 
response, and I yield back, Madam Chairman.
    Mrs. Capps. Thank you. I now yield myself my time for 
questions, and I thank you both for your testimony today. Mr. 
Hackbarth, we are sort of picking on you, I think, but you can 
tell from the questions that Medicare payment reform seems to 
be a very pressing issue for many of us. And one of the 
Medicare payment reforms that we are suggesting in this 
legislation is a change to the Gypsy formula in California so 
that it is now based on MSAs, Metropolitan Statistical Area.
    Two of the counties I represent in California are 
negatively impacted by the current payment formula. Physicians 
in both San Luis Obispo and Santa Barbara Counties are paid 
less, much less they would say, than the actual cost of 
practicing medicine. My question to you is in general, but also 
specifically toward California. Will the Gypsy provisions 
improve the accuracy of payments in the new fee schedule areas 
that you--across the country, as you have envisioned them?
    Mr. Hackbarth. Yes. The provision related to California in 
the bill is based on one of two options that MedPAC developed 
for CMS back in--I think it was 2007. So approach in the bill 
is consistent with the advice that we have given CMS.
    Mrs. Capps. Excellent. And then maybe you could elaborate a 
little bit on the benefit, obviously, that you are seeing from 
having physician payment areas aligned with hospital payment 
areas, and is that, again, consistent around the nation, once 
we get our alignment correct in California?
    Mr. Hackbarth. Well, the issue that we focused on was 
specific to California. As you know, the Gypsies work 
differently in different states, and so our recommendation 
wasn't that this approach be applied everywhere, but we saw it 
as a reasonable solution to the California issues that you and 
other members have raised.
    Mrs. Capps. Now, we have seen that other area of the 
country have this disparity as well, but you think those are 
best resolved on a regional basis?
    Mr. Hackbarth. Yes. Different states have elected to 
resolve it differently, and we think the problems are not 
national in scope, but more isolated, and more tailored 
approaches are the best way to go.
    Mrs. Capps. And that would be a pattern that you might 
suggest in other areas as well, that we look at regional 
issues, particularly--at least in the payment schedules?
    Mr. Hackbarth. Yes. Well, you know, that is a big 
statement, and I----
    Mrs. Capps. Well, I am just wanting to see how far you want 
to go----
    Mr. Hackbarth. Yes. I would like to take a look at--
consider the issues one by one, as opposed to make that as a 
broad policy statement.
    Mrs. Capps. Well, I know our--my California colleague said 
this has been a real serious detriment to Medicare, and the 
practice of Medicare in our state. In many of the regions that 
the cost of living has been----
    Mr. Hackbarth. Right.
    Mrs. Capps. [continuing]. Very different from what the 
allotment has been, so this becomes, for us, a really vital 
component of Medicare reform----
    Mr. Hackbarth. Yes.
    Mrs. Capps [continuing]. Under this bill.
    Mr. Hackbarth. Yes. And to say we think the approach in the 
bill is a reasonable one, and it is one of the options that we 
recommended to see in this.
    Mrs. Capps. OK. I am going to yield back my time, and 
recognize Mr. Buyer for his questions.
    Mr. Buyer. I see a company in Tampa just shut their doors 
to 500 jobs due to the S-CHIP bill. They are going to send the 
tobacco--those cigars to be made offshore. Just thought I would 
let everybody know who really cares, I guess.
    This has been a challenge to get my arms around this in a 
short period of time, just to be very honest with you, so--I am 
trying to understand--I just went through that tobacco bill, 
where the majority froze the market, so they are--now they love 
this talk about competition, and they love to freeze the market 
in place, and I am getting a sense that that is what you are 
doing in this bill also, freezing the market. So those of whom 
had existing plans, you freeze it, grandfather it, and then you 
have got to figure out how you move people into the exchange, 
and if you--and when we freeze that market--so help me here 
with my logic, because I am trying to figure out what you are 
trying to do. We freeze that market, and you want to move a 
population into an exchange. You can--we will grandfather, so 
people can keep their existing coverage, but if, at some point 
in time, that employee chooses to move to a government plan, 
then the employer has to be an eight percent tax on it. Is that 
right?
    Mr. Hackbarth. Is that----
    Mr. Buyer. Yes.
    Mr. Hackbarth [continuing]. Mr. Buyer?
    Mr. Buyer. Congressman Buyer.
    Mr. Hackbarth. Buyer, I am sorry.
    Mr. Buyer. OK.
    Mr. Hackbarth. Our focus is on the Medicare provisions of 
the bill, and the bill is not our bill. We--our advisory----
    Mr. Buyer. OK. So you----
    Mr. Hackbarth [continuing]. Our body----
    Mr. Buyer [continuing]. Can't answer that question?
    Mr. Hackbarth. Absolutely----
    Mr. Buyer. Right
    Mr. Hackbarth [continuing]. Not. That is beyond our 
jurisdiction.
    Mr. Buyer. No, that is oK. Well, let me ask a question, 
then, that is within your jurisdiction. You had--sir, you had 
suggested that encouraging the use of comparative effectiveness 
information would facilitate informed decisions by providers 
and patients about alternative services for diagnosing and 
treatment of most common clinical conditions, is that correct?
    Mr. Hackbarth. Um-hum.
    Mr. Buyer. Uh-huh means yes?
    Mr. Hackbarth. Yes, sir.
    Mr. Buyer. Thank you. Following your line of reasoning, 
could the Medicare program also use this research to exert 
fiscal pressure on drug and device makers, or even restrict 
certain procedures based solely on price?
    Mr. Hackbarth. What MedPAC has recommended is that the 
Federal government invest in comparative effectiveness 
research, make it available to physicians, patients, insurers, 
for them to make their own decisions about how to use the 
information.
    Mr. Buyer. Then how best do we, i.e. Congress--how best do 
we make sure that this research is used to inform the consumer 
and providers without being an excuse to exclude or ration 
certain types of care? How do we best do that?
    Mr. Hackbarth. Well, decisions about how Medicare would use 
the information are issues on which Congress can legislate. 
What MedPAC has recommended is investment in information to be 
used in a de-centralized way by all of the participants in the 
system.
    Mr. Buyer. All right. Mr. Levinson, the--one of the great 
concerns I have is--can you--would you be able to address a 
comparison or an analogy on Medicaid? I know you are Medicare--
you guys are claiming lanes of jurisdiction here.
    Mr. Levinson. Mr. Buyer, we actually--as an Office of 
Inspector General, we oversee all 300 programs of----
    Mr. Buyer. OK.
    Mr. Levinson [continuing]. Of the Department, so----
    Mr. Buyer. All right.
    Mr. Levinson [continuing]. We also have----
    Mr. Buyer. Most of the----
    Mr. Levinson [continuing]. Side of Medicaid.
    Mr. Buyer. All right, thank you. So most of the fraud 
cases, with regard to Medicaid, are they discovered by the 
states or are they discovered by the Federal government?
    Mr. Levinson. Medicaid cases can be developed along a very 
wide spectrum of possible sources.
    Mr. Buyer. I understand, but are most cases discovered in 
the states or by the Federal government?
    Mr. Levinson. I would have to find out those numbers for 
you. I suspect it would be mostly states in terms of absolute 
number. But in terms of dollars, because some of the biggest--
--
    Mr. Buyer. All right. Don't do it by dollars, do it by 
cases.
    Mr. Levinson. By the number of cases----
    Mr. Buyer. I think common sense tells us--let me jump 
ahead.
    Mr. Levinson. Given the Medicaid fraud----
    Mr. Buyer. I think common sense is going to tell us that if 
states had a stake in the game, that they have an incentive, 
then, to make sure they go after fraud cases. If the Federal 
government picks that up at 100 percent, my concern is are we 
disincentivizing states with this oversight responsibility, 
which places more on you, and is that a concern to you?
    Mr. Levinson. It is a--certainly a very important concern 
that we make sure that every Medicaid dollar--and we, of 
course, have responsibility for the Federal share of that 
Medicaid--is accounted for as much as possible. And as the 
Federal share, as the FMAP goes north, goes up, obviously our 
reach needs to be greater, our concern needs to be elevated on 
the Medicaid side, absolutely.
    Mr. Pallone. Thank you. The gentleman from Iowa, Mr. 
Braley.
    Mr. Braley. Thank you, Mr. Chairman.
    Mr. Levinson, to follow up on that point, all of us on this 
Subcommittee are strongly opposed to fraud in any health care 
delivery system, so let us start with that premise. I think the 
real elephant in the room is that fraud is a small component of 
what the real obstacle is to meeting full health care reform, 
and that is waste. Because, according to many reliable 
projections, there are $700 billion annually of waste in 
Medicare delivery, which is a much greater problem. Because if 
you take that number and multiply it over the 10 year period of 
this health care bill we are talking about, you are talking 
about $7 trillion of cost savings that would more than pay for 
the entire cost of the program we are talking about. So isn't 
it waste that is really the problem here?
    Mr. Levinson. Mr. Braley, we try to identify and correct 
issues of fraud, waste and abuse, and we do not have solid 
figures in which to share with you exactly how that pie may be 
divided specifically. But all of those kinds of issues are of 
great concern to the office, and we have work that supports 
recommendations on--in all of those areas.
    Mr. Braley. And they should be of concern to American 
taxpayers also?
    Mr. Levinson. Absolutely.
    Mr. Braley. OK. Mr. Hackbarth, I really appreciate the 
effort that you and MedPAC have put into this. You mentioned 
the objectives of health care reform being high quality care 
and protecting taxpayers from undue financial burdens, and 
getting back to my point that I just made, under the current 
health care delivery system and reimbursement model, we are 
wasting billions of dollars every year, aren't we?
    Mr. Hackbarth. It is our belief that, yes, we can do better 
with less, and there is lots of research to support that.
    Mr. Braley. Well--and one of the problems that my health 
care providers and I will have is that for years they 
consistently rank in the top five in every objective quality 
measurement, and at the very bottom of Medicare reimbursement. 
Isn't that a summary of what is wrong with our health care 
model today?
    Mr. Hackbarth. Well, my home state of Oregon is also----
    Mr. Braley. Exactly.
    Mr. Hackbarth [continuing]. With you in Iowa, and--so that 
is a type of evidence that we can do better for less in 
Medicare. You know, I think it is good for Iowa, good for 
Oregon, that we have got low health care costs and high 
quality. Not only does it hold down Medicare expenditures, it 
is good for our beneficiaries. It holds down their out of 
pocket expenses, the Medigap premiums. So I don't want to 
increase Iowa and Oregon to be more like some of the high cost 
states.
    Mr. Braley. Exactly.
    Mr. Hackbarth. I want to bring the high cost states down to 
Iowa and Oregon.
    Mr. Braley. And isn't that the problem? Because under 
Medicare's proposed pay for performance system, the modeling is 
based upon improvement in efficiency. So if you are a state 
like Oregon and Iowa, who is already delivering efficient, low 
cost, high quality health care, you get no incentive from a 
model of reimbursement that is based only on improvement, isn't 
that true?
    Mr. Hackbarth. Well, as we move to new payment systems, 
move away from our siloed fee for service system to bundle 
payment systems or ACOs, one of the critical decisions that is 
going to have to be addressed is how to set those initial rates 
for these new types----
    Mr. Braley. Right.
    Mr. Hackbarth [continuing]. Of payment systems. And in that 
is an opportunity to address some of these regional inequity 
issues that have come up in the program.
    Mr. Braley. But if you are going to base a public health 
insurance option on a Medicare model that already has built-in 
inefficiencies and inequities in reimbursement, what reform 
hope does that give to this country?
    Mr. Hackbarth. Yes. We need to change the Medicare model. 
Independent of the public plan issue, for Medicare's own sake, 
for the taxpayers' sake, for the beneficiaries' sake, we have 
to change the Medicare model.
    Mr. Braley. Well--and I am glad you mentioned that, because 
Congressman Ron Kind and I have introduced the Medicare Payment 
Improvement Act of 2009, H.R. 2844, that attempts to do just 
that by identifying clear, objective quality measurements that 
are highly recommended by a number of health care organizations 
that are looking to improve efficiencies and increase quality. 
It examines things like health outcomes and health status of 
the Medicare population, patient safety, patient satisfaction, 
hospital readmission rates, hospital emergency department 
utilization, hospital admissions for conditions, mortality 
related to health care, and other items determined by HHS.
    Isn't it true that until we move to some transformational 
type of health care reimbursement we are ignoring the real cost 
opportunities to transform health care and provide expanded 
access to coverage?
    Mr. Hackbarth. Yes. We believe that we need to adjust 
payment to reflect the quality of care. That is one type of 
change. But we also believe that we need to move away from 
fragmented fee for service payment to paying for larger 
bundles, paying for populations of Medicare patients.
    The big difference between Iowa and the high cost states is 
on the utilization of services. How many hospital days per 
1,000, how many referrals to specialists and the like. Iowa 
tends to be low on those things, and the high cost states tend 
to be high on those things. If we move towards a payment system 
that advantages places with lower utilization, like Iowa, that 
will begin to address these regional inequity issues that you 
are focused on.
    Mr. Braley. Thank you.
    Mr. Pallone. Thank you, Mr. Braley. Mr. Shimkus?
    Mr. Shimkus. Thank you, Mr. Chairman, and I appreciated the 
little comments we had before my questioning.
    I am going to follow up on something I addressed last 
night, and--addressing just the basic FMAP formula, which has 
been a bone of contention for me for many years, because I 
believe it has been flawed, and does not accurately reflect a 
given state's need to meet its Medicaid obligations. So that is 
kind of where I am coming from.
    The formula does not accurately reflect the difference 
between a state's fiscal earnings, low income citizens, or cost 
of delivery of service. This results in states like mine, and I 
think other states, if my colleagues would do some research, 
which--only having a match of around 50 percent. We know in the 
testimony yesterday we had New Jersey here, we had California. 
They are also 50 percent match states, and I have got the list 
here where every state falls. But it falls short of its needs, 
yet other states have matches as high as 75 percent.
    Overall, the FMAP formula has resulted in the Federal 
government's financing remaining around 57 percent across the 
board, yet the discussion draft seeks to have states enroll 
childless adults ages 19 to 64, up to 137 of poverty line, and 
have the Federal government finance 100 percent of this new 
Medicaid population. That was part of the discussion we were 
having offline. Do you think it is fair that we continue to 
have these inequities among states when it comes to FMAP, given 
we aren't meeting the needs of many states, especially those 
with low matches?
    Mr. Levinson. Mr. Shimkus, would you like me to respond to 
that----
    Mr. Shimkus. Both.
    Mr. Levinson [continuing]. Question?
    Mr. Shimkus. It is a question to both.
    Mr. Levinson. Because I would have to say that our office, 
not being a policy office, we don't actually establish the FMAP 
rates. We certainly audit those among our auditors, but we are 
not a program office. We oversee that. So I can't----
    Mr. Shimkus. So as an auditing office, you wouldn't 
disagree with that analysis that I have given?
    Mr. Levinson. Well, actually, the rate is higher now in 
some of the states as a result of the American----
    Mr. Shimkus. Yes, and that is----
    Mr. Levinson [continuing]. Recovery----
    Mr. Shimkus. That is--yes, that is true, but there are 
still percentage inequities. So you have a 75 percent state 
that is now up to 83 percent. You have a 50 percent state that 
is up to maybe 60 percent, but, of course, there is no 
assumption--I mean, depending upon what we do on a bill, there 
is no assumption that those amounts remain, because the 
stimulus bill was a short term bill, and there is no certainty 
that that input of money will remain.
    Mr. Levinson. Mr. Shimkus, we work with the numbers that we 
are given, as opposed to----
    Mr. Shimkus. OK. That is----
    Mr. Levinson [continuing]. The numbers ourselves.
    Mr. Shimkus. Mr. Hackbarth?
    Mr. Hackbarth. Mr. Shimkus, we focus exclusively on 
Medicare issues, not Medicaid. That is our jurisdiction under 
the statute.
    Mr. Shimkus. OK. Let me just--then let me go with a few 
other questions, just to put it--you know, our frustration with 
this process of rushing through and having a draft is we have 
got to ask these questions when we have--and I want to get 
these out. Would it be appropriate, in the context of health 
reform, to address the inequity of FMAP by recalculating the 
FMAP to accurately reflect needs, or, at the very least, level 
the playing field for every state? Mr. Levinson, do you want 
to----
    Mr. Levinson. Mr. Shimkus, that is really beyond my 
charter.
    Mr. Shimkus. Good. OK. Mr. Hackbarth, same answer?
    Mr. Hackbarth. Yes.
    Mr. Shimkus. OK. So what I am trying to establish is this. 
Illinois is a 50/50 match state, which means that for every 
dollar spent on Medicaid, we will write a check to the state 
for 50 cents, OK? There are states out there that for every 
dollar they spend on Medicaid, the Federal government sends 
them 75 cents. If we are doing health care reform, and the 
premise of this bill is when we add people to Medicaid, 100 
percent of that will be spent, but it still does not affect the 
basic fundamental inequity of the FMAP. So what states have to 
do is they have to game the system. They have to go to HHS, 
they have to find past additional tax incentives to get 
additional rebates. We have the tax increase on beds in 
hospitals that we passed, so they pass a tax. They remit the 
tax back to the Federal government, the Federal government 
gives the tax back to them, plus some additional revenue.
    So I would encourage folks to look--my colleagues to look 
at their FMAP percentage. And if we are going to move on 
streamlining health care and reimbursement that--even as we 
increase the amount for the new Medicaid people we bring on, we 
really bring some clarity and equality across the state lines 
and FMAP.
    And Mr. Chairman, thank you for letting me go 13 seconds 
over, and I yield back my time.
    Mr. Pallone. Thank you. The gentlewoman from Florida, Ms. 
Castor.
    Ms. Castor. Thank you, Mr. Chairman. Good morning. Mr. 
Hackbarth, you state in your testimony that the payment system 
for Medicare Advantage plans needs reform. Medicare Advantage--
the Medicare Advantage program continues to be more costly than 
traditional Medicare health services. The Medicare Advantage 
government payments per enrollee are projected to be 114 
percent of comparable fee for service spending in 2009. It is 
up from 2008. The high Medicare Advantage payments provide a 
signal to plans that the Medicare program is willing to pay 
more for the same services in Medicare Advantage than it does 
in traditional Medicare and fee for service.
    Our discussion draft tackles the overpayment issue, but 
what would happen if we did not do this?
    Mr. Hackbarth. Well, let me begin by saying that MedPAC 
very much supports giving Medicare beneficiaries the option to 
enroll in private plans, so we are enthusiastic about that. Our 
objections are to the current payment system, which, as you 
say, pays significantly more on average for private plans that 
it would cost traditional Medicare to pay for the same 
patients. If we were to lower the rate, one of the effects of 
that would be to send a marked signal to private plans about 
what we want to buy as a Medicare program, and we reward plans 
that take steps to be more efficient, more effective in the 
care that they provide.
    So long as we continue to pay more, the signal that we are 
sending is mimicking Medicare, traditional Medicare, just at a 
higher cost, is OK with us. And so long as we send that signal, 
we will get more of that. We have got to change the signal to 
get the market response that we desire.
    Ms. Castor. And ultimately help us control costs across the 
board?
    Mr. Hackbarth. Absolutely. Even control costs for the 
beneficiaries as well----
    Ms. Castor. Um-hum.
    Mr. Hackbarth [continuing]. ecause all beneficiaries, even 
those who aren't enrolled in private plans, are paying part of 
the additional costs for Medicare Advantage.
    Ms. Castor. And I am afraid these overpayments have created 
incentives for extensive unethical behavior by insurance 
companies. Three-fourths of the states report marketing abuses 
in Medicare, and I have some firsthand experience with this, 
talking to seniors at retirement centers in my hometown, where 
insurance salesmen have come in, targeted seniors with 
dementia, who have--were on traditional Medicare and signed 
them up for Medical Advantage, sometimes under the guise of 
coming in and selling their Medicare Part D policies, and then 
switching them out.
    And what happens is that senior, who has a longtime 
relationship with their doctor, oftentimes they lose access to 
that doctor they had under traditional Medicare because their 
Medicare Advantage plan doesn't have the same doctor. There 
have been cases that--where cash incentives have been provided 
to insurance salesmen, and this shouldn't be--we shouldn't have 
these incentives for fraudulent behavior. They--I think it has 
gotten out of hand, and unfortunately, CMS has all but 
abdicated its oversight role.
    The Congress, some years ago, took the states' ability 
away, their ability to regulate and oversee these terrible 
marketing abuses. Now, our discussion draft, it makes some very 
subtle change in--with enhanced penalties for Medicare 
Advantage and Part D marketing violations, but don't you think 
we need to go back to having as robust a strike force as we 
possibly can so--and give the states the ability--you know, 
they are closer to the ground--the ability they had before to 
tackle the marketing abuses? The National Associations on 
Insurance Commissioner supports such a move.
    Without it--unless we do this, we will continue to have 
this huge regulatory gap, but what is your view?
    Mr. Levinson. Ms. Castor, we certainly work with the states 
to--as much as possible to protect the Medicare and the 
Medicaid programs. We have a very good collaborative 
relationship with our state auditors and state and local law 
enforcement. There are jurisdictional divides, and we try to 
respect those. But to the extent that we can actually 
understand schemes that are broader than just one particular 
matter, that really allows us to do our work more effectively 
because the fact of the matter is, although we are one of the 
larger Inspector General offices in government, given the size 
of our programs, we are very stretched. We only have a few 
hundred criminal investigators to handle, you know, billions 
and billions of dollars stretched across the country in a 
variety of health care contexts.
    But I certainly would underscore the importance of being 
able to work very much hand in glove with our state and local 
partners.
    Mr. Pallone. Thank you. Gentleman from Pennsylvania, Mr. 
Murphy.
    Mr. Murphy of Pennsylvania. Thank you, Mr. Chairman. I 
thank the panelists for being here.
    Some questions about Medicare. It was founded in 1965. In 
the ensuing years, has there ever been a time when any 
president or any Congress has really gone back and overhauled 
the program, and--this program being established back inpre-CT 
scan and MRI days. Has there ever been a comprehensive overhaul 
of the system to modernize it, reform it, make it work more 
effectively?
    Mr. Hackbarth. Well, the payment systems have changed. 
Medicare began with payment systems----
    Mr. Murphy of Pennsylvania. Right.
    Mr. Hackbarth [continuing]. Were based on cost 
reimbursement.
    Mr. Murphy of Pennsylvania. And in terms of how it--because 
today you are talking about a number of interesting reforms, 
and has that ever been attempted before?
    Mr. Hackbarth. Well, the payment systems have been 
reformed. They have changed substantially over the life of the 
program.
    Mr. Murphy of Pennsylvania. But I mean----
    Mr. Hackbarth. We think more changes are warranted.
    Mr. Murphy of Pennsylvania. You are talking about the 
delivery--like, care coordination and preventing re-admissions 
and things like that. That has never been attempted, right? I 
mean, in terms of overall reforms in the system.
    Mr. Hackbarth. In terms--there has not been payment reforms 
focused on re-admissions, no.
    Mr. Murphy of Pennsylvania. OK. I am assuming you are 
talking about more than just payment reforms today, because 
your report has a lot more than just how the money gets spent. 
OK. And in that--I mean, I noted in the 110th Congress there 
was 452 bills put in by Members of Congress to make some 
reforms to Medicare and Medicaid, I think 12 passed, and some 
13,000 co-sponsors of these bills came through members of 
Congress. So I look upon this--and Members of Congress 
themselves recognize there needs to be some changes in Medicare 
and Medicaid, but it seems to come slow.
    I am wondering in this process, where--some of the changes 
you recommend here--and I applaud them, because they are things 
I have been asking for for a long time too. Care coordination, 
I mean, we will pay to amputate the legs of a diabetic, won't 
pay to have some nurse call them with these cases. We will--we 
recognize one in five chronic illnesses gets re-admitted to the 
hospital, but we haven't been working at keeping them out. 
Those are major changes to make here.
    Mr. Hackbarth. Yes.
    Mr. Murphy of Pennsylvania. My concern is the speed at 
which the Federal government moves to make changes, number one, 
and two, does the Federal government have to run its own 
insurance plan, given its track record of not being very good 
at coming up with timely changes? Can we come up with some of 
these changes with the Federal government pushing for and 
mandating some of these changes in the private market----
    Mr. Hackbarth. Yes.
    Mr. Murphy of Pennsylvania [continuing]. And in the 
meantime Medicare pushing some within itself? Is that possible 
to do that?
    Mr. Hackbarth. Well, I think we need to do some of each. 
The potential for Medicare Advantage is to invite private plans 
to enroll Medicare beneficiaries, do things differently to get 
better results for both the beneficiaries and the program. 
Because of the way Medicare Advantage works, the way the prices 
are set, it has not fulfilled that potential. It has allowed 
private plans to enroll Medicare beneficiaries, essentially 
mimic traditional Medicare, with all the same problems. So one 
of the reasons we believe Medicare Advantage reform is so 
important is to reward private plans that do it better.
    Mr. Murphy of Pennsylvania. OK. So that is--so, in other 
words, you know, they can just continue on with business as 
usual, but Medicare Advantage, they should really be using 
these things for what it was designed to be, and that is really 
work at prevention, really working at care coordination, am I 
correct on that?
    There was something else mentioned, or you--a point that 
was made earlier, encouraging use of comparative effectiveness 
information, public reporting, provider quality, et cetera. 
This also relates to the issue of evidence based medicine and 
evidence based treatments that many people referred to. 
Throughout medicine, there are many branches that have their 
own standards and protocols, College of Surgeons, American 
Academy of Pediatrics. Would those be things that Congress or 
the FDA or HHS could look towards in terms of what these 
standards might be, in terms of what is the best practices and 
what would be the standards and protocols to use?
    Mr. Hackbarth. Well, specialties are quite variable in how 
they develop those standards, those protocols. It is difficult 
to generalize about them. Let me focus on the area of imaging 
as one example. We had as a witness before the MedPAC the 
president of College of Cardiology to talk about imaging 
issues, and one of the things that she called for was more 
information so they can move from just consensus based 
guidelines to evidence based guidelines.
    The potential in comparative effectiveness research is that 
we give physicians and societies the raw material to do a 
better job at what they want to do.
    Mr. Murphy of Pennsylvania. So--and this is a critically 
important point, and one that we should not rush, because it is 
going to have long term implications. So the College of 
Cardiologists or Radiologists or whatever that is, we have to 
make sure it isn't just they have all sat down and voted that--
best thing, but there really needs to be a demand, and this is 
where a valuable role of government--the HHS or FDA to have 
oversight to say, we want to see evidence based medicine here. 
Is that what you are suggesting?
    Mr. Hackbarth. That is the goal. We need information for 
physicians, as well as patients, to guide that.
    Mr. Murphy of Pennsylvania. I mean, this is a critical 
thing, Mr. Chairman, and one I hope we continue dialogue on 
because it is going to be a factor that I think makes or breaks 
the budget, is how we go through there, and I think also deal 
with the issue of who is making the decisions, and I think a 
valuable place where this Committee can have tremendous 
oversight in working with medicine, and with that, I yield 
back. Thank you, sir.
    Mr. Pallone. Thank you, Mr. Murphy. Gentlewoman from 
Wisconsin, Ms. Baldwin.
    Ms. Baldwin. Thank you, Mr. Chairman.
    Mr. Hackbarth, welcome back to the Subcommittee. I recall 
when you were here in March we had quite a dialogue about--as 
we have today, about the difference between pilot projects and 
demonstration projects, and you expressed then, as you have 
here today, some hesitation about the administrative and 
regulatory burdens associated with demonstration projects, and 
how that affects the ability to scale those up, if they have 
proven successful.
    This draft health care reform legislation offers new pilot 
projects in accountable care organizations and medical home 
models, and I am wondering if it is your sense that these 
pilots will provide us, the Congress, and MedPAC with 
sufficient evidence to make broader payment reforms. And also, 
if you have examined these provisions in the draft, if you have 
any recommendations for further improvement.
    Mr. Hackbarth. Well, on the issue of pilots, we welcome the 
fact that the Committee is looking at pilots, and what MedPAC 
has advocated, and we have talked about this before, is that 
Congress give the Secretary discretion to test a new payment 
method and to implement it, if the pilot is successful, 
establish goals in advance, and then give the Secretary 
discretion, plus the resources necessary.
    And an important part of this, I think, is a much larger 
budget for the Department to not just test ideas that come 
through the Congress, but to generate new ideas independently 
in the Department. Right now the demonstration budget is way 
too small for that.
    Ms. Baldwin. In your--in MedPAC's most recent reports, 
there is an interest sidebar concerning the physician group 
practice demonstration, which serves, really, as a foundation 
for the accountable care organization pilot in the draft bill 
that we are looking at. You noted that a surprising number of 
the sites for the physician group practice demonstration 
project had high cost growth, and it is linked to the risk 
profiles of the patients at those sites. And it strikes me that 
basically there is an inference that these demonstration sites 
may be picking up more of their patients' medical issues, 
resulting in more treatments, and increasing costs. What 
lessons do you suggest that we take from this demonstration?
    Mr. Hackbarth. Well, in setting payment rates for new 
payments systems like ACO, the details are very important, and 
how the targets are set, how the potential gains are shared 
between the providers in the Medicare program, and how you 
adjust for things like risk, the risk profile of the patients. 
And so there are important steps that have to be taken from 
endorsement of a broad concept, like ACOs, to making it an 
operational effective idea. And this is part of why we think 
the Secretary needs some flexibility and discretion and design 
in the resources, to be able to do that quickly and 
effectively.
    On an idea like ACOs, we are unlikely to get it exactly 
right the first time, so there needs to be ongoing cycles of 
refinement and improvement. That requires discretion and 
resources.
    Ms. Baldwin. And we can certainly relate to the difficulty 
to create a national program to rein in Medicare spending. And 
on the ACOs, the idea is to set spending targets to hold the 
providers accountable to the targets. If you tied spending 
targets to national averages, I guess I would like to ask how 
are we going to attain or incent participation in higher cost 
areas, and do you have any ideas of how we would address that 
challenge?
    Mr. Hackbarth. Yes. Well, this goes back to the dialogue 
that I had with Mr. Braley. One of the very important details 
in these new payment systems, like ACOs, is how you set those 
targets. If you take a group that has a very low historic level 
of utilization, they have been very efficient, very high 
quality, and say, oK, we are going to set your target at your 
historic level of costs, it is going to be more difficult for 
them to beat that and earn rewards than for a practice that is 
in a very high cost state and performing very poorly. That is 
not an equitable way to get to where we want to go, so setting 
the target rate so that your reward historic performance, as 
well as future performance is, for me, a goal in the target 
setting.
    Now, in order to do that, you are going to have to squeeze 
someplace else. You are going to have to squeeze those high 
cost places to offset the cost. So the--again, the details in 
this are very important, and the Secretary needs to be given 
the latitude to strike that balance.
    Mr. Pallone. Thank you. Mr. Pitts is next.
    Mr. Pitts. Thank you, Mr. Chairman.
    Mr. Levinson, in your testimony, you mentioned Medicaid 
specific services that--there are services unique to Medicaid 
that could lead to significant savings, and one example you 
cite is school based health services. You say that OIG 
``consistently found that school had not adequately supported 
their Medicaid claims for school based health services, and 
identified almost a billion dollars in improper Medicaid 
payments.'' Can you go into this further?
    Mr. Levinson. Mr. Pitts, we do make audit recommendations 
to the Centers for Medicare and Medicaid Services based on our 
audit findings, as our auditors look at programs that are 
supported by the program, and that is an area that the OIG has 
identified over the last few years as one that CMS needs to 
focus on more clearly to make sure that those dollars are 
really spent appropriately.
    Mr. Pitts. Well, what were some examples of these improper 
payments? What was Medicaid paying for?
    Mr. Levinson. Well, overall, they were paying for those 
kinds of services that are not included in the program, but I 
would need to provide more detail to you as a follow up to our 
hearing.
    Mr. Pitts. Now, the Bush administration proposed 
regulations which would stop these fraudulent services and stop 
wasting taxpayer dollars. However, the present Administration 
has put a moratorium on these regulations. Do you believe that 
this moratorium should be lifted?
    Mr. Levinson. We do not comment on what the Executive 
Branch decides to do with those kinds of regulations or not. We 
certainly, you know, advance what we believe would be 
appropriate ways of being able to account for the Medicare 
dollars better, and our recommendations are given in the first 
instance, in these kinds of cases, to the Centers for Medicare 
and Medicaid Services.
    Mr. Pitts. Do you have any idea how much money in total 
might have been wasted in this way?
    Mr. Levinson. Our audit findings will indicate the dollars 
that we believe are not appropriately spent under the Medicare 
program, and I don't have that dollar figure immediately at my 
fingertips. We will certainly provide as much detail as we can, 
based on the audit findings we already have.
    Mr. Pitts. All right. In your testimony, you mention the 
creation of the Health Care Fraud Prevention and Enforcement 
Action Team. Can you give me some examples of what cases this 
team is currently addressing?
    Mr. Levinson. Well, the most recent example would be the 
case that was publicized yesterday in Detroit, a Medicare 
infusion drug fraud case that has resulted in 53 indictments. 
There have been 40 arrests so far. 40 of our agents have been 
involved in what is claimed as $50 million in false claims.
    This is a strike team in which we are working with the FBI 
and local law enforcement to clean up a significant Medicare 
infusion drug problem that now infects the city of Detroit. 
Some of these issues have actually migrated from South Florida, 
so the strike force effort is to try to provide both national 
and regional focus on those kinds of frauds that not only tend 
to plague particular cities in the country, but that also have 
regional impact. We already have strike forces in operation in 
a number of cities, but the effort now will be to extend that 
to more cities over the course of the next year.
    Mr. Pitts. Mr. Chairman, I don't know----
    Mr. Pallone. You want the time? You have a minute left.
    Mr. Pitts. One minute left?
    Mr. Pallone. I am sorry----
    Mr. Pitts. How do you get the provider ID--the criminals 
get the provider ID numbers?
    Mr. Levinson. Well, obviously through a variety of 
fraudulent means, but it is too easy at this point in our 
system to get provider numbers, and that has been a constant 
theme of our office over the years, that enrollment standards 
have not been sufficiently rigorous to ensure that we are not 
allowing, in effect, criminals to masquerade as health care 
providers.
    Mr. Pitts. Um-hum.
    Mr. Levinson. And that has been a significant problem not 
just in Detroit and Miami, but really throughout the country. 
And one of the key principles we have in terms of our anti-
fraud fighting effort is to make more rigorous who actually 
gets in the program, because historically there has been too 
much a right to access, as opposed to the privilege of actually 
being enrolled in the program.
    Mr. Pitts. Mr. Buyer wants to follow up.
    Mr. Buyer. I guess--to be responsive here. How are they--
are they relying on insiders within the system to get these ID 
numbers, or you don't want to tell us so that others will know 
how to--I mean, we can always--you can tell us offline.
    Mr. Pallone. Mr. Buyer--let him answer the question, but 
the time is expired. I have to apologize. The electronics have 
gone off again, so I am going to just have to tell everybody 
when their 5 minutes is up. But go ahead and answer your 
question.
    Mr. Levinson. Thank you. I think it probably would be 
better to have an offline conversation, because the schemes are 
varied, and some of them are rather sophisticated, and it is 
probably better not to discuss in any detail what actually 
occurs in a public hearing.
    Mr. Pitts. Thank you, Mr. Chairman.
    Mr. Pallone. Thank you. Next is Ms. Eshoo, and I will just 
tell you when the 5 minutes are up.
    Ms. Eshoo. Thank you, Mr. Chairman. Gentlemen, thank you 
for your testimony today, and to the Chairman for this series 
of hearings with many panels this week.
    As we look to reshape America's health care system, we have 
very clear goals that we have set down. We want it to be 
universal, it needs to be affordable. We think that choice is 
important. We believe that many of the rules that--need to be 
rewritten that the insurers, the private insurers, employ, 
amongst them knocking people out because they have pre-existing 
conditions and gender based issues, et cetera. So that is on 
the--kind of on the one side of the ledger.
    The other side of the ledger, in my view, are two major 
issues. One, that we be able to achieve this without raising 
taxes, and number two--maybe I should have said number one. 
Number one, that we reform Medicare and strengthen it. We have 
read the report of the trustees. We know that they shaved off 
two years, and that we have got until 2017. 2017, believe it or 
not, is not that--it sounds like it is another century away. It 
is a handful of years away. So my question to both of you is 
what are the large ticket items that you can name today for us 
that will strengthen Medicare?
    Now, Mr. Levinson, I recall a hearing here many years ago 
on waste, fraud and abuse and what--essentially the private 
sector ripping off the public sector, and you have touched on 
that today. In fact, we had testimony from someone whose case 
had been adjudicated, and he was on his way to prison, and he 
came here and explained how he had ripped Medicare off. And it 
was, essentially, the private sector ripping off the public 
sector. So what are the price tags that you can tell us about 
in these efforts that will save us money, save Medicare money, 
and overall strengthen Medicare as we come through this large 
effort, this overall effort, to reform our nation's health care 
system? Because I believe if we don't reform and strengthen 
Medicare that we will not have accomplished what needs to be 
accomplished.
    Mr. Hackbarth. I am going to go first. I would name four 
things. One is that we need to continue to apply pressure under 
the existing payment systems of Medicare.
    Ms. Eshoo. Can you speak a little louder, please? Can you 
speak just a little louder?
    Mr. Hackbarth. We need to continue to apply pressure to the 
update factors in the existing payments systems.
    Ms. Eshoo. And what is that going to--what do you think 
that is going to save us?
    Mr. Hackbarth. Well, you know, it depends on exactly what 
the levels are, but it is, you know----
    Ms. Eshoo. Has MedPAC done that work?
    Mr. Hackbarth. Well, the CBO does the estimates of the 
budget impact of different recommendations.
    Ms. Eshoo. Do you have any idea what that might be?
    Mr. Hackbarth. You know, we are--again, it depends on the 
specific level, but tens of billions or more over a 10 year 
horizon. A second area that I had mentioned is Medicare 
Advantage. There, as I think you know, the CBO estimate is 
higher than $150 billion over 10 years. A third area that I 
mentioned is re-admissions, excess re-admissions, and off the 
top of my head I don't know what the estimate is for that, but 
there was a proposed one. President Obama's budget on that--a 
fairly significant number. And the fourth area that I would 
emphasize is assuring primary care. Now, that doesn't lead to a 
direct savings, but I mention it here because if we allow 
things to go as they are right now, our primary care base is 
going to continue to erode away money.
    Ms. Eshoo. You spoke to that earlier, so I appreciate that.
    Mr. Levinson?
    Mr. Levinson. Yes, Ms. Eshoo----
    Ms. Eshoo. And thank you for your wonderful work as IG.
    Mr. Levinson. Thank you very much.
    Ms. Eshoo. We really can't function well and do oversight 
without the IGs, and I just think that you all should be 
canonized, so----
    Mr. Levinson. Well, on behalf of----
    Ms. Eshoo. Be interesting to have a Levinson canonized, 
right? I am pretty ecumenical, though, so----
    Mr. Levinson. Well, it so happens that, of course, Dante 
was talking about fraud 700 years ago----
    Ms. Eshoo. That is right.
    Mr. Levinson [continuing]. So it is an issue that is both 
timely----
    Ms. Eshoo. Right.
    Mr. Levinson [continuing]. And has a long----
    Ms. Eshoo. Um-hum.
    Mr. Levinson [continuing]. And very troublesome pedigree. 
But on behalf of 1,600 very dedicated auditors and evaluators 
and investigators and lawyers----
    Mr. Pallone. Somebody want to tell her----
    Mr. Levinson [continuing]. Thank you so much.
    Mr. Pallone [continuing]. Time has----
    Ms. Eshoo. Um-hum.
    Mr. Pallone [continuing]. Expired?
    Mr. Levinson. And just--as I look at some of the 
recommendations that are in our compendium of unimplemented 
recommendations, our auditors estimate that we could--the 
program could save $3.2 billion over 5 years if we just limited 
the rental time for oxygen equipment. I mean, I think that 
there are specific areas where there are significant savings 
that can be had.
    As I look at just our most recent semi-annual report, in 
terms of monies returned to the Treasury, we are expecting, 
just in the first 6 months of the fiscal year, $275 million in 
audit receivables and $2.2 billion in investigative 
receivables. A lot of that has to do with pharmaceutical cases. 
Pharmaceutical pricing, of course, is a very significant area 
that can also, if properly addressed, can save significant 
dollars.
    It would be hard to come up with total figures on a list of 
top ten, but certainly pharmaceuticals, DME, getting the dish 
payments right. We think that it is important to clarify 
exactly what Medicare should be paying, the Medicare and the 
Medicaid dish payments, and how the states handle those 
dollars. We need to avoid gaming the Federal dollar, so that it 
is clear, it is transparent about who is actually paying for 
what, and how the states account for the dollars that come from 
Washington.
    I would hesitate to put a dollar savings on it, but I think 
that there is a great need for much more significant 
transparency and accountability in our programs, and that is a 
very helpful trend, from the standpoint of our office.
    Ms. Eshoo. Do I have any time left, Mr. Chairman?
    Mr. Pallone. No. I am trying not to----
    Ms. Eshoo. OK. Thank you very much.
    Mr. Pallone [continuing]. Interrupt now.
    Ms. Eshoo. Thank you.
    Mr. Pallone. Sure. Next is the gentlewoman from Illinois, 
Ms. Schakowsky. I am going to just tell everybody when the 5 
minutes are up, just so you know. Thanks.
    Ms. Schakowsky. Mr. Levinson, one of the biggest single 
expenditures out of Medicaid is for long term nursing home 
care, and I have been working with Chairman Waxman and Chairman 
Stark on a nursing home quality and transparency legislation, 
which has been included in the draft bill. And I would like to 
know what you have found, in terms of problems with nursing 
homes, that would necessitate more transparency and oversight 
of them.
    Mr. Levinson. Yes. Congresswoman, it has been difficult, 
actually, to find out who makes the decisions when we 
investigate substandard care in nursing homes and try to locate 
exactly who, financially, is in charge. So I think the effort 
to create greater transparency in terms of ownership, in terms 
of management, and get a clear understanding of actually who is 
in charge would help our investigators and lawyers 
significantly in being able to both investigate and resolve 
some of the very serious quality of care cases that have 
emerged in the nursing home area.
    Ms. Schakowsky. We are going to hear some testimony a bit 
later that disparages the notion that there is any substantial 
fraud or wasteful spending on the part of some doctors that 
participate in the Medicare program. Would you agree with that 
assessment?
    Mr. Levinson. Well, I can only point to individual cases 
that we have actually worked on. We try not to generalize. Our 
investigators and auditors are very focused, very anchored on 
particular instances when it comes to either individual venues 
or a larger corporate structure, and we do have an existing, 
and unfortunately a growing, case load, work load.
    Ms. Schakowsky. But let me ask this, though. Would you say 
that some may be fraudulent, some may be wasteful, but that in 
general the decisions about utilization are provider driven, as 
opposed to the kind of fraud of--or wasteful spending that is 
generated by individuals in the program?
    Mr. Levinson. You know, I would hesitate, again, to make 
any kind of generalizations because these individual cases are 
very much focused on the facts as we find them. But there are 
certainly cases in which we have found that we are frustrated 
in our ability to actually understand who makes the decisions 
in the nursing home chain.
    Ms. Schakowsky. Let me ask Mr. Hackbarth about the Medicare 
Advantage plans. It is great that, in the Medicare program, 
consumers can actually go online and find out what Medicare 
pays for health care services. To your knowledge, is there a 
place where consumers can actually access rates that Medicare 
Advantage plans pay providers, or other private insurers?
    Mr. Hackbarth. The actual payment rates for----
    Ms. Schakowsky. Uh-huh.
    Mr. Hackbarth [continuing]. Providers? Not to my knowledge. 
I think most private plans consider that information 
proprietary business information.
    Ms. Schakowsky. In your view, will Medicare Advantage plans 
remain in the market if we eliminate overpayments?
    Mr. Hackbarth. I believe that they will, many will. Some 
will leave the market because they have a model that can't 
compete with traditional Medicare. But, as I said earlier, we 
would be sending an important market signal about the type of 
plan we want to participate. We want plans that can help us 
improve the efficiency of the system, not plans that just add 
more cost to the system. And when you send that signal, I 
believe, in the market, I believe that we will get more plans 
that can compete effectively with traditional Medicare.
    Ms. Schakowsky. What mechanisms will we need to ensure that 
Medicare Advantage plans and private insurers in the exchange 
meet a minimum loss requirement--a minimum loss ration 
requirement?
    Mr. Hackbarth. Yes. The minimum loss ratio, I think, is--it 
is a tricky issue. As you may know, I used to work for Harvard 
Community Health Plan, Harvard Pilgrim Health Care, two very 
well regarded HMOs, and this was a big issue for us sometimes 
with employers, how you calculate loss ratios. Our piece of the 
organization, the one I ran, is an integrated pre-paid group 
practice, and we have a lot of clinical programs that we 
believe improve patient care that sometimes employers wanted to 
characterize not as medical care, but as administrative cost, 
so the--and that works against you, in terms of calculating the 
loss ratio. So the details of this can be pretty tricky, in my 
personal experience. I am always a little uneasy about just 
having simple rules on loss ratios. How you define those loss 
ratios is very important.
    Ms. Schakowsky. Thank you.
    Mr. Pallone. The time is expired. I am sorry. Thank you, 
and next is the gentleman from Maryland, Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman. Thank you all. I 
have got a couple of quick questions at the outset.
    Mr. Levinson, you talked about the--trying to step up 
efforts to curb some of the fraud, and particularly you talked 
about, in response to one question, the application process for 
new provider numbers, and having that vet properly. Have 
resources been an issue, in terms of the capacity of those 
people that do the processing and the review? Has resource, in 
terms of the number of folks that can do that, been an issue or 
not an issue?
    Mr. Levinson. Well, that is an important question, Mr. 
Sarbanes, that, in the first instance, I think needs to be 
addressed and responded to by CMS, which is the agency that 
runs the program. And, as an office that looks to see where the 
vulnerabilities, where the weaknesses are in the administration 
of a program, we have identified for some years now that 
enrollment standards are too lax, especially in specific areas 
of vulnerability, like DME. And whether or not there are 
resource issues, we find too many of the wrong kinds of people 
are getting into the program, and, therefore, we have urged--we 
have recommended, over the course of the last few years, that 
enrollment standards be strengthened.
    Mr. Sarbanes. Well, I would imagine--I mean, I used to do 
some of that work, and I would imagine that the best way to vet 
it on the front end is with a little more intensity of 
resources applied. Actually going out and finding out who is 
behind these applications that are being filed.
    Let me shift gears. I was really intrigued by the 
discussion on the school based health centers, and some of the 
findings of fraud. In that discussion, there was an allusion to 
the possibility that there were services being--that 
reimbursement was being sought for services that were not 
actually provided, but possibly there were other services being 
provided that might--that one might view as important services, 
they just aren't services that Medicare or Medicaid reimburses. 
And I wanted to ask the question of whether this phenomenon--
and this is--in my view, the problem is whether you are talking 
about fee for service or you are talking about capitation, 
either one of those can work OK if you are paying for quality, 
as opposed to paying for quantity, and if you are paying for 
the right things, as opposed to not paying for the right 
things. But maybe both of you could comment on whether the 
potential for fraud is greater when you have a system that pays 
for quantity versus quality, or is paying for the wrong things.
    And while I don't want to excuse fraud, if somebody is 
trying to find some payment for what they view as a very 
important service that is not covered under Medicare or 
Medicaid, that is a different kind of impulse than seeking to 
get paid for a service that is not being provided at all. And 
it seems to me the way the system is structured right now, and 
it is so distorted, that it leads to that kind of thing, 
because people say, this service is valuable, but Medicare 
won't pay me for it. And if we can move in a direction where we 
are paying smarter for things that make a difference, we might 
actually make some progress on this fraud issue. So maybe you 
could each----
    Mr. Levinson. Well, I do think the facts that you have laid 
out, Mr. Sarbanes, are important ones to focus on. The notion 
that there can be monies spent that are just not appropriately 
covered by the program, and in many instances we are really not 
talking about fraud in terms of the legal definition of fraud. 
We are talking about dollars that Congress--that the program 
says should be directed in a particular way, and our audit 
people, not our criminal investigators, find have not been 
spent appropriately, and then we make the appropriate findings 
and recommendations to CMS.
    Not all of our recommendations are acted upon by CMS. There 
unquestionably are judgments. Perhaps some of the kinds of 
judgments you are talking about here and judgments that, 
programmatically, are made by CMS over the course of looking of 
our recommends, because--just by the fact that we make those 
recommendations doesn't necessarily mean that the dollars will 
actually be collected. And I do think that it is important to 
distinguish, you know, between those who have an intent to take 
advantage of the program and those who, unfortunately, are 
simply not paying appropriate attention to our rules. But, of 
course, given the precious resources, we take the rules as set 
by Congress and the Department seriously, and we report 
accordingly.
    Mr. Pallone. Now the time has expired. I am sorry. Next is 
Ms. DeGette.
    Ms. DeGette. Thank you very much, Mr. Chairman, and thanks 
to this Committee.
    I know you have discussed some of the issues in general 
that I want to talk about, I would like to hone in on them a 
little more. My first question is you talked about--actually, 
Mr. Hackbarth, the MedPAC has talked about changing the 
Medicare payment system incentives by basing a portion of 
provider payment on quality of care, and to do this, Congress 
could establish a quality incentive payment policy for 
physicians and other plans, Medicare Advantage plans, health 
care facilities. I am wondering if you have some specific 
recommendations you can make as to what kind of quality 
measures people would have to include to be--or to develop to 
be included in a quality incentive payment policy.
    Mr. Hackbarth. Well, let me focus on a few different areas 
of the program. For example, in the Medicare Advantage program, 
we have long advocated that a piece of the payment be adjusted 
to reflect the quality, and----
    Ms. DeGette. How do you do that?
    Mr. Hackbarth. There are well established industry measures 
developed by NCQA that private employers use to assess health 
plans. We believe Medicare should be doing the same and 
adjusting payment accordingly. In the case of dialysis 
services, again, there is a pretty strong consensus about what 
the critical quality measures are. We have advocated that the 
dialysis payments be adjusted to reflect those outcomes for 
patients.
    Likewise, in hospitals, we think there are some strong 
consensus measures. In fact, Medicare requires, as you know, 
specific measures be reported. We would like to see payment----
    Ms. DeGette. Do you think that the current--and I do know 
that, because my heroine, Patty Gabow from Denver Health, is 
here on the next panel----
    Mr. Hackbarth. Um-hum.
    Ms. DeGette [continuing]. But do you think that we could--
do you think that the--that these quality measures that we have 
in place now are sufficient as we move forward with a 
comprehensive health care plan? Do we need some kind of 
additional mechanism? Do we need additional quality measures? 
What do we need----
    Mr. Hackbarth. Yes, I think the measures need to evolve 
over time. I think we have got starter sets, if you will, for a 
lot of providers, but we need to invest in developing in the 
long term.
    Ms. DeGette. And who should do that?
    Mr. Hackbarth. Well, Congress has invested some money now 
in NQF, the National Quality Forum, which I think is a wise 
investment to build infrastructure for ongoing improvement and 
quality measures.
    Ms. DeGette. And do you think some of these quality 
measures that you talk about for Medicare Advantage can also be 
used for physicians in other types of health care facilities, 
like hospitals and community health facilities?
    Mr. Hackbarth. Well, each provider group presents its own 
challenges and will require unique measures. I mentioned three 
areas, Medicare Advantage, ESRD and hospitals, but I think 
there is a pretty strong consensus on a starter set of 
measures. Other areas are more challenging. Physicians are more 
challenging just because of the nature of a medical practice. 
You often have small groups, or even solo physicians, so not a 
lot of numbers to do measurement.
    Ms. DeGette. But you know what, though, people like 
Geisinger and Kaiser and others have been able to develop 
quality measures for doctors, that it would seem to me you 
could develop, and if you don't develop those for physicians, 
then it is hard to see how you can get the improvement in 
medical care at the same time that you get the cost containment 
in our system.
    Mr. Hackbarth. And I agree with that, that we do have 
initial measures--they are not comprehensive measures for 
physicians. They tend to be very focused process measures.
    Ms. DeGette. Right.
    Mr. Hackbarth. I think we can do a better job in assessing 
physician performance as we move to bundle payment systems. 
Where we get groups of physicians working together, we can 
start to measure outcomes, not just----
    Ms. DeGette. That was my next question. So to develop those 
measures, again, what kind of mechanism do you think--would it 
be the same one you talked about that Congress--there is a 
group of us----
    Mr. Hackbarth. Yes?
    Ms. DeGette [continuing]. Senator Whitehouse and myself and 
others who are very concerned that if we don't develop quality 
measures throughout the system----
    Mr. Hackbarth. Yes.
    Ms. DeGette [continuing]. That we are really not going to 
have----
    Mr. Hackbarth. Yes.
    Ms. DeGette [continuing]. Improvements in patient outcomes.
    Mr. Hackbarth. So we need a process for forging consensus 
and establishing a set of measures.
    Ms. DeGette. Right.
    Mr. Hackbarth. You don't want, you know, 12 different 
ones----
    Ms. DeGette. Right.
    Mr. Hackbarth [continuing]. And everybody using different 
measures.
    Ms. DeGette. Right.
    Mr. Hackbarth. That is a burden on providers.
    Ms. DeGette. Right.
    Mr. Hackbarth. And NQF can be that process. It can grow 
into that process, where we have consensus. Then we also have 
to invest in the research about what works----
    Ms. DeGette. What works.
    Mr. Hackbarth [continuing]. And that is where comparative 
effectiveness comes in. That can provide raw material for 
specialty societies and the like to develop guidelines on what 
constitutes good care, and that can also feed, ultimately, into 
the assessment process.
    Ms. DeGette. Thank you. Thank you, Mr. Chairman.
    Mr. Pallone. Thank you. Gentleman from Texas, Mr. Gonzalez.
    Mr. Gonzalez. Thank you very much, Mr. Chairman. This will 
go to the Chairman.
    There are two major components of what we are considering, 
and the experience gleaned from Medicare is going to be used 
either by the proponents or the opponents. Just--again, it will 
be the performance of Medicare in the eye of the beholder. One 
is the public option, the other is the health insurance 
exchange. So I am going to pose a couple of questions, and then 
just let you respond, and that way the--it will be the Chairman 
that will be advising you that my five minutes are over.
    But first, I haven't met with a group of doctors in San 
Antonio yet that have agreed with the compensation adequacy. 
And what they are all saying is that you guys are basically 
working with stale data and information, that it is at least 
two years behind the times of what modern medicine, in its 
practice, entails. That is the first question, and I know that 
we have touched on it more or less, but that is going to be 
very important as we go out there with a broader plan that, 
again, has something that will mimic what we have been doing 
under Medicare. So that is the first complaint that we get.
    My colleague, Ms. DeGette, also touched on something, and 
that was how do you establish proper protocols? What is 
acceptable--practices and standards? On the Small Business 
Committee, we had Governor Pawlenty who came up, and I asked 
him that, because my doctors asked the same thing. Different 
patient populations may dictate different practices and such.
    Well, Governor Pawlenty told me, he says, we have got Mayo. 
They establish the standards, pretty much, and no one is going 
to argue with them. The question to you is how do we ever 
really achieve nationwide standards that may address diverse 
populations and such? The last question is somewhat 
interesting, one, because it presents a real dilemma for me 
back home. Texas has probably the greatest number of specialty 
hospitals. The question really is how is modern medicine being 
delivered in this country, and--to keep up with that?
    There are portions of this bill that would discourage, of 
course, specialty hospitals, yet we are looking at what we 
refer to as bundling, and that is more centralization, more 
coordination, medical home, all that that entails. But in 
essence, isn't that what specialty hospitals and many of these 
specialty practices provide? And that is, when a patient goes 
into those settings, that there are many different services 
that are being provided within that environment that otherwise 
would be separated out to different locales, offices and other 
doctors. And we even have different specialists that argue 
among themselves as to what extent they should be able to do 
that. And I would just like your views on those three points, 
and again, thank you for your service.
    Mr. Hackbarth. OK. That is a lot of ground to cover in just 
a minute or two. Starting with the stale data, I imagine what 
your physician constituents are referring to is Medicare claims 
data, which, in fact, is a couple years old by the time it is 
used in the policy process. That is a problem. That is an area 
where I think some wise investments in Medicare infrastructure 
would pay dividends. I am not sure, however, that the age of 
the data would alter any of the recommendations we are talking 
about for reforming the payment system.
    With regard to standard setting, I do believe it is very 
important to have a process that is coherent and credible from 
the perspective of providers. I fear that sometimes we have 
embarrassment of riches. We have a lot of different people 
saying this is what constitutes quality of care. Some of it is 
well-founded in research, other pieces of it are not. If we 
want to send clear, consistent, signals to providers, not just 
from Medicare but from private insurers as well, we need to 
have a coherent standard setting process.
    As I said a minute ago, Congress, I think, wisely has 
invested some money in NQF to start building that 
infrastructure.
    On the last issue of specialty hospitals, roughly 2 years 
ago now MedPAC at Congress' request invested a lot of effort in 
analyzing specialty hospitals. Our basic findings were that 
when physician-owned specialty hospitals enter the market, 
costs tended to increase, not decrease. More procedures were 
done. The evidence on the quality of care was there was not 
definitive evidence one way or the other that it was better or 
worse. It seemed to be about the same.
    At the time we did our analysis, our big concern, our 
immediate concern was that at least some physician-owned 
specialty hospitals were exploiting flaws in the Medicare 
payment system. They were focused on procedures where the 
Medicare rates were too high. We made recommendations which 
Congress adopted and CMS has now largely implemented to change 
payment rates so there aren't those gaping opportunities to 
exploit the system.
    Mr. Pallone. Thank you.
    Mr. Matheson is next.
    Mr. Matheson. Thank you, Mr. Chairman.
    I am sorry I was not able to be here for all your testimony 
but I do appreciate your coming before the committee today. A 
question I wanted to raise is, MedPAC has had the opportunity 
to make a lot of recommendations about how we can achieve 
greater efficiencies or greater value or good practices, and 
often when it comes to implementation, Congress has not 
necessarily followed through on that. Do you have suggestions 
if there would be a better structure to help assist in allowing 
these recommendations to be implemented in a more effective 
way?
    Mr. Hackbarth. Well, one of my themes this morning has been 
that I think the Secretary of Health and Human Services and CMS 
need both more discretion and more resources so they need the 
flexibility to refine change, payment systems, overtime to 
achieve goals established by the Congress. For every small 
change to have to come back through the legislative process is 
a very cumbersome process and it makes progress very slow and I 
am not sure that is a luxury we can afford at this point, so 
more discretion and more resources for the Department would be 
my first recommendation.
    Mr. Matheson. Do you have--in terms of making that 
recommendation, is there a specific proposal about what the 
resource needs might be or is that something that we can look 
to maybe get some information?
    Mr. Hackbarth. I would urge you to go to the Department for 
that information. They are the best judges of exactly what they 
need.
    Mr. Matheson. Do you feel like the way MedPAC is structured 
right now that you are adequately insulated from having Members 
of Congress come in and tell you here is what we think you 
really ought to be doing?
    Mr. Hackbarth. Well, we welcome our exchange with Members 
of Congress and the MedPAC staff works very closely with both 
the committee and personal staffs to understand Congressional 
perspective. I have never felt undue pressure from any Member 
of Congress.
    Mr. Matheson. Do you feel like you are adequately 
structured to be an independent entity? I guess that is what I 
am asking.
    Mr. Hackbarth. Yes.
    Mr. Matheson. OK. Thanks, Mr. Chairman. That will be it for 
me.
    Mr. Pallone. Thank you.
    Mr. Barrow.
    Mr. Barrow. Thank you, Mr. Chairman, and thank you 
gentlemen for being here today. I too along with Jim had 
several other meetings this morning so I apologize for being a 
little late but I am glad to have the chance to visit with you. 
Thank you for coming and offering your testimony.
    You know, fixing what is broke with Medicare Part D is a 
large part of comprehensive health care reform and a lot of 
attention has been given to ways and means of trying to plug 
the donut hole, among other things. I want to focus on a 
problem with the Medicare Part D program that has bedeviled the 
people I represent. I hear about it at every one of my town 
hall meetings, and that is the excessive degree of discretion 
and variety in the formularies that all of these various for-
profit insurers are paid by the public essentially to assume a 
public risk and the incredible confusion. You know, there is 
such a thing as too much of a good thing. When there is too 
much variety and choice in the marketplace, you have a hard 
time finding what you need and you have to do a lot of hunting 
and trying to find the drug that you want and then with a 
potential for bait and switch that can exist and the formulary 
being changed on you. That just makes things so much worse.
    My question to you is, and I guess Chairman Hackbarth, you 
are probably in the best position to answer this, is any 
thought being given, since this is a public financed plan, to 
get the for-profit insurance industry to compete with each 
other to make money trying to offer a benefits package to 
assume a public risk in providing this benefit? Any thought 
given to trying to make more--to have a centralized or more 
standardized formula that is comprehensive in its scope but 
provides all of the necessary flexibility and variety to allow 
doctors to opt out when there is a medical necessity that they 
know about, a generally good reason to do so, but to make it 
clear that when folks go into this very confusing marketplace 
with so many people competing for the customers' business that 
they know that they are comparing apples to apples, they know 
that the benefits package is substantially the same just as the 
entity that is paying for this is substantially the same, just 
as what you hope to get is substantially the same. Is any 
effort being made to do that?
    Mr. Hackbarth. Well, you are absolutely right, that the 
choices that Medicare beneficiaries face are complicated and 
choosing among plans because of, among other things, 
differences in formularies. I would add that it doesn't stop 
with the beneficiaries. You know, differences in formularies 
also have a significant impact on practicing physicians and how 
they deal with patients. What they prescribe needs to vary 
according to the plan that the patient is covered by, and that 
can be a real problem for physicians. There is a tradeoff here, 
though. The flexibility around formularies and the exact 
benefit structure, those are tools that private plans can use 
to try to offer a better value for Medicare beneficiaries. 
Those are the tools that they can use to reduce the cost of the 
plan, and so there is a tradeoff to be made.
    Mr. Barrow. If you have a plan that is designed to the 
health profile of the patient, in theory you can get yourself 
into a much smaller risk pool and be shopping for something 
that is just tailored for you, but the point is, at least the 
quality of the insurance and it takes on the quality of being 
sort of a revolving loan program.
    Mr. Hackbarth. And some people have expressed concern in 
particular about specialty drugs, very high-cost drugs for 
patients with serious illnesses.
    Mr. Barrow. Well, there is a medical necessity for that. 
The smaller the risk pool of folks buying into the program, the 
more expensive that is going to be when it is absolutely 
necessary to get it, so that sort of drives up the cost for 
those folks who need it when they need it I guess what I am 
getting at is, if you really have too much choice, you don't 
know what you are choosing and the other party on the other 
side of this deal can change the deal on you after you have 
signed up. We make this thing much more complicated and much 
user friendly than it has to be, and I want to make sure we are 
not driving up the cost by having exotic stuff driving up the 
cost for the ordinary, everyday stuff but there is a profile, 
there is a comprehensive scope of conditions that we can treat 
effectively, cost-effectively with medication, and it seems to 
me the more we can eliminate the confusion in this, the more--
and make it genuinely available and comprehensive in its scope, 
the better service we are providing all our customers. Because 
after all, we are paying these folks to assume this public risk 
and we ought to make sure that folks know what they are getting 
when they go into the marketplace. What is MedPAC doing about 
this? Are you all looking into this?
    Mr. Hackbarth. Well, on the specific issue of the 
complexity, we have looked at the choices that Medicare 
beneficiaries have to make in choosing among plans, and looked 
at the tools that beneficiaries have available to them. CMS 
does have some tools, as you know, to try to help beneficiaries 
compare plans and choices. We think here again this is another 
area where some investment could pay dividends in helping 
beneficiaries understand their choices. There is no way around, 
though, the ultimate tradeoff that you are going to face 
between complexity on the one hand and flexibility for plans to 
manage the costs on the other. There is no answer on how to 
strike that balance.
    Mr. Barrow. I think doctors----
    Mr. Pallone. Your time is expired, but if you want to say 
something----
    Mr. Barrow. I think doctors ought to be able to make those 
calls. Thank you, Mr. Chairman.
    Mr. Pallone. Thank you.
    Unless anyone else has questions, we are going to proceed 
to the next panel, so thank you very much. Your input is 
obviously very important as we proceed on this and we 
appreciate your being here this morning. Thank you.
    I ask the next panel to come forward. Could we ask that 
everyone be seated and that everyone else clear the room, 
because we do have to get moving. We have three more panels. 
Those who are talking and socializing, please leave the room.
    OK. Our second panel is on doctor, nurse, hospital and 
other provider views, and as you can see, it is a rather large 
panel so we want to get started, and let me--I don't think I 
have seen such a large panel. We will start on my left with Dr. 
Ted Epperly, who is president of the American Academy of Family 
Physicians, and then we have Dr. M. Todd Williamson, who is 
president of the Medical Association of Georgia, and then is 
Dr. Karl Ulrich, who is clinical president and CEO of the 
Marshfield Clinic, and Dr. Janet Wright, who is vice president 
of Science and Quality at the American College of Cardiology, 
Dr. Kathleen White, who is chair of the Congress on Nursing 
Practice and Economics at the American Nurses Association, Dr. 
Patricia Gabow, who is chief executive officer of the Denver 
Health and Hospital Authority for the National Association--
well, she will be speaking for the National Association of 
Public Hospitals, Dan Hawkins, who is senior vice president of 
public policy of research for the National Association of 
Community Health Centers, and Bruce Roberts, who is executive 
vice president and CEO of the National Community Pharmacists 
Association, Bruce Yarwood, president and CEO of the American 
Health Care Association, and Alissa Fox, who is senior vice 
president of the Office of Policy and Representation for the 
Blue Cross Blue Shield Association.
    Now, before we begin, I just wanted to point something out 
that I believe has been shared with staff but I think needs to 
be repeated because of the panel. It would touch upon some of 
the things particularly with regard to community health 
centers. In several sections of the draft--well, I should say 
in several sections of that part of the draft that deals with 
the public health and workforce development, in that division, 
a sentence that was supposed to be an addition to current 
authorizations was instead drafted to take the place of them. 
So instead of ``in addition'' it says ``to take the place of'' 
in that decision, and this is an error. It was caught on Friday 
afternoon shortly after the draft was announced and we did 
notify both Democrat and Republican committee staff of the 
mistake and corrections have been sent to the Office of 
Legislative Counsel, but I did want to point that out before I 
started here today because I wasn't sure that all of you who 
are testifying were aware of that. The mistake is particularly 
glaring in the provision related to community health centers, 
and I think Mr. Hawkins knows this, but just let me point it 
out to everyone, that the draft is supposed to include an 
additional $12 billion over 5 years in new money and that is 
over and above the current appropriation. Again, that is why we 
have drafts, I guess.
    But let us start. As you know, we ask you to keep your oral 
comments to 5 minutes and of course all of your written 
testimony will be included in the record, and we will start 
with Dr. Epperly.

STATEMENTS OF TED D. EPPERLY, M.D., PRESIDENT, AMERICAN ACADEMY 
  OF FAMILY PHYSICIANS; M. TODD WILLIAMSON, M.D., PRESIDENT, 
 MEDICAL ASSOCIATION OF GEORGIA; KARL J. ULRICH, M.D., CLINIC 
PRESIDENT AND CEO, MARSHFIELD CLINIC; JANET WRIGHT, M.D., VICE 
PRESIDENT, SCIENCE AND QUALITY, AMERICAN COLLEGE OF CARDIOLOGY; 
 KATHLEEN M. WHITE, PH.D., CHAIR, CONGRESS ON NURSING PRACTICE 
  AND ECONOMICS, AMERICAN NURSES ASSOCIATION; PATRICIA GABOW, 
   M.D., CHIEF EXECUTIVE OFFICER, DENVER HEALTH AND HOSPITAL 
   AUTHORITY, NATIONAL ASSOCIATION OF PUBLIC HOSPITALS; DAN 
  HAWKINS, SENIOR VICE PRESIDENT, PUBLIC POLICY AND RESEARCH, 
  NATIONAL ASSOCIATION OF COMMUNITY HEALTH CENTERS; BRUCE T. 
   ROBERTS, RPH, EXECUTIVE VICE PRESIDENT AND CEO, NATIONAL 
COMMUNITY PHARMACISTS ASSOCIATION; BRUCE YARWOOD, PRESIDENT AND 
 CEO, AMERICAN HEALTH CARE ASSOCIATION; AND ALISSA FOX, SENIOR 
VICE PRESIDENT, OFFICE OF POLICY AND REPRESENTATION, BLUE CROSS 
                    BLUE SHIELD ASSOCIATION

                  STATEMENT OF TED D. EPPERLY

    Dr. Epperly. Chairman Pallone, Ranking Member Deal and 
members of the Energy and Commerce Health Subcommittee, I am 
Ted Epperly, president of the American Academy of Family 
Physicians, which represents 94,600 members across the United 
States. I am a practicing family physician from Boise, Idaho. I 
am delighted to say that your draft bill goes a long way 
towards providing quality, affordable health care coverage for 
everyone in the United States.
    The AAFP has called for fundamental reform of our health 
care system for over 2 decades. We commend you for your 
leadership and commitment to find solutions to this complex 
national priority. We appreciate efforts to improve primary 
care through this draft bill. The Academy believes that making 
primary care the foundation of health care in this country is 
critical. Primary care is the only form of health delivery 
charged with the long-term care of the whole person and has the 
most effect on health care outcomes. Primary care is performed 
and managed by a personal physician leading a team, 
collaborating with other health professionals and using 
consultation or referral as needed.
    Many studies demonstrate that primary care is high quality 
and cost-effective because it includes coordination and 
integration of health care services. The Academy believes the 
key to designing a new health care system is to emphasize the 
centrality of primary care by including the patient-centered 
medical home where every patient has a personal physician, 
emphasizing cognitive clinical decision making rather than 
procedures, and ensuring the adequacy of our primary care 
workforce and aligning incentives to embrace value over volume.
    Many of these key provisions are contained in your draft 
legislation. Specifically, we applaud the committee for 
including a medical home pilot program in Medicare as a step 
towards a primary care system. Your definition of the patient-
centered medical home is consistent with the one established by 
the AAFP and other primary care organizations. We also support 
the PCMH demonstration project in Medicaid. Use of the medical 
home will achieve savings and improve quality. We appreciate 
the inclusion of a bonus of 5 percent for primary care services 
and up to 10 percent for services provided in a health 
profession shortage area. We urge you to make this bonus 
permanent.
    Medicare is a critical component of the U.S. health system 
and must be preserved and protected. With this draft, you take 
the first bold steps needed to remedy the Medicare physician 
payment system. The AAFP appreciates your recognition of the 
longstanding problems with the dysfunctional formula known as 
the sustainable growth rate, or SGR. We thank you for proposing 
that it be rebased. This is an important, necessary and welcome 
step.
    We also appreciate the bill's attention to workforce 
issues. Numerous studies indicate that more Americans depend on 
family physicians than on any other medical specialty. We are 
deeply concerned about the decline in the number of medical 
students pursuing a career in primary care at a time when the 
demand for primary care services will only be increasing. The 
majority of health care is provided in physicians' offices now 
and will be in the future. We must revitalize the programs to 
train the primary care physician workforce that will meet our 
needs in those locations.
    We thank you for reauthorizing and providing a substantial 
investment in section 747 of the health professions primary 
care medicine training program. The National Health Care 
Workforce Commission in the discussion draft is needed to 
recommend the appropriate numbers and distribution of 
physicians.
    The AAFP is also pleased that the Medicaid title provides 
for a substantial expansion of coverage to the uninsured. In 
particular, we support increases to the Medicaid primary care 
payment so that it is equal to Medicare by 2012. The AAFP 
supports a public plan option consistent with the principles 
included in our written testimony. Patients should have a 
choice of health plans and a public plan should be one of them. 
However, the public plan should not be Medicare. We acknowledge 
that for transition purposes, there may be some similarities to 
the federal program but we urge Congress to delink the public 
plan from Medicare by a date certain.
    The AAFP strongly supports the inclusion of comparative 
effectiveness research in the draft bill. We appreciate the 
establishment of a center within the Agency for Health Care 
Research and Quality. If we wish to improve the patient care 
and control costs in this country, this type of research is 
crucial. It is only with CER that we can provide evidence-based 
information to patients and physicians for use in making health 
care decisions.
    Finally, we support a number of insurance market changes 
that will help our patients in regards to the health insurance 
exchange where they can one-stop shop for a health care plan, a 
sliding-scale subsidy so that people can purchase meaningful 
coverage, guaranteed availability and renewability of coverage, 
prohibition of preexisting conditions exclusions and denials, 
and benefit packages that allow consumers to select the one 
that best meets their needs as well as a requirement for a core 
set of benefits.
    In conclusion, the Academy believes that health care should 
be a shared responsibility and applauds the section of the bill 
that requires all individuals have coverage. Now is the time to 
provide affordable, high-quality health care coverage. The 
status quo is not working. We urge Congress to invest in the 
health care system we want, not the one we have. Thank you very 
much, Mr. Chairman.
    [The prepared statement of Dr. Epperly follows:]





    Mr. Pallone. Thank you, Dr. Epperly.
    Dr. Williamson.

                STATEMENT OF M. TODD WILLIAMSON

    Dr. Williamson. Good morning, Chairman Pallone and Mr. 
Deal. My name is Todd Williamson, and I want to thank you for 
the opportunity to speak to you today. I am a neurologist from 
Atlanta and I serve as the president of the Medical Association 
of Georgia, and I am speaking on behalf of that association.
    I recently had the privilege on speaking on behalf of a 
coalition of 20 State and specialty medical societies 
representing more than 100,000 physicians, which is nearly half 
of the practicing physicians in the United States. This 
coalition believes that ensuring the patient's right to 
privately contract with their physician is the single most 
important step we could take to reform our medical care system.
    I would like to begin by addressing three assumptions that 
underpin the discussion draft. The first relates to geographic 
disparities in spending. Peter Orszag recently said that nearly 
30 percent of Medicare's costs could be saved without 
negatively affecting health outcomes of spending in high- and 
medium-cost areas could be reduced to the level in low-cost 
areas. We do not agree. This flawed claim was first made by the 
Dartmouth Group, which used only Medicare data to analyze 
spending and quality. Please consider the work of Dr. Richard 
Cooper, which shows that an examination of total medical 
spending per capita reveals that quality and cost are indeed 
connected. He also demonstrates that Medicare payments are 
disproportionately higher in States with high poverty levels 
and low overall medical care spending. The suggestion that our 
medical care expenditures are greater than other countries is 
also misleading, countries that account for expenditures such 
as out-of-pocket payments and the cost of long-term care in 
different ways. Some countries drive down costs by rationing 
care. The cost of research and development distorts our 
expenditures as well.
    A third faulty assumption is that medical care outcomes in 
the United States are worse than in other countries. America's 
often-cited infant mortality statistics cannot be directly 
compared to statistics from other countries that do not record 
the deaths of low birth weight newborns that we try to save. 
Comparisons of a host of specific diseases such as diabetes 
clearly show our outcomes are superior.
    We cannot support and would actively oppose the discussion 
draft. As I noted, we believe that allowing patients and 
physicians to privately contract is the single most important 
step we can take towards reforming the Nation's medical care 
system. This will empower patients to choose their physician, 
spend their own money on medical care and make their own 
medical decisions. Medical expenditures can only be 
appropriately controlled and allocated where there is complete 
transparency and acknowledgement of necessity and value at the 
time of the patient-physician interaction. Private contracting 
will enhance access to medical care. Many physicians opt out of 
government plans because payments do not cover costs. If 
private contracting was allowed, every patient would have 
access to every doctor. This option is currently not available 
under government plans and is prohibited in the discussion 
draft. Critics cite that private contracting will disadvantage 
impoverished patients. I would argue that they will benefit 
from increased access and competition in the medical community 
and their physicians will be at liberty to waive copays, which 
is currently forbidden in government plans.
    We applaud the draft sponsors for planning to rebase the 
SGR payment system but we remain concerned that they continue 
to rely on a target-based approach. We support the emphasis on 
prevention, wellness and claims transparency. We agree that 
primary care should receive greater support and administrative 
burdens should be reduced. We do not believe that the federal 
government should replace current research and development 
mechanisms or the training and judgment of physicians with 
federally controlled comparative effectiveness research.
    While we recognize the need for reform, we believe that the 
private marketplace should remain the primary means of 
obtaining insurance. A government-sponsored health insurance 
program for working-age adults will invariably eliminate 
private options. Recall that Medicare was originally introduced 
as an option for seniors but today it has essentially become 
their only choice.
    We can reduce obstacles to individual ownership and control 
of mental illness by adopting new tax policies. This would 
eliminate the phenomenon of preexisting conditions because 
individuals could carry their insurance with them for life 
independent of their occupation or employer. To those who 
assert that the private sector has failed our patients, I say 
that our patients have been disadvantaged in the marketplace by 
a tax system that penalizes individual ownership of health 
insurance. When all Americans own their policies, insurance 
companies will be forced to compete for the business of 
millions of individuals and they will focus on satisfying the 
patient, not the patient's employer. Finally, we can 
significantly reduce health care expenditures and improve 
access by enacting proven, effective medical liability reform 
measures.
    I appreciate this opportunity to present the views of 
practicing physicians to you today. Thank you.
    [The prepared statement of Dr. Williamson follows:]





    Mr. Pallone. Thank you, Dr. Williamson.
    Dr. Ulrich.

                  STATEMENT OF KARL J. ULRICH

    Dr. Ulrich. Mr. Chairman, Ranking Member Deal and members 
of the subcommittee, my name is Karl Ulrich and I am president 
and CEO of Marshfield Clinic in Marshfield, Wisconsin. On 
behalf of myself, our staff and the tens of thousands of 
patients that we care for, we commend you for advancing the 
national health reform debate.
    At our clinic, we continue to follow closely this dialog, 
especially reorienting the system towards quality and 
efficiency while at the same time ensuring that any meaningful 
reform is not built upon the flawed incentives of the current 
program. Therefore, we strongly urge this committee to be bold 
and address the problems of affordability, quality and 
disparities in payment that plague the program, hurting 
beneficiaries and providers alike.
    As background, Marshfield Clinic is one of the largest 
medical group practices in Wisconsin and indeed the United 
States with almost 800 physicians, 6,500 additional staff and 
3.6 million annual patient encounters per year. As a 501(c)(3) 
not-for-profit organization, our clinic is a public trust 
serving all who seek care regardless of their ability to pay. 
As part of our commitment, the clinic has invested in 
sophisticated tools that complement and support our mission 
such as an internally developed certified electronic medical 
record, a data warehouse and an immunization registry. With 
this infrastructure, the clinic is presently publicly reporting 
clinical outcomes and providing quality improvement tools to 
analyze processes, eliminate waste and improve consistency 
while still reducing unnecessary costs. These initiatives are 
consistent with the stated goals of the national health reform 
debate. Our clinic has long used information to facilitate care 
redesign and we expanded these efforts after becoming a 
participant in the federal physician group demonstration 
project. As a result, we have improved care, reduced costs and 
achieved significant savings for the Medicare program. In the 
first 2 years of the demonstration, we have saved taxpayers 
more than $25 million with our redesigns while meeting or 
exceeding all 27 possible quality metrics. We believe that 
equivalent or even greater results are possible with the 
creation of the proposed accountable care organizations, 
especially if the subcommittee aligns the incentives of the 
Medicare program reimbursement with value and efficiency.
    However, of concern is the current tri-committee mark. The 
authors have proposed the establishment of a public health 
insurance option. Providers who voluntarily participate in 
Medicare would be required to participate in the public option 
and would be paid at Medicare rates plus some incremental 
percentage for the first 3 years of operation. This raises 
substantial financial and operational questions around how the 
federal government could compel physicians to see those 
patients. For instance, would this mean that patients must be 
seen when they present or would providers be compelled to see 
the patient within a certain time frame? Further, if the public 
plan pays at Medicare rates, the reduction in commercial 
service revenue would compel radical restructuring of our 
institution, perhaps resulting in our demise. As such and in 
this current form, Marshfield Clinic strongly opposes the 
public plan alternative based on the belief that a true level 
playing field could never exist between public and private 
providers. In Wisconsin, where commercial rates vary between 
180 to 280 percent of Medicare rates, this public plan would 
have such a profound competitive advantage that one needs to be 
concerned that providers would uniformly abandon the Medicare 
program to survive in the practice of medicine.
    Further, there is a significant problem with the Medicare 
payment rates in Wisconsin as well as the rest of rural 
America. For example, Medicare currently reimburses us at only 
51.6 percent of our allowable costs. We believe that this is a 
result of Medicare's failed formulas for reimbursing physician 
work and practice expense and Medicare's geographic adjustment. 
To address these systemic problems, we believe that Congress 
and CMS must refine Medicare payment systems to address the 
problems of access and encourage appropriate care by providing 
incentives that focus on quality and efficiency. Similarly, we 
are also concerned about the practice expense components of the 
Medicare physician formula. It is widely agreed that the data 
used to estimate non-physician wages does not reflect current 
patterns and practice of medicine. As a result, the formula 
distorts payments, paying some too much and others too little. 
To resolve this disparity, we would like to heighten the 
legislative work of Congressmen Braley and Kind, who have each 
authored legislation to correct this inequity, and we urge the 
subcommittee to include these members' thoughtful provisions in 
any health care reform legislation that advances.
    Again, Marshfield Clinic appreciates the opportunity to 
share our views and we look forward to advancing our shared 
vision of a healthy America. Thank you.
    [The prepared statement of Dr. Ulrich follows:]





    Mr. Pallone. Thank you, Dr. Ulrich.
    Dr. Wright.

                   STATEMENT OF JANET WRIGHT

    Dr. Wright. Chairman Pallone and Ranking Member Deal and 
members of the subcommittee, thank you for the opportunity to 
appear before the subcommittee today. My name is Janet Wright. 
I am a board-certified cardiologist, having trained in San 
Francisco and practiced in northern California for 25 years. 
For the last year I have been serving as the American College 
of Cardiology's senior vice president for science and quality 
here in Washington, and in that role I oversee our registries, 
our scientific documents like guidelines and performance 
measures and appropriate-use criteria and also our quality 
improvement projects and programs.
    On behalf of the 37,000 members of the ACC, I commend you 
for setting out the health care reforms in the current draft 
bill. We see so many improvements and we commend you and 
applaud your efforts to both attend to and correct the flawed 
physician payment model. We also register concerns about 
proposed cuts in imaging and the effect they may have on 
patients' access to care. But in broad overview, the ACC is 
completely committed to comprehensive reform and we are very 
grateful for your attention to the matter.
    Ranking Member Barton invited me to speak today about his 
draft proposal, the Health Care Transparency Commission Act of 
2009, and I am delighted to offer these comments. The American 
College of Cardiology values performance measurements, its 
analysis and improvement and it demonstrates this commitment 
through a 25-year history of producing guidelines for clinical 
practice, the more recent generation of a particular kind of 
guidance called appropriate-use criteria, to help clinicians 
choose the appropriate type of treatment or technology or 
procedure that best fits that patient's clinical scenario, and 
in our efforts in what is now called implementation science, 
taking what we know works and trying to get that into the 
practice of medicine in a systematic way. Examples of that in 
recent years are the Door To Balloon project of the Alliance 
for Quality, over 1,100 hospitals here in the United States and 
beyond trying to shorten up that time from diagnosis of a 
myocardial infarction until the balloon opens that artery. And 
more recently we are about to launch a program called Hospital 
to Home, Excellence in Transition, along with key partnerships, 
particularly with the Institute for Health Care Improvement. 
And finally, we are beginning to implement our appropriate-use 
criteria, both in imaging and soon in revascularization, to 
help clinicians, their patients and their surgeons make good 
decisions about revascularization.
    In fact, our vision is not just separate projects but a 
network of practices in hospitals. Our registries are in about 
2,300 hospitals around the country and our ambulatory registry 
called the Improvement Program is just beginning but we are out 
into about 600 practices in the country. Our fully realized 
vision is to connect these practices and hospitals in a quality 
network. Those individuals practicing in the hospitals and 
outpatient settings are committed to the systematic delivery of 
scientifically sound patient-centered care, and fully realize 
that vision will include a primary care network as well because 
we understand most of cardiac diseases are actually managed by 
primary care docs and nurses. In order to effect this vision to 
make this come true, obviously payment needs to be readjusted 
from the volume that we have known to the value that we 
treasure. I enlist and again appreciate your efforts to make 
that happen.
    We believe that good data are the foundation for quality 
improvement and serve to stimulate innovation, very healthy 
competition amongst providers and rapid and continuous learning 
network. As the science of performance measurement improves and 
the skill of all of us at communicating complicated statistics 
to lay people, as that skill is honed, consumers will likewise 
find great value in quality information. The ACC strongly 
supports the public's right to valid, actionable and current 
data to help inform and enhance decision making. We find Mr. 
Barton's proposal to be a laudable one and should Congress 
proceed in this direction, we recommend consideration of the 
following principles. These were published in 2008 and I am 
only going to hit the high points.
    But number one, the driving force for performance 
measurements and public reporting should be quality 
improvement. We acknowledge and support Mr. Barton's critical 
inclusion in his draft bill of quality ratings along with 
pricing information. Number two, public reporting programs 
should be based on performance measures with scientific 
validity. Number three, public reporting programs should be 
developed in partnership with health care professionals, those 
being measured. Number four, every effort should be made to use 
standardized data elements to assess and report performance, 
and to make the submission process uniform across all public 
reporting programs. This helps reduce the measurement fatigue 
and the disengagement that we often see in health care 
professionals who are exhausted with the effort of measuring. 
Number five, performance reporting should occur at the 
appropriate level of accountability. I think this is true in 
all areas of medicine but certainly in cardiology. The most 
effective care is delivered by teams. Focusing on an individual 
within that team may skew the measurement and the result of 
that measurement in a way that has adverse consequences.
    Mr. Pallone. Dr. Wright, you are almost a minute over, so 
if you could just summarize.
    Dr. Wright. Number six is avoiding those unintended 
consequences. Thank you very much.
    [The prepared statement of Dr. Wright follows:]





    Mr. Pallone. Thank you. Sorry.
    Dr. White.

                 STATEMENT OF KATHLEEN M. WHITE

    Ms. White. Chairman Pallone, Ranking Member Deal, 
distinguished committee members and Congressional staff, I am 
Kathleen White, a registered nurse, speaking today on behalf of 
the American Nurses Association, and we thank you for this 
opportunity to testify. The ANA is the only full-service 
national association representing the interests of the Nation's 
2.9 million registered nurses in all educational and practice 
settings. ANA advances the nursing profession by fostering high 
standards of nursing practice.
    ANA comments the committee for its work in the tri-
committee's draft legislation which represents a movement 
toward much-needed comprehensive and meaningful reform for our 
health care system. We appreciate the committee's recognition 
that in order to meet our Nation's health care needs, that we 
must have an integrated and well-resourced national workforce 
policy that fully recognizes the vital role of nurses and other 
health care providers and allows each to practice to the 
fullest extent of their scope. ANA remains committed to the 
principle that health care is a basic human right and all 
persons are entitled to ready access to affordable, quality 
health care services that are patient centered, comprehensive 
and accessible. We also support a restructured health care 
system that ensures universal access to a standard package of 
essential health care services for all.
    That is why ANA strongly supports the inclusion of a public 
health insurance plan option as an essential component of 
comprehensive health care reform. We believe that inclusion of 
a public plan option would assure that patient choice is a 
reality and not an empty promise and that a high-quality public 
plan option will above all provide the peace of mind that is 
missing from our current health care environment. It will 
guarantee the availability of quality, affordable coverage for 
individuals and families no matter what happens and generate 
needed competition in the insurance market. ANA looks forward 
to partnering with you to make this plan a reality.
    There are a wide variety of ideas currently circulating on 
health care reform but all include discussion of prevention and 
screening, health education, chronic-disease management, 
coordination of care and the provision of community-based 
primary care. As the committee has clearly recognized in its 
drafts, these are precisely the professional skills and 
services that registered nurses bring to patient care. As the 
largest group of health care professionals, registered nurses 
are educated and practice within a holistic framework that 
views the individual family and committee as an interconnected 
system. Nurses are the backbone of the health care system and 
are fundamental to the critical shift needed in health services 
delivery with the goal of transforming the current sick care 
system into a true health care system.
    ANA deeply appreciates the committee's recognition of the 
need to expand the nursing workforce and thanks you for your 
commitment to amend the title VIII nursing workforce 
development programs under the Public Health Service Act and 
commend the inclusion of the definition of nurse-managed health 
centers under the title VIII definitions. We applaud the 
removal of the 10 percent cap on doctoral traineeships under 
the advanced education nursing grant program and the inclusion 
of special consideration to eligible entities that increase 
diversity among advanced educated nurses.
    Additionally, the expansion of the loan repayment program 
eligibility to include graduates who commit to serving as nurse 
faculty for 2 years will help address this critical shortage of 
both bedside nurses and nursing faculty. We are also grateful 
for the funding stream created through the public health 
investment fund and the commitment of dollars through 2014 that 
would offer vital resources and much-needed funding stability 
for these title VIII programs.
    ANA applauds the use of community-based multidisciplinary 
teams to support primary care through the medical home model. 
ANA is especially pleased that under this proposal nurse 
practitioners have been recognized as primary care providers 
and authorized to lead medical homes. Nurse practitioners' 
skills and education, which emphasize patient- and family-
centered whole person care, make them particularly well-suited 
providers to lead in the medical home model, focused on 
coordinated chronic care management and wellness and 
prevention. Many recent studies have demonstrated what most 
health care consumers already know: nursing care and quality 
patient care are inextricably linked in all care settings but 
particularly in acute and long-term care.
    Because nursing care is fundamental to patient outcomes, we 
are pleased that the legislation places a strong emphasis on 
reporting nurse staffing and long-term care settings, both 
publicly and to the Secretary. The availability of nurse 
staffing information on the nursing home compare Web site would 
be vital to help consumers make informed decisions and the full 
data reported to the Secretary will ensure staffing 
accountability and enhance resident safety. ANA hopes that in 
the same vein the committee will look toward incorporating 
public reporting of similar nurse staffing measures and 
nursing-sensitive indicators in acute care through the hospital 
compare Web site as recommended by the National Quality Forum.
    Finally, a reformed health care system must value primary 
care and prevention to achieve improved health status of 
individuals, families and the community. ANA supports the 
renewed focus on new and existing community-based programs such 
as community health centers, nurse home visitation programs and 
school-based clinics and applauds the committee's recognition 
of the vital importance of addressing health disparities.
    Once again, the American Nurses Association thanks you for 
the opportunity to testify before this committee. We appreciate 
your understanding of the important role nurses play in the 
lives of our patients and the health system at large. Nurses 
are ready to work with you to support and advance meaningful 
health care reform today. Thank you.
    [The prepared statement of Ms. White follows:]





    Mr. Pallone. Thank you, Ms. White.
    Dr. Gabow.

                  STATEMENT OF PATRICIA GABOW

    Dr. Gabow. Chairman Pallone, Ranking Member Deal and 
members of the committee, thank you for the opportunity to 
testify. I am Dr. Patricia Gabow and I am speaking for Denver 
Health and National Association of Public Health and Hospital 
System. Please excuse my voice.
    Denver Health is an integrated safety-net institution that 
includes the State's busiest hospitals, all Denver federally 
qualified health centers, the public health department, all the 
school-based clinics and more. Since 1991, we have provided 
$3.4 billion in uninsured care and have been in the black every 
year. We have state-of-the art facilities and sophisticated 
HIT. These characteristics have enabled amazing quality. 
Ninety-two percent of our children are immunized. Our hospital 
mortality is one of the lowest in the country. Sixty-one 
percent of our patients have their blood pressure controlled 
compared to 34 percent in the country. This is despite the fact 
that 46 percent of our patients are uninsured, 70 percent are 
minorities and 85 percent are below 185 percent of federal 
poverty level.
    So you may ask if we are doing so well and meeting 
patients' needs, why am I here supporting health reform. The 
answer is straightforward. As the safety-net physician leader, 
I see every day that America is failing to meet people's health 
care needs in a coordinated, high-quality, low-cost way. The 
number of uninsured at our door and the cost of their care 
increases every year. In 2007, our uninsured care was $275 
million. Last year it was $318 million, and is projected to be 
$360 million this year. This is not sustainable. Moreover, not 
every American city has a Denver Health. As a doctor, I ask 
myself why should where you live in America determine if you 
live. Why should an uninsured cancer patient get care if they 
live in Denver but not if they live in another Colorado county?
    You have included important reform components in your draft 
bill. We support your goal to ensure affordable, quality care 
for all. I agree that costs must be reduced if we are to cover 
everyone and costs can be reduced by developing integrated 
systems that get patients to the right place at the right time 
with the right level of care, with the right provider and the 
right financial incentives. We support your continued 
investment in DSH hospitals, community health centers and 
public health. I would encourage incentives to integrated 
systems. These entities will be important during the transition 
to full coverage and afterwards to vulnerable patients 
including Medicaid, which will be a building block for much of 
the coverage expansion. Integrated systems are cost efficient. 
Our charges for Medicaid admission are 30 percent below our 
peer hospitals.
    Your investment in primary care and nurse training and the 
National Health Service Corps is critical. Without this, we 
will not be able to get patients to the right provider for the 
right level of care. As a public entity, we believe in the 
power of the public sector to meet the needs not only of those 
patients on public programs but also private patients. We are 
the major Medicaid provider for our State but our HMO also 
serves private patients including Denver's mayor. We and other 
safety-net systems would welcome the opportunity to continue to 
be a plan of choice.
    In summary, as a physician and a GEO of a public safety-net 
system, I urge you to continue this effort to substantially 
reform our delivery system, our payment model and to provide 
care for all Americans. Our current system cannot and should 
not be sustained. America deserves better. I and NPH are eager 
to help you in this very important task. Thank you.
    [The prepared statement of Dr. Gabow follows:]





    Mr. Pallone. Thank you, Doctor.
    Mr. Hawkins.

                    STATEMENT OF DAN HAWKINS

    Mr. Hawkins. Well said, Dr. Gabow.
    Good morning, Mr. Chairman, Ranking Member Deal and 
distinguished members of the subcommittee, distinguished 
meaning present and accounted for. On behalf of the National 
Association of Community Health Centers, the Nation's more than 
1,200 community health center organizations and the more than 
18 million people they serve today, thank you for the 
opportunity to contribute to today's discussion. In community 
health centers all across the country, we witness the urgent 
need for fundamental health reform every single day in the 
faces and the struggles of our patients who for too long have 
been left behind by our dysfunctional health care system.
    Our 43 years' experience in caring for America's medically 
disenfranchised and underserved has taught us three things. 
First and foremost, that health reform must achieve universal 
coverage that is available and affordable for everyone and 
especially for low-income individuals and families, second, 
that that coverage must be comprehensive and must emphasize 
prevention and primary care, and third, that it must guarantee 
that everyone has access to a medical or a health care home 
where they can receive high-quality, cost-effective care for 
their needs.
    Mr. Chairman, we believe that the plan we have before us 
today meets those principles and also moves our Nation much 
closer to achieving the equity and social justice in health 
care that has proven so elusive over the past century. 
Community health centers strongly support the draft 
legislation's call to expand Medicaid to cover everyone with 
incomes up to 133 percent of poverty without restriction. This 
Medicaid expansion may well be the most important and the most 
essential feature of this plan, especially for the patients we 
serve.
    At the same time, we urge you to ensure that as these 
Medicaid beneficiaries are potentially moved into the health 
insurance exchange, they can continue receiving supplemental 
Medicaid benefits, those key services like outreach, 
transportation, nutrition and health education, screening and 
case management that will remain so vital to their health and 
well-being but will most likely not be covered by their 
exchange plans. It is also clear that the expansion of 
insurance coverage, while a vital first step, can only take the 
country so far. Most importantly, the increased demand for care 
that comes from expanding coverage must be met with an 
augmented primary health care system as the people of 
Massachusetts learned in the wake of their State's reform. Here 
again, the draft legislation delivers a solid response to this 
challenge and we applaud its call to expand the health center 
system of care through increased funding as part of the new 
public health investment fund. The members of this committee 
have consistently provided broad, bipartisan support for health 
centers over the years and we deeply appreciate that, and I can 
assure that health centers are repaying your trust and your 
investment in their every day.
    For example, a recent national study done in collaboration 
with the Robert Graham Center found that people who use health 
centers as their usual source of care have 41 percent lower 
total health care costs and expenditures than people who get 
their care elsewhere. As a result, health centers saved the 
health care system $18 billion last year alone, more than nine 
times the federal appropriation for the program and better than 
$2 for every dollar they spent in care. With the new funding in 
the draft bill, these savings will grow even larger. The 
National Health Service Corps is a vital tool for health 
centers and underserved communities seeking to recruit new 
clinicians and the draft legislation would bring an historic 
investment to the program, leading to thousands more primary 
care providers to practice in underserved communities.
    The committee has also historically recognized that it 
makes sense for all insurers to reimburse health centers and 
other safety-net providers appropriately and predictably for 
the comprehensive primary and preventive care they provide. In 
order to accomplish this goal, we recommend that Congress align 
health center payments from all insurers, public and private, 
with the structure currently in place under Medicaid. As you 
continue deliberations, we urge the committee to consider 
improving the bill further by including language from H.R. 
1643, which would align the current Medicare health center 
payment methodology with the successful Medicaid prospective 
payment system.
    Finally, as full participants in a reformed health care 
system, America's health centers stand ready to deliver quality 
improvement, increased access and cost containment that will be 
necessary to make this reform successful. To that end, we 
applaud the committee's inclusion of network adequacy standards 
for all exchange plans to ensure that people living in 
underserved communities have access to the health centers and 
other essential community providers located there.
    Mr. Chairman and members of the committee, we again thank 
you for your leadership and your commitment to make health care 
reform work for all Americans and we pledge ourselves to work 
with you to make that a reality this year. Thank you.
    [The prepared statement of Mr. Hawkins follows:]





    Mr. Pallone. Thank you, Mr. Hawkins.
    Mr. Roberts.

                 STATEMENT OF BRUCE T. ROBERTS

    Mr. Roberts. Chairman Pallone, Congressman Deal and members 
of the Health Subcommittee, I am Bruce Roberts, the executive 
vice president and CEO of the National Community Pharmacists 
Association, NCPA. I am a licensed pharmacist in the State of 
Virginia and I have owned four community pharmacies over the 
last 33 years in Loudon County, Virginia. NCPA represents the 
owners and operators of 23,000 independent community pharmacies 
in the United States. We appreciate the opportunity to testify 
before you today on the role of pharmacy in health care reform.
    In many communities throughout the United States, 
especially in urban and rural areas, independent community 
pharmacies are often the primary source of a broad range of 
health care products and services, services such as medication 
therapy management and immunization programs for seniors under 
Medicare Part B and D. We believe that a reformed health care 
system should expand the availability of these programs because 
they can help improve the quality of care and reduce health 
care costs.
    The reality is that for every dollar the health care system 
spends paying for prescription medications, we spend at least 
another additional dollar on health care services to treat the 
adverse effects of medications that are taken incorrectly or 
not at all. For example, a primary cause for costly hospital 
readmissions is the lack of patient adherence to medications 
used to treat chronic medical conditions such as hypertension 
and high cholesterol. Pharmacists can play an important role in 
the post-acute care and helping patients manage their 
medications through education, training and monitoring. We 
applaud the fact that the draft House language would allow the 
involvement of non-physician practitioners such as pharmacists 
in the medical home pilot project. Pharmacists can help improve 
the use of prescription medications, especially in those 
individuals that have multiple chronic diseases.
    NCPA is very much appreciative of the fact that the draft 
House legislation includes reform of the average manufacturer's 
price, AMP, based reimbursement system for Medicaid generic 
drugs. We would like to get this fixed this year. We are 
concerned that the Medicaid generic reimbursement at 130 
percent of the weighted average AMP as proposed in the draft 
House bill combined with low dispensing fees paid by States 
will in total still significantly underpay pharmacies for the 
dispensing of low-cost generics in the Medicaid program. This 
could create a disincentive for the use of generic drugs 
causing a rise in Medicaid costs over the long term. NCPA asks 
the committee to consider a higher FUL reimbursement rate for 
generic medications, especially for critical access community 
pharmacies that serve a higher percentage of the Medicaid 
recipients or rural pharmacies.
    With respect to our ability to continue to provide durable 
medical equipment, DME, to Medicare beneficiaries, we believe 
that requiring State-licensed, State-supervised community 
retail pharmacies to obtain both accreditation and surety bonds 
to simply sell demipost items such as diabetes testing supplies 
to Medicare beneficiaries is basically overkill. Thousands of 
pharmacies across the country, mostly small pharmacies, will 
not be accredited at all or not be finished the accreditation 
process by October 1, which will mean that they will not be 
able to provide diabetes testing supplies for Medicare 
beneficiaries. We applaud the 90 bipartisan members of the 
House and 13 members of the Energy and Commerce Committee who 
supported H.R. 616, the bill that was introduced by Congressman 
Barry and Congressman Moran that would exempt pharmacies from 
redundant and unnecessary accreditation requirements. We also 
appreciate the work of Congressman Space in introducing H.R. 
1970, which would exempt pharmacies from unnecessary surety 
bonds. We ask that the provisions from these bills be included 
in the chairman's mark. If there is willingness to exempt 
pharmacies from these requirements, we ask that Congress 
consider acting by October 1, which is the deadline for 
providers to obtain accreditation and surety bonds.
    Finally, I would make a few comments regarding the public 
plan option. Under the House proposal, payment rates for 
prescription drugs under the public plan proposal would be 
negotiated by the Secretary. We would be very concerned giving 
the Secretary authority to set payment rates for prescription 
drugs without some basic guidance to how these rates should be 
established and updated. We also ask that the language be 
clarified such as the administration of any benefit under the 
public plan would be accomplished by a pharmacy benefit 
administrator as opposed to a pharmacy benefit manager. We 
would prefer a model used in the Medicaid program or in the 
Department of Defense Tri-Care program where the administrator 
is used. Under this model, most, if not all, the negotiated 
drug manufacturer rebates would be passed through to the public 
program.
    In conclusion, we look forward to working with Congress and 
the Administration to reform the health care system and we look 
forward to the opportunity to work with you to meet that end.
    [The prepared statement of Mr. Roberts follows:]





    Mr. Pallone. Thank you, Mr. Roberts.
    Mr. Yarwood.

                   STATEMENT OF BRUCE YARWOOD

    Mr. Yarwood. I should first of all say thank you for 
including me in the distinguished panel. I mean, doctor, 
doctor, doctor, doctor, pharmacy, and here is old Yarwood 
sitting right in between them all. Thank you very much. I 
appreciate being here.
    As you know, I am Bruce Yarwood. I am president and CEO of 
American Health Care Association and the National Center for 
Assisted Living, which we represent about 11,000 facilities 
across the country with a great cross-section of the 
profession. We have big, we have small, we have rural, we have 
urban, proprietary, non-proprietary. And I would be remiss if I 
didn't say we look at ourselves as a pretty significant portion 
of the economy right now. We are about 1.1 percent of the gross 
domestic product when you kind of sort it all out.
    Now, having said that, we have taken a look at the 800 
pages and it is a significant bill, and I must admit one that 
does not include long-term care reform. At the same time, it 
includes a whole bunch of stuff that has impact on us. And let 
me try to synthesize a little bit of the comments.
    First, as we move forward and try to do a better job in 
terms of quality, it is really important for us to have 
economic stability, and one of the things we find in the bill 
is we have three pretty big problems with it. First of all, the 
bill has a provision that would institutionalize what the CMS 
is doing to cut 3.3 percent out of our Medicare rate based on a 
formulary mistake that was made by them 4 years ago. Secondly, 
we are concerned about the discussion draft that will eliminate 
a part of the market basket and so what we are looking at then 
is not only a 3.3 percent cut in our rate coming from CMS but 
then an additional cut coming from the committee that would 
significantly take resources out in terms of our ability to 
pay, and as you know, we are two-thirds to three-quarters or 75 
percent labor based, and so a significant reduction in 
reimbursement causes us a big problem in terms of our ability 
to pay and keep staff.
    Third, which is not your doing, but Medicare cuts are being 
considered at the same time we are looking at what we call the 
unfortunate reality of Medicaid underfunding. What we have 
seen, the stimulus package was a help. However, in response to 
the recession, we see 46 percent of the States are freezing or 
cutting nursing home rates and that the 75 percent are not 
keeping up with inflation. So in a short statement, what is 
occurring is that we are looking down the barrel of a Medicare 
cut and at the same we are looking across the country at 
Medicaid rates either staying stable or falling in a period of 
inflation and so we are feeling caught in an economic vise, if 
you will.
    Now, let me talk a little bit about some other stuff that 
is I would say very positive. Regarding Part B, we applaud you 
for the proposal to extend the therapy cap extension process 
exception process. Second, I think in testimony earlier we 
talked about Medicare re-hospitalization. We have a re-
hospitalization problem and we need to address that issue. We 
think there are ways to do that. In a short statement, we find 
that our re-hospitalization comes on day 2, 3 and 4 of 
admission and typically they go back to the hospital because 
they come on the weekend or things of that nature. So we think 
we should continue work on that together. Third, we think that 
we should be looking at the whole post-acute setting and trying 
to integrate that much better than it is now and we have 
numbers that would show that if we either on a pilot or 
demonstration basis, we find that if we would integrate and pay 
based on diagnosis, not on site, we can save multibillion 
dollars ranging above $50 billion over the next 10 years, and 
that simply stated is that we can take a knee or a hip that is 
not an IRF but in a nursing home and do it for about half the 
cost.
    I would be remiss if I didn't respond a little bit to 100 
pages of your bill that was addressed somewhat earlier by the 
prior panel that talks about transparency in long-term care. 
Very basically put, the question is that what we need to do is 
take a lot better look at who owns places, how they are owned, 
who makes the decisions. We have been in discussions with the 
staff for about the last 18 months and frankly we support the 
concept and the direction of the committee and we believe 
firmly that by continuing to work together, the final 
legislation that we can parse together, we can absolutely 
support.
    I would say there are a few specifics though that I would 
be remiss if I didn't say that we have a problem with. First, 
we have a difficult time with what a disclosable party, and in 
the bill itself, for example, it mentions that we should be 
disclosing our bankers' boards of directors. That is something 
we don't have or can't get to. Secondly, we would suggest the 
provisions that you are looking at be tailored to talk about 
exactly who we want to disclose. We take a look at the bill and 
we are in the position of disclosing people like who are 
landscapers are, painters are and things of that nature that 
don't have a significant amount so we think we can work that 
out. Third, we heard a lot about compliance programs from the 
Inspector General. We have no problem with compliance programs 
but what we need is to tailor those based on the size of the 
facility. A compliance program for Kindred Health Care, the 
largest in the country, versus the compliance program for a 35-
bed facility in Oakland are two different things so we just 
need to be sympathetic as to what those are.
    Mr. Pallone. You are a minute over.
    Mr. Yarwood. Let me say this. Thank you very much for 
letting us be here. We certainly want to work together and 
there are great things in the workforce area and the 
transparency stuff. We are here to make it work for you.
    [The prepared statement of Mr. Yarwood follows:]





    Mr. Pallone. Thank you. Thanks a lot.
    Ms. Fox.

                    STATEMENT OF ALISSA FOX

    Ms. Fox. Thank you very much, Chairman Pallone, Ranking 
Member Deal and other members of the committee. I really 
appreciate the opportunity to be here today.
    Blue Cross Blue Shield plans strongly support enactment of 
health reform. We must rein in costs, improve quality, and 
importantly we must cover everyone. Today the Blue system 
provides coverage to more than 100 million people in every 
community and every zip code in this country. For the past 2 
years we have been supporting five key steps to reform our 
system.
    First, we believe Congress should encourage research on 
what treatments work best by establishing a comparative 
effectiveness research institute. We are very pleased the House 
draft bill recognizes the importance of this key step. Second, 
in order to attack rising costs, we must change the incentives 
in the payment systems both private and in Medicare to promote 
better care instead of just more services. The draft bill 
includes some of the Medicare delivery system recommendations 
we support. We also agree with provisions in the bill to help 
build an adequate medical workforce to care for everyone in the 
country. Third, consumers and providers should be empowered 
with information and tools to make more-informed decisions. 
Fourth, we need to promote health and wellness and prevention 
and managed care for those with chronic illnesses. Finally, we 
believe a combination of public and private coverage solutions 
are needed to make sure everyone is covered. We support a new 
individual responsibility program for all Americans to obtain 
coverage along with subsidies to ensure coverage is affordable. 
We also support expanding Medicaid to cover everyone in 
poverty. We are also supporting major reforms in our own 
industry including new federal rules to require insurers to 
open the doors, accept everyone regardless of preexisting 
conditions and eliminate the practice of varying premiums based 
upon health status, and we also support a national system of 
state exchanges to make it easier for individuals and small 
employers to purchase coverage. I know there is a perception 
that this is a new position for the insurance industry. It is 
not for the Blue system. We had the same position in 1993.
    We appreciate this opportunity to comment on the tri-
committee bill. We support the broad framework of the bill 
which includes many of the critical steps we believe are 
needed. However, we have very strong concerns that specific 
provisions will have serious unintended consequence that will 
undermine the committee's goals. Our chief concern is creation 
of a new government-run health program. We believe a 
government-run health program is unnecessary for reform and 
will be very problematic for three reasons. First, many people 
are likely to lose the private coverage they like and be 
shifted into the government plan. This is because the 
government plan will have many price advantages that the 
private plans won't including paying much lower Medicare rates 
than the private sector. This is an enormous advantage on its 
own as Medicare rates are already 20 to 30 percent lower than 
what we pay in the private side, and that is a national 
average. I think here you heard Marshfield Clinic talk about 
much huger variations in Wisconsin. But there are other 
advantages in the bill as well. I will give you two examples. 
Individuals in the government plan, they can only sue in 
federal court for denied services. However, individuals in 
private plans can sue in State court for punitive, compensatory 
and other damages. In addition, private plans would have to 
meet 1,800 separate State benefit and provider requirements 
while the government plan would not. Second, the draft bill 
would underpay providers in the government plan. This is likely 
to lead to major access issues in the health care system such 
as long waits for services. And third, the government plan 
would undermine much-needed delivery system reforms that are 
critical to controlling costs. We agree Medicare needs to be 
reformed to reward high-quality care. We commend the committee 
for including reforms to modernize Medicare. However, history 
has shown the government can be slow to innovate and implement 
changes through the complex legislative and regulatory 
processes. The private sector, on the other hand, is free to 
innovate, and let me just give you one example from our program 
that is improving outcomes and lowering costs through our Blue 
Distinction Centers of Excellence. Recent data shows that 
readmission rates at our cardiac care centers around the 
country have 26 to 37 percent lower readmission rates than 
other hospitals.
    In closing, I would like to emphasize the Blue system's 
strong support for health care reform including major changes 
in how insurers do business today. We believe the federal 
government has a vital and expanded role to play in reform by 
expanding Medicaid to cover everyone in poverty and enrolling 
all the people that are now eligible for Medicaid coverage, by 
reforming Medicare to pay for quality and assuring Medicare's 
long-term solvency and setting strict new rules for insurers to 
assure access to everyone regardless of their health. We are 
committed to working with all of you to enact meaningful health 
care reform this year. Thank you very much.
    [The prepared statement of Ms. Fox follows:]





    Mr. Pallone. Thank you, Ms. Fox, and now we will have 
questions starting with me. Obviously I can't reach everyone so 
I am going to direct my question--I will try to get in three 
questions about primary care, Medicaid and DSH if I could, and 
I am going to start with Dr. Epperly on the primary care 
promotion issue.
    We have obviously heard a lot of testimony about the 
primary care shortages. We have heard that action on a single 
front is not enough but that concerted action across the health 
system is going to be required, and the discussion draft 
reflects these calls for action and proposes major investments, 
and I will list first increasing the rate paid by Medicaid for 
primary care services, second, the primary care workforce 
including increases for the National Health Service Corps and 
scholarship and loan programs, third, payment increase in 
Medicare and the public option for primary care practitioners 
including an immediate 5 percent in payments and high-growth 
allowances under a reformed physician fee schedule, fourth, an 
additional payment incentive for primary care physicians in 
health profession shortage areas, and finally, an expansion of 
medical home payments and added flexibility for that model of 
care. The draft also proposes a reform to graduate medical 
education programs funded by Medicare and Medicaid. Two 
questions. First, will these proposals help to reverse the 
decline in interest in primary care among medical students, Dr. 
Epperly?
    Dr. Epperly. Absolutely.
    Mr. Pallone. OK.
    Dr. Epperly. Did you want me to expand on that?
    Mr. Pallone. Well, let me give you the second one and then 
you can talk. The second is, will the rate increases proposed 
for primary care services in Medicaid and Medicare help to 
address problems with access we have seen in those programs 
over the past several years? So generally will you reverse the 
decline among medical students, and secondly, what will it do 
for access to Medicaid and Medicare?
    Dr. Epperly. Thank you, Mr. Pallone. I would say to you 
that the return to a primary care-based system in this country 
is essential. If you will, it is foundational to building the 
health care system of our future. To get primary care 
physicians back into a position where they can integrate and 
coordinate care, lower costs and increase quality, we must do 
that. Right now, primary care is in crisis. A lot of that has 
to do with the dysfunctional payment system. Primary care 
practices are barely making it in regards to their margins, so 
what we have to do in terms of the reform measures is, number 
one, make this viable financially for physicians to choose 
primary care.
    Mr. Pallone. But tell me whether you think these proposals 
that are in our draft discussion will accomplish that. Will we 
get more medical students to go into primary care and what will 
it mean for access to Medicare and Medicaid specifically with 
this proposal before us?
    Dr. Epperly. Right. So medical students now are opting not 
to choose primary care because they can see that incomes can be 
three to five times higher if they choose subspecialties so the 
payment reform will help narrow that gap in disparity so that 
they choose more to do primary care. The derivative effect of 
that is that workforce will then be enhanced, access then 
increases. What we must do in the system is not only coverage 
people but we have got to have the right types of physicians 
and the right communities to see them. So it is kind of 
multifaceted, multilayered. We have got to fix payment, which 
will increase workforce. Workforce will enhance access. That is 
how it is all linked. What it saves America is cost in the long 
run, increases affordability and access as a derivative.
    Mr. Pallone. Do you believe that this discussion draft will 
accomplish that?
    Dr. Epperly. Yes.
    Mr. Pallone. OK. Now, let me just ask my Medicaid and DSH 
question of Dr. Gabow, if I can. Can you talk to us on 
Medicaid, what will it mean to have Medicaid covering up to 133 
percent of the federal poverty level, having subsidies that 
help people access health care up to 400 percent and to have 
individuals response to encourage all else to make sure that 
their dependents have health insurance. So basically, you know, 
the increase to the poverty level eligibility for Medicaid, the 
subsidy in the health marketplace and the individual mandate. 
That is a lot.
    Dr. Gabow. Yes. Well, clearly, anything that expands 
coverage, particularly for low-income, vulnerable people, will 
reduce our $360 million of uninsured care. But as it relates to 
Medicaid disproportionate share payment, I think the timing is 
important. We would like to make sure that we see that the 
patients actually who are eligible get enrolled and that they 
are covered and that our uninsured costs go down before there 
is any change in disproportionate share payments. So we applaud 
your version of the draft bill regarding DSH. We know that many 
patients who we hope to get enrolled are the most difficult to 
enroll, for example, homeless for whom we did over $100 million 
of care last year, the chronically mentally ill, illiteracy. 
These patients have been difficult to enroll in Medicaid. So I 
think expanding Medicaid is terrific. I don't know that 
immediately it will reduce our need for other coverage. 
Ultimately it should and I think we have seen in Massachusetts 
that reduction of DSH at the front end has had negative effect 
on the two principal safety-net institutions. So I think the 
expansion of coverage that you are planning will reduce the 
amount of uninsured care over time and we need to deal with 
that sequentially as regards DSH.
    Mr. Pallone. Thank you.
    Mr. Deal.
    Mr. Deal. Thank you.
    I am going to ask for a yes or no answer from a couple of 
you on this first question. We just heard the preceding panel 
member who is chairman of MedPAC say that he felt that Medicare 
reimbursements were adequate, and I would ask if you concur 
with that. Dr. Williamson?
    Dr. Williamson. No.
    Mr. Deal. Dr. Ulrich?
    Dr. Ulrich. No.
    Mr. Deal. Dr. Wright?
    Dr. Wright. No.
    Mr. Deal. Dr. Epperly, I am going to ask you that question 
in the context of the current reimbursements under Medicare, 
not counting the bonuses that are proposed in this legislation. 
Do you consider the current Medicare reimbursements to be 
adequate?
    Dr. Epperly. No, sir, I don't.
    Mr. Deal. Have you, Dr. Epperly, as a result of that 
inadequacy seen many of the members of your organization not 
take Medicare patients?
    Dr. Epperly. Yes, sir, I have.
    Mr. Deal. Dr. Williamson, first of all, let me acknowledge 
that he is the president of my Georgia Medical Association and 
I am pleased to have him here. I made those statements 
yesterday in your absence as we began these things yesterday. 
Dr. Williamson, let me ask you what you think the impact would 
be for the public option plan to adopt the Medicare 
reimbursement plan as its model. How would that impact the 
delivery of health care under the public option plan and also 
as it then migrates, in my opinion, to the private insurance 
market?
    Dr. Williamson. I think it would have a very adverse impact 
on access for patients and on the delivery of quality medical 
care. Right now, access for Medicare patients I think is really 
a house of cards. A lot of doctors are there simply by inertia, 
and surveys that have been done in Georgia amongst practicing 
physicians show that a large percentage of doctors plan on 
dropping Medicare in the near future, and I think that is just 
basically a train coming down the track, and I think any system 
that is modeled on that premise is really going to fail in the 
short run, not the long run.
    Mr. Deal. The doctor-patient relationship has been really 
the cornerstone of the importance of our health care delivery 
system that makes it work. I would ask you, Dr. Williamson, in 
light of this draft legislation, in particular the comparative 
effectiveness portion of it, how do you see that potentially 
impacting that doctor-patient relationship?
    Dr. Williamson. I think it is going to push us farther and 
farther away from it, which is really I think the opposite 
direction that we need to be going. I have serious concerns 
that bundling payments is going to drive a wedge between 
patients and their physicians. I know that in some clinics that 
we have looked at as examples, that type of environment works 
but those are rare and I think they are different than the 
general practice of medicine across the country and they have a 
different patient population in some cases. I have grave 
concerns about comparative effectiveness as well. I think this 
would essentially give the federal government the ability to 
practice medicine, and I know that is a strong statement but 
let me say this. Scientific research is not new. It has always 
been done and it has always been the basis of medical learning 
and medical treatment but the art of medicine is taking this 
science, these large studies and applying it to an individual 
patient. When you try to treat the individual from the 30,000-
foot level, it is very difficult, and I am afraid that this 
would drastically diminish our choice of options for our 
patients. I can tell you that I am well aware as a neurologist 
of the importance of the last 20 years in pharmaceutical 
research. I have a lot of options for my patients now that 
weren't available before. And some of these things are found 
quite by accident, and we take them and we apply them and they 
may be off-label drugs and that sort of thing and they may even 
be therapies that have not been shown to work in large 
randomized controlled trials that take many years and millions 
of dollars to accomplish, and if we are limited by that we are 
going to have a lot of therapies taken off the table for our 
patients. And I will also tell you that I think it is a bit of 
a conflict of interest to have the government deciding what is 
valuable to patients because they are serving as the largest 
payer. I think that the physician and the patient ought to be 
able to decide in the context of private contracting what is 
value and what is appropriate care.
    Mr. Deal. Thank you.
    Mr. Roberts, you have alluded to the issue with AMP. As you 
know earlier this year, I introduced an amendment that I think 
was more appropriately dealing with this federal upper limit 
for reimbursement of going to 300 percent of the volume 
weighted average and also included a minimum prescribing fee 
for pharmacists, or dispensing fee, I should say, for 
pharmacists. Which of those options do you prefer, what I 
offered earlier this year versus what is in this bill?
    Mr. Roberts. Well, I think, Congressman Deal, that your--
the challenge that we have is that we really don't know what 
this benchmark is so there are changes made in the current 
version that redefine the benchmark in a way that will make it 
much better than what it is but the reality of what you are 
proposing and having a minimum dispensing fee I think is 
absolutely critical. The challenge that we have is that, you 
know, the benchmark is just meant to get us to even, to break 
even on the cost of the product. But the reality is, the States 
set the dispensing fees and the dispensing fees are all over 
the place from one State to another. And so unless the federal 
government takes some action to say, you know, that our costs 
of dispensing and a small profit are available to the pharmacy, 
it is going to be very difficult to have pharmacies remain 
viable.
    Mr. Deal. Mr. Chairman, I take that as an endorsement of my 
approach and I will yield back.
    Mr. Pallone. Thank you.
    Our vice chair, Mrs. Capps.
    Mrs. Capps. Thank you, Mr. Chairman, and I want to thank 
again all of the panelists for appearing today. It was a very 
interesting presentation that each of you made, a lot of 
linking, which I think is really important for us to have a 
part of this discussion.
    Of course, Dr. White, I want to single you out and thank 
you for being here today to represent the voice of America's 
nurses who are so important every day in delivery of health 
care but also in understanding what this crisis is all about. I 
was very pleased to hear that the American Nurses Association 
has endorsed a public plan option. I also support this option 
and the one that we are developing in this legislation and want 
to hear your perspective a bit more as a nurse on why this is 
so essential because it is one of the crucial parts of the 
choice that people are going to make whether or not they 
support this reform legislation. I will ask you to do it within 
this framework. I often speak about the role that nurses have 
not only as providers of health care and delivering service but 
we are also patient advocates, and would you talk about maybe 
the reason you endorse as ANA the public plan option and why 
you feel it is best for patients and perhaps are encouraging 
patients to advocate for this as well as the choice, to have 
this choice made available?
    Ms. White. Thank you, Mrs. Capps. I am happy to answer that 
question because I do think it is extremely important, the 
American Nurses Association endorsing a public option plan 
because, as you said, our role is direct care. We are there 24/
7, 24 hours a day, 7 days a week, 365, you know, depending on 
how long a patient is in there. We don't like to think it is 
that long. But we see patients and families and how they are 
dealing with the catastrophic impact of illness whether it is 
an episode, a single, acute that affects the patient and their 
family or whether it is a long-term kind of chronic condition 
that, you know, includes, you know, many admissions or many 
returns. And not being able to have a choice of insurance I 
think is key and unfortunately we have seen employer plans 
rising, the costs of those to patients rising greater than 
wages over the last several years, and so patients are looking 
for other ways of paying for their health care insurance and 
sometimes those plans may not be exactly what they think they 
are or they may have surprises so certainly a public plan that 
includes some type of defined or essential benefit package that 
the patient, the family could be sure will be there when they 
need it I think it is extremely important.
    Mrs. Capps. Let me follow this by another aspect of our 
reform legislation. One of the ways--Dr. Epperly mentioned this 
but he wasn't the only one on the panel, which was interesting, 
who is stressing now on primary care as one of the ways we can 
lower health costs and the ways he discussed on how we can 
improve our primary care workforce and there are many advanced 
practice nurses, nurse practitioners and others who can and do 
serve as primary care providers and this bill ensures that 
nurse practitioners can be the lead providers in medical home 
models and increases reimbursements, for example, for certified 
nurse midwives. Can you discuss this a little bit? You 
mentioned one bill that I coauthored on nurse-managed clinics 
but that is not the only avenue, and you might mention a few 
others for the record.
    Ms. White. Absolutely. Obviously the nurse-managed clinics 
is an extremely important way for many vulnerable populations, 
inner city, rural areas that get primary care and other--even 
other follow-up care in those areas, and as far as nurse 
practitioners, as our advance practice nurses functioning 
within the primary care medical home and being able to lead 
those teams, we have seen in the demonstration projects 
throughout the country that nurse practitioners have been 
paneled. They do function to their scope of practice in the 
different states and the different demonstration projects and 
have been able to lead their panel of patients and provide that 
primary care. I think it is extremely important when we are 
talking about the shortage of primary care that all providers 
be able to be used to the fullest extent of their scope that 
they can provide the care.
    Mrs. Capps. Thank you very much. I will yield back.
    Mr. Pallone. The gentleman from Indiana, Mr. Buyer.
    Mr. Buyer. The challenge we have with a panel this large is 
to try to get our questions in, so if you can take out a pen 
and pad, I am going to rip through some questions. They won't 
apply to all of you. First I am going to go to Mr. Yarwood. 
When you stated the provisions in the draft bill would cut 
Medicare reimbursement rates to skilled nursing facilities by 
$1.05 billion in fiscal year 2010 alone and ultimately $18 
billion from skilled nursing care over 10 years, I would like 
to know whether you have calculated the number of jobs that 
would be lost due to these cuts.
    The next question I have would go to Dr. Ulrich. The draft 
bill provides that physicians who treat both Medicare and the 
public plan, patients would receive Medicare plus 5 percent for 
treating their public plan, really the government plan, 
patients for the first 3 years. What is the, quote, magic 
number, end quote, regarding the percent of Medicare that it 
would take to keep you whole? Is it Medicare plus 10, plus 12, 
plus 13, plus 14?
    The other question I have for Blue Cross Blue Shield, what 
are the advantages that the government plan would have over the 
private insurers? What about State premium taxes, State 
solvency regulations, State benefit mandate requirements?
    And the last question I have, I am going to go right down 
the line with all of you. Medical liability reform that 
restricts excess compensatory awards, limits on punitive 
damages and attorney fees, should this be part of the public 
plan option? Let us go right down the line. Dr. Epperly?
    Dr. Epperly. Yes, we believe that----
    Mr. Buyer. Dr. Williamson?
    Dr. Williamson. Absolutely.
    Mr. Buyer. Dr. Ulrich?
    Dr. Ulrich. Yes.
    Mr. Buyer. Dr. Wright?
    Dr. Wright. Yes.
    Mr. Buyer. Dr. White?
    Ms. White. Yes.
    Dr. Gabow. Yes.
    Mr. Hawkins. We have FTCA coverage so I can't really 
comment.
    Mr. Buyer. All right. One equivocator.
    Mr. Roberts. Yes.
    Mr. Hawkins. Yes.
    Ms. Fox. Yes.
    Mr. Buyer. All but one except Mr. Hawkins testified in the 
affirmative that it should be included. The other is, would 
everyone on this panel agree that individual liberty is a 
cornerstone of our society as an inalienable right? Would 
everyone on this panel agree? OK. Mr. Hawkins, are you in?
    Mr. Hawkins. Yes, I am in.
    Mr. Buyer. He is in. All right. Awesome. Now, an individual 
right, if in this scheme we are moving people into the 
government plan, what about an individual's right to contract 
with a physician of their choice? Should an individual in 
America have the right to contract with an individual doctor of 
their choice? Yes or no. Dr. Epperly?
    Dr. Epperly. Yes.
    Mr. Buyer. Oh, let me--without penalty from their 
government. Dr. Epperly?
    Dr. Epperly. Yes.
    Mr. Buyer. Dr. Williamson?
    Dr. Williamson. Yes.
    Dr. Ulrich. Yes.
    Dr. Wright. Yes.
    Ms. White. Individual provider, yes.
    Mr. Buyer. Thatta girl.
    Dr. Gabow. Yes.
    Mr. Hawkins. With their own money, yes.
    Mr. Buyer. Thatta boy.
    Mr. Roberts. Yes.
    Mr. Hawkins. Yes.
    Mr. Yarwood. Yes.
    Ms. Fox. Yes.
    Mr. Buyer. We are on a roll. Now, does everyone agree that 
in the capital economic system that we have, even though we may 
have a public option plan, that the marketplace should be able 
to create some type of an instrument that would be a 
supplement, a potential medical insurance supplement plan? 
Should that be some type of an option that the marketplace 
could create? Dr. Epperly?
    Dr. Epperly. Yes.
    Dr. Williamson. Yes.
    Dr. Ulrich. Yes.
    Dr. Wright. Yes.
    Ms. White. I am not sure.
    Mr. Buyer. OK. Dr. White is an unsure.
    Dr. Gabow. No.
    Mr. Buyer. A no.
    Mr. Hawkins. I am not sure I understand----
    Mr. Buyer. I am not sure.
    Mr. Roberts. I am not sure I do either.
    Mr. Buyer. Two I am not----
    Mr. Yarwood. I am number three not sure.
    Ms. Fox. Well, we are hoping that there is no public plan.
    Mr. Buyer. Pardon?
    Ms. Fox. We are hopeful there will be no public plan in the 
program.
    Mr. Buyer. All right. But if there is a public plan, should 
individuals in the marketplace be able to create supplemental 
coverage?
    Ms. Fox. Yes.
    Mr. Buyer. Yes?
    Ms. Fox. Yes, like Medicare.
    Mr. Buyer. All right. Thank you. Now I will rest and allow 
those individuals to answer the questions that I had asked.
    Dr. Ulrich. The answer is Medicare plus 100, and I can 
expound as to why if you would prefer. I think in my testimony 
I cited the fact that we currently in Wisconsin from the 
private sector get anywhere from 180 to 280 percent of Medicare 
in payment. Medicine is changing, and this is what is really 
interesting, is that we have gone from kind of being a cottage 
industry to now much more high tech. Our costs are very 
different than what Medicare allocates to us now. We now 
employ, for example, systems engineers. Why? Trying to 
understand efficiency of work flow. We also in our clinic and 
others as well employ many people in information technology. We 
developed our own electronic medical record. We have close to 
350 employees now, software engineers, et cetera. Our cost 
structure has shifted dramatically from what the traditional 
concept of what medical practice is, you know, a nurse 
practitioner, physician, a nurse, a technician, et cetera, and 
so the costs keep changing. The other thing I would ask this 
committee to keep in mind is that medicine as an entity is an 
ever-evolving one in the sense that we have come from----
    Mrs. Christensen [presiding]. Dr. Ulrich, could you----
    Dr. Ulrich. Yes?
    Mrs. Christensen. We are way over time. Could you wrap up 
your response, please?
    Dr. Ulrich. I will just stop there, if my initial answer 
satisfied you.
    Mr. Buyer. Mr. Yarwood, do you have an answer?
    Mr. Yarwood. Thirty thousand jobs.
    Mr. Buyer. Thirty thousand jobs would be lost?
    Mr. Yarwood. Over 10 years, yes.
    Mrs. Christensen. Thank you. The gentleman's time has 
expired. The chair now recognizes Ms. Castor for 5 minutes.
    Ms. Castor. Thank you, Madam Chair, very much, and I would 
like to return to the workforce issues.
    This bill rightfully targets workforce incentives because 
we must bolster the primary care workforce especially. Fifty 
years ago, half of the doctors in America practiced family 
medicine and pediatrics. Today, 63 percent are specialists and 
only 37 percent are family doctors, and it is those family 
doctors and the nurses on the front lines and the pediatricians 
that really help us contain costs over time. I do not know what 
I would do if I did not have the ability to call the nurse in 
my daughter's pediatrician's office and ask a question and they 
have had a consistent medical home over time and yet millions 
of American families do not have that type of medical home and 
relationship with their primary care providers.
    So I think our bill does take important steps to bolster 
primary care workforce but one place that I think it falls 
short, and I would be very interested in your opinions, is that 
we are not increasing the residency slots for our medical 
school graduates, these doctors in training. The discussion 
draft provides a redistribution of unused residency slots to 
emphasize primary care, which is a good first step because we 
are going to hopefully send them to community health centers 
and other hospitals in need and other communities in need. But 
we have got to enact the second step, the complementary step, 
to even out the residency slots because, for example, in my 
home State of Florida, the fourth largest State in the country, 
we rank 44th in the number of residency slots and most folks do 
not understand that those slots are governed by an old, 
outdated, arbitrary formula that assigned distribution many 
years ago and has not changed, even though the population of 
the country has shifted. So I would like to know, do you 
agree--Dr. Epperly, you might be the one most in tune but I 
think many of you would have an opinion on that. Do you agree 
we need to alter the residency in toto? And then are there 
sections in the bill--the sections in the bill related to 
scholarships and loan repayments, are they adequate? Are we 
doing enough?
    Dr. Epperly. Yes, ma'am. Can I expand for just a second?
    Ms. Castor. Yes.
    Dr. Epperly. In my day job, I am a residency program 
director of a family medicine program in Boise, Idaho, and you 
are right on. In fact, the workforce numbers are about 70/30 
subspecialists to generalists. We must increase residency 
training, especially for primary care, and what are we trying 
to build, what system are we after. We think there should be 
some regulation of what kind of physicians medical schools are 
producing. It needs to meet community needs and so we are in 
agreement with some sort of workforce policy center to kind of 
take a look at this and what it is we are trying to accomplish. 
I totally agree with you in terms of scholarships and loan 
repayment. Scholarships on the front end will be more effective 
than loan repayment on the back end because it helps shape the 
types of physicians you are trying to train.
    Ms. Castor. Does anyone else want to comment quickly? OK. 
Then I will move on.
    Ms. Fox, thank you so much. It is great to hear that Blue 
Cross is supportive of health care reform. What I wanted to 
share with you, I had a great meeting last week with the 
Florida CEO, president and CEO of Blue Cross, and you all are a 
very important provider in the State of Florida. You have about 
32 percent of the market share in the State of Florida. Four 
million Floridians are enrolled in Blue Cross and depend on you 
all every day. It was interesting that the CEO from Florida had 
a slightly different take and spoke much more favorably of the 
public option because while Blue Cross in Florida has 30 
percent of the market share and over 4 million folks enrolled, 
you know, in Florida we have 5.8 million people who do not have 
access to health insurance because it is so expensive, and I 
think that in the discussion we had, he saw it as an 
opportunity, that you all are so effective that you wouldn't 
have any trouble competing against a startup public option, and 
I thought we had a great discussion and exchange and I was 
heartened to hear that maybe it is not--maybe while big Blue 
Cross has a certain position, the folks on the ground in my 
State are not daunted by the challenge ahead.
    Ms. Fox. Well, I would respond that I think people are 
looking at, can you create a level playing field and I think it 
is very difficult to imagine how you can. I mean, I look at the 
House draft bill, I just see huge advantages for the government 
plan ranging from, you know, big advantages in the payment 
levels to lawsuits to covering different--the government plan 
would cover a lot fewer benefits than private plans would be 
required to do. There is just a long list. For example, if the 
government plan didn't estimate their premiums correctly, would 
the government step and----
    Ms. Castor. But where do these 5, almost 6 million 
residents of my State go now? How do they--we can't afford--
America can't pay for all of them to go into subsidized 
Medicaid. We have got to provide a level playing field and real 
opportunity for them to access affordable care.
    Ms. Fox. We agree we need to cover everyone and we are 
recommending covering everyone in poverty under Medicaid and 
then above that having subsidies as you do in your bill for 
private insurance to help people afford coverage. We think that 
is absolutely critical. You know, I have been doing health care 
issues for over 25 years, and it used to be that everybody 
believed that if you have individual mandate, employer mandate, 
alliances, insurance reforms, that really would cover everyone. 
It has only been the past year----
    Mrs. Christensen. Ms. Fox.
    Ms. Fox. --we talked about a public plan. We think it is 
totally unnecessary and very problematic.
    Mrs. Christensen. Thank you. The gentlelady's time has 
expired. I now recognize Mr. Burgess for 5 minutes.
    Mr. Burgess. Thank you, Madam Chairman.
    Ms. Fox, let us continue on that and maybe if I could, I 
think Mr. Buyer was asking a question or you were answering a 
question when time ran out and maybe we could just get the 
answer to the question that Mr. Buyer posed about the 
advantages of a public plan would have over private insurance 
in premium taxes, State solvency regulations, State benefit 
mandates.
    Ms. Fox. Yes. I mean, private plans have to pay a wide 
range of premium taxes, assessments, federal taxes. The 
government would be exempt from that. We have actually prepared 
a little chart that we would love to submit that actually walks 
through what are the rules private plans have to abide by.
    Mr. Burgess. If you will suspend for a moment, I would ask 
unanimous consent that that chart be made available to the 
members and made part of the record.
    Ms. Fox. And raises questions, would the public plan abide 
by that, and when we look at the draft bill, we see there is a 
huge unlevel playing field where the government would have so 
many advantages that you could see why people will estimate 
that millions of people will leave private coverage that they 
like today and go into the public plan.
    Mr. Burgess. OK. Great. I appreciate that answer very much.
    Dr. Ulrich, let me just address you for a second. I really 
appreciate--well, I appreciate all of you being here. I know 
that many of you are taking time off of your private individual 
practices and it is with great expense and inconvenience to 
your families, and we have had a long day and appreciate your 
willingness to be part of the panel here. The physician group 
practice demonstration project that you referenced at your 
clinic, I am somewhat familiar with that. I think that does 
hold a lot of promise. In fact, you may have heard me question 
Mr. Hackbarth from MedPAC about the feasibility of using the 
Federal Tort Claims Act for Medicare providers under a 
physician group practice model, the accountable care model if 
you comport with all of the requirements, disease management, 
care coordination, the IT, the e-prescribing, if you do all of 
those things, getting some relief from liability under the 
Federal Tort Claims Act. Do you think that is--is that a 
reasonable thing to look at?
    Dr. Ulrich. Absolutely.
    Mr. Burgess. Thank you. I appreciate your brevity. Let me 
ask you this, since we are in agreement. One of the things 
about the physician group practice demonstration project was 
you were going to actually benefit financially by doing things 
better, faster, cheaper, smarter, and in fact there are some 
great lessons for us that have come out of that, those 
management techniques. But there is a barrier to entry. Do you 
think the bar to that has been set too high? You have got to 
make a lot of initial investment when you get into that and 
then your return for your doctors, for the people in your 
practice is a little slow in coming. Is that not correct?
    Dr. Ulrich. Dr. Burgess, you show keen insight here into 
this, and if I can just take a second to explain this?
    Mr. Burgess. Sure.
    Dr. Ulrich. As part of the group demonstration project, 
what we are finding is that it is not just trying to strive for 
quality outcomes. There are operational changes that you need 
to make in how you deliver care. For example, we have 
consolidated all of our anticoagulation patients into one 
entity. Rather than being in each physician's practice, we now 
share that coordinated care under one entity, and what we found 
is that our capacity to have bleeding times, for example, are 
much better within the therapeutic range. We also are 
consolidating care of congestive heart failure rather than 
being in a particular individual physician's office, whether it 
be a cardiologist or a primary care physician into a congestive 
heart failure clinic. Physicians craft the criteria we want. 
Our nurses watch those. We are proactive in working with the 
patients. The problem with doing all that is no one pays us, 
you know, to undertake those operational changes at first. What 
we are hoping and why we partnered with the federal government 
through the CMS PGP project is that we are trying to prove that 
yes, by undertaking these, ultimately there are cost savings. 
Lastly, I would just make the point that we are just beginning 
the process of understanding the cost of care in chronic 
illness over time. We understand what the costs are to provide 
care on an individual visit but not over time.
    Mr. Burgess. One of the things that concerns me about our 
approach to things and what little I know of the great 
successes you have shown, for example, like bringing a 
hospitalized CHF patient back to the doctor's office within 5 
days, not just you make an appointment in 2 weeks, you get that 
patient back to the office in 5 days and you really reduce the 
re-hospitalization rate significantly and yet you have got CMS 
now writing a rule that says well, if that is the case and you 
can do that, we are just going to pay for one hospitalization 
every 30 days and that will cut our costs down. It is 
absolutely backward way of looking at what the data that you 
all are generating, and instead of building on your successes 
in fact we are going to make things punitive then for Dr. 
Williamson in Georgia who may have an entirely different type 
of practice. Again, that is one of the things that concerns me 
about this. Do you have a concept? You mentioned about the rate 
of reimbursement on the Medicare side. What would that 
multiplier have to be in your accountable care organization or 
physician group practice? What would that Medicare multiplier 
have to be in a public plan?
    Dr. Ulrich. We would say Medicare plus 100.
    Mr. Burgess. Medicare plus 100 percent?
    Dr. Ulrich. Yes.
    Mr. Burgess. So double what the Medicare rates are?
    Dr. Ulrich. Exactly.
    Mr. Burgess. That is fairly significant.
    Dr. Ulrich. That is significant, but it is also a realistic 
significantly----
    Mr. Burgess. And do you have data to back that up that you 
can share with the committee?
    Dr. Ulrich. I would be happy to provide information to you 
in written form relative to that, yes.
    Mr. Burgess. That would be tremendous.
    Dr. Williamson, in words of one syllable, we heard Glenn 
Hackbarth say that no doctors are not seeing Medicare patients 
now because of the reimbursement rate. Is that your sense? Do 
you think doctors are restricting their practice because of the 
reimbursement rates in Medicare?
    Dr. Williamson. Yes.
    Mr. Burgess. Thank you.
    Mrs. Christensen. Thank you. The gentleman's time has 
expired. I now recognize myself for 5 minutes.
    Let me just welcome everyone. It is great to have such a 
diverse panel of witnesses here and we thank you for all of the 
good work that all of you have been doing in this dysfunctional 
system that really doesn't always give you the kind of support 
that you need, and I want to particularly welcome Dr. Epperly, 
president of the American Academy of Family Physicians. I want 
to direct my first question to you, Dr. Epperly. In meetings, 
for example, with the tri-caucus, we are on record as 
supporting a public plan, and I do support a public plan but 
also a public plan that is linked to Medicare. I have raised 
concerns about that in our meetings and I would like you to 
elaborate on your concerns about linking the public plan to 
Medicare.
    Dr. Epperly. Yes, ma'am. Thank you. First, we are 
definitely in support of a public plan option but we do have a 
couple caveats. One of them is linked to Medicare, just as you 
are saying. We recognize there is going to be a huge 
infrastructure cost in getting this thing up and running so our 
position is that it can be the Medicare rate for the first 2 
years but with a date certain then to elevate that. More of 
just Medicare rates won't cut it for the physicians across 
America. It is already a problem. But we recognize that there 
is going to be a transition period. We recognize that 
flexibility. So what we would say is yes, we are in favor of a 
public plan. Medicare rates could be what it would be aimed at 
for the first 2 years but by a date certain that has to 
elevate.
    Mrs. Christensen. Thank you. And I guess I can't ask 
everyone this question, so Dr. Epperly, Dr. Gabow and Mr. 
Hawkins, you have heard reference to bundling of payments by 
Mr. Hackbarth of MedPAC and I wanted to know if you are in 
support of the proposal to bundle payments to providers. Dr. 
Epperly?
    Dr. Epperly. Yes, ma'am. We are in favor of bundling in 
terms of a team approach. We do have concerns that we would 
want to make sure that primary care and the patient-centered 
medical home is a very important part of that bundling was not 
denigrated nor belittled into its importance. For instance, 
with the heart failure example, we are talking about heart 
failure patients and readmissions. Let us prevent it in the 
first place. So with a bundling model, which looks at already 
this has occurred, it is in the hospital, how do we pay for 
this, why don't we take a better approach and look at what it 
takes to prevent that in the first place. So therefore the 
patient-centered medical home, primary care is critical in 
that. Bundling could be a very interesting option if the 
primary care is reincorporated into that in a big way.
    Mrs. Christensen. Dr. Gabow?
    Dr. Gabow. As an integrated system that deploys physicians, 
we favor moving away from fee for service to a more global 
payment, and we would favor the ultimate bundle, capitation, 
and think that capitation or more global bundling would have 
less administrative costs than if you bundle small things. I 
would encourage it to be global but we favor it given a big, 
integrated system.
    Mr. Hawkins. Congresswoman, or----
    Mrs. Christensen. Would it affect----
    Mr. Hawkins. Madam Chair----
    Mrs. Christensen. Would it affect community health centers?
    Mr. Hawkins. Really, there are some important points to 
make here. On today's panel, we are very fortunate to be joined 
by Dr. Epperly, who runs a family medicine residency program, 
Dr. Ulrich, who runs the Marshfield Clinic, and Dr. Gabow, who 
runs Denver Health, unique and especially with the last two, 
fully integrated health care systems. What may not be known 
generally but should be is that all three are community health 
centers or have community health centers embedded in them. As 
such, two examples, Denver Health and Marshfield Clinic, are 
good examples of integrated health systems that include 
community health centers, but I am sure, as Dr. Gabow and Dr. 
Ulrich would agree, the primary care component, the very issue 
that Dr. Epperly expressed concern, appropriate concern over, 
is identified and, I am not going to say separate but it is 
able to function on a sort of co-equal basis with the specialty 
and inpatient care components of their institutions. To the 
extent that that is done, I think that is what Dr. Epperly was 
relating to when he said primary care needs to be recognized 
and appropriately integrated. We would agree. The notion of 
integrated care systems, accountable care organizations and the 
like and rewarding results is something that we all absolutely 
support. What should not be lost, however, in the integration 
of care, the vertical integration of care across primary, 
secondary, tertiary care is the small ambulatory care practice, 
be it independent practice, private practice physicians, health 
centers or other forms of ambulatory care within the context of 
a large, multilevel institution like Denver Health, and I am 
sure Dr. Gabow would agree with that.
    Mrs. Christensen. Thank you. To be a good example, my time 
is up but I want to also without objection accept the chart 
from Blue Cross Blue Shield into the record that was brought to 
us by Dr. Burgess.
    [The information appears at the conclusion of the hearing.]
    Mrs. Christensen. The Chair now recognizes Dr. Gingrey for 
5 minutes.
    Mr. Gingrey. Madam Chair, thank you so much. I want to 
direct my first questioning to my colleague from Georgia, 
Gainesville, Georgia, and the president of the Medical 
Association of Georgia. Glad to see you, Dr. Williamson. And I 
have a series of questions that I would like to ask you. First 
off, do you support a government-run plan?
    Dr. Williamson. No, the Medical Association of Georgia does 
not support a public option or a government-run plan in 
addition to the public plans that already exist, Medicare and 
Medicaid.
    Mr. Gingrey. Right. We are talking about the government 
option plan that would be competing with the private insurance 
plans that----
    Dr. Williamson. Right. We do not support a public option.
    Mr. Gingrey. What would a government-run health plan that I 
just described do to your ability and those of your colleagues 
to treat your patients? What do you fear the most about that 
type of a government-run option?
    Dr. Williamson. My biggest concern is that it like Medicare 
will become the only option, and I think over time I think the 
plan as it is set up in the discussion draft already has the 
framework for that, for basically all private plans to have to 
conform to certain rules over time, and my fear, and I think it 
is a very real concern, is that over time other plans will 
disappear and the public option will become the only option and 
we will be left with a single-payer system which I think if you 
look at what has happened across the planet, single-payer 
systems basically save money by rationing care and I see that 
as an inevitable consequence of the creation of a public 
option, no matter how benign it looks at first glance.
    Mr. Gingrey. Well, that was going to be my next question. 
You pretty much answered my question, which would be, Dr. 
Williamson, do you support a government-run health care system 
with the ability to ration care based on cost?
    Dr. Williamson. I absolutely do not support that. I think 
that care decisions should be made on an individual basis when 
the patient sits down in the physician's office and I don't 
think that the government can substitute for the training that 
a physician has and the opportunity that a physician has to 
look the patient in the eye and decide what that patient needs.
    Mr. Gingrey. Let us see, I am going to skip over number 
four. My fifth question, fourth actually, we have heard 
testimony in this committee recently regarding the 
Massachusetts health care system and the fact that those with 
public health insurance in the State are twice as likely as 
those who choose private health insurance to be turned away 
from a desired physician. As a physician, practicing physician, 
what are your thoughts on the reasons behind that kind of 
disparity in access between a public and a private insurance 
plan?
    Dr. Williamson. Well, public plans in general, and I am 
speaking in general now, are associated with quite a lot of 
paperwork. They are associated with the hand of government and, 
you know, right now in Georgia we are looking at these recovery 
auditor contractors that are moving across the Nation and 
coming back and recouping money, saying that you coded 
something wrong 20 years ago or 10 years ago and coming after 
those dollars. These sorts of things that the federal 
government has the power to do makes dealing with them as a 
payer a very daunting prospect, and traditionally, government 
payers have been at the bottom of the barrel in terms of 
covering costs and so physicians feel like they can't deliver 
to patients what they have been trained to do and the downsides 
associated with the government as a payer are daunting, and, 
you know, I recently had the opportunity to go to the AMA and 
one of my colleagues from Massachusetts stood and spoke loudly 
in support of a national public option, but I believe that the 
folks from Massachusetts probably want a public option 
nationally so they don't have to pay for their own anymore.
    Mr. Gingrey. Well, Doctor, I appreciated that response and 
the reason I asked you the question is because what we are 
talking about here is something very, very similar to the 
Massachusetts model, and we have even heard suggestions from 
the majority that it may be that physicians who are treating 
people within this exchange would absolutely have to accept the 
public option plan or they would be ruled ineligible to 
participate in Medicare or Medicaid. So they would have their 
arm twisted behind their back and have no choice, which is 
pretty frightening.
    I have got just a little bit of time left and I wanted to 
go to Dr. Ulrich and also Dr. Gabow if we have a chance. If 
time permits, Madam Chair, I hope you will let me get this in. 
If health reform were to include a requirement that all 
Americans purchase health insurance, do you think that 
hospitals would need continued federal funding to offset cases 
of uncompensated or charity care and why? And basically I am 
talking about DSH hospitals and the suggestion that we are 
going to save money by eliminating all DSH payments when we 
pass this bill.
    Dr. Ulrich. Well, my sense is, the answer to that is yes, 
you would still need to have some supplemental dollars rolling 
in, simply because the reality is that there still are things 
as bad debt, you know, people who need care get it and then 
can't pay for it because of competing priorities of their own 
pocketbook and plus the fact that, you know, we really haven't 
gotten to the point of having fair practice expense 
accountability within the remunerative system yet and that is 
absolutely critical to any kind of a public plan. If we are 
going to go that way, then we have to have fair practice 
expenses covered before we can go forward.
    Mr. Gingrey. That would be a pretty painful pay-for for 
your----
    Dr. Ulrich. That is correct.
    Mr. Gingrey. Dr. Gabow?
    Mr. Gabow. My understanding, Congressman, is that this bill 
does not cut disproportionate share payments and I think that 
that will be necessary to be sustained at least in the 
foreseeable future because we know that many of the patients 
that we serve, the homeless, the chronically mentally ill, are 
traditionally difficult to enroll and so I think if we got to 
full coverage, certainly we may be able to decrease it but I 
doubt that it will ever go away. So we support the preservation 
of DSH as outlined in the draft bill.
    Mr. Gingrey. You support the elimination of DSH payment? Is 
that what you said?
    Dr. Gabow. We support the maintenance of DSH payments----
    Mr. Gingrey. Oh, absolutely, as I expected you would, Dr. 
Gabow, and as Dr. Ulrich and hospitals all across the 11th 
Congressional district of Georgia support the continuation of 
those DSH payments. Thank you for your patience, Madam Chair. I 
yield back.
    Mrs. Christensen. Thank you. The Chair now recognizes 
Congresswoman Baldwin for 5 minutes.
    Ms. Baldwin. Thank you, Madam Chairwoman.
    I want to welcome a fellow Wisconsinite, Dr. Ulrich. I am 
pleased to have you on the panel. I wanted to probe into an 
area--I stepped out for a little while so I don't know if 
anyone else has raised this, but in your testimony on page 7, 
you talk a little bit about care issues at the end of life and 
make some recommendations, and it is one of those very 
challenging topics because we certainly hear from much research 
that much of our health care dollar goes to treat people at 
that stage of their lives. But that is one thing much more 
disturbingly that that often doesn't align with the wishes of 
the person being treated. Could you elaborate a little bit more 
about both your recommendations to this committee in that arena 
but also the practices at the Marshfield Clinic, what you have 
implemented in this regard?
    Dr. Ulrich. Yes. Thank you, Congresswoman. I appreciate the 
question. At Marshfield Clinic, we do have in conjunction with 
St. Joseph's Hospital, who is our hospital partner, developed 
palliative care. We have palliative care fellowships where we 
train young physicians who are interested in that. We work with 
families, the patient, obviously, et cetera, really try to do 
two things. One, there is a humanistic process that occurs 
under palliative care and that is taking care of people in 
comfortable surroundings in their last few weeks or days of 
life, and that really is a throwback, if you will, to the way 
medicine used to be practiced before we were very fancy with 
technology, et cetera, and it is not something that we should 
ever forget. It is something that we need to continue. So we 
are committed to doing that and will, and I think most medical 
organizations throughout the country would be in sync with that 
kind of concept.
    The question you raise about the cost of care at the end of 
life is obviously an important one, and if you think about the 
cost of medical care in our country, there are really two main 
things we need to understand. One, as you point out, the costs 
escalate rather dramatically as life is ebbing away from us 
because it is an emotional decision for families and patients 
to keep mom or dad or grandma or grandpa alive for a little 
while longer, et cetera. It is very difficult for families to 
say it is time to say goodbye to someone. So we continue then 
to provide medical care under those very difficult 
circumstances. There is a cost to providing that care. The 
other thing that I would like the subcommittee to understand is 
that not all costs within the system are the same so that we 
know from the Commonwealth Fund, for example, that really it is 
only about 20 percent of patients that are costing about 75 to 
80 percent of care in this country so that if we can manage 
these chronic illnesses and in particular patients who have 
more than one or two chronic illnesses concomitantly, that is 
where the cost savings will come as we get better in managing 
folks with complicated chronic illnesses who concurrently are 
suffering from several of them at the same time.
    Ms. Baldwin. Your testimony specifically points to things 
that we could do earlier in life to talk about having people 
think about advanced directives or other documents. I would 
offer you to elaborate on that, but also I see some other 
nodding heads and I would open this up to any of the panelists 
who would like to make a contribution on this point.
    Dr. Epperly. Thank you. What Dr. Ulrich just described is 
the value of primary care. It is having that relationship of 
trust with people over time in which you can have that type of 
dialog, and I would say that those sorts of decisions are so 
important, so critical to the family as a whole and many of 
those decisions can take place outside of a hospital in terms 
of where those final days and weeks are. In fact, I would 
submit that most people would like to have a very dignified 
death in the place where they can be surrounded by most of 
their loved ones. And so again, we return right squarely back 
to what primary care brings to the system. It is what Dr. 
Ulrich said. It used to be part of medicine. That is kind of 
gone now. We need to re-create that kind of system. It is in 
that system that savings are made, quality goes up, cost goes 
down.
    Ms. Baldwin. Please, Dr. Wright.
    Dr. Wright. Yes. I just would like to agree that what needs 
to take place and is often missing is the conversation, which 
begins with the relationship. So I completely agree and would 
support recognition of the value of the cognitive services, not 
to say that folks who do procedures for a living are not 
thinking them, they certainly are, but the importance--I have 
seen it over and over in my practice that while someone does 
indeed benefit from a procedure, what is wrapped around that 
procedure, the informed consent process, the education about 
the disease process and right now the aftercare to try to 
prevent that from ever happening again is incredibly valuable 
to that individual and that family and our economy at this 
point.
    Ms. Baldwin. Dr. White, did you have a comment?
    Ms. White. Yes, I would just like to add that I think as 
Congresswoman Capps had mentioned earlier that patient advocate 
role that nurses provide is absolutely important and I think 
the emphasis on primary care medical home, nurse practitioners 
being involved in that who have the skills for those 
conversations, discussions and the relationships I think would 
be an important consideration for it all.
    Dr. Williamson. Thank you. I would like to briefly add, I 
think that resources spent on time with the doctor saves money 
in the long run. If you look at the percentage of medical 
expenditures, physicians' services constitute a small fraction 
of that. By concentrating on that whether it be for primary 
care or for a specialist, you are going to have money in other 
areas whether it is the end of life, very sick patients. So 
funds, resources that are concentrated on giving the patient or 
the patient's family face time with their doctor is going to 
save you lots of money across the system.
    Mrs. Christensen. Thank you. The gentlelady's time has 
expired, and I now recognize Congresswoman Blackburn for 5 
minutes.
    Mrs. Blackburn. Thank you, Madam Chairman, and thank you to 
all of you.
    I want to do a yes and no and show of hands to get where 
you all are on some issues, and by the way, thank you for your 
patience with us today. As you know, we have another hearing 
that has been going on upstairs. OK. Show of hands, how many of 
you favor a single-payer system? OK. Nobody on the panel favors 
a single-payer system. OK. How many of you favor a strategy, 
putting in place a strategy that would eventually move us to a 
single-payer system? So nobody favors doing that. That is 
really interesting because there are some of us that fully 
believe that this bill that is before us, whether it is the 
House version, the Senate version or the Kennedy plan would 
move us to a single-payer system and we make that determination 
based on experience that we have had from pilot projects and 
from programs that have taken place in the States, my State of 
Tennessee being one of those. OK. How many of you favor having 
government-controlled comparative research? Nobody favors 
government-controlled comparative research. OK. How many of 
you--OK. We have got some takers on that one. All right. Just 
show of hands, the comparative research board that they are 
talking about having, that this bill would put in place, how 
many of you want to see that? OK. So we have Epperly, Ulrich, 
Wright, White and Gabow. OK. And then how many of you favor 
having that comparative research board make medical decisions 
for patients? Nobody. OK. All right.
    Dr. Epperly, you know, it makes it kind of a head scratcher 
to me and I appreciate having your views on this because we 
know that the comparative research results board would end up 
making a lot of the medical decisions for patients and it would 
move that away from the doctor-patient relationship. I wanted 
to ask you, you had mentioned in your testimony that you felt 
that a public plan would be actuarially sound. What I would 
like for you to do is cite for me the research upon which you 
base that assessment and that decision. How did you arrive at 
that?
    Dr. Epperly. You know, I would say that I don't--I am not 
aware of anything I said that said that it would be actuarially 
sound.
    Mrs. Blackburn. Well, I think that that is a statement in 
your testimony.
    Dr. Epperly. What I will say as you look that up, though, 
is that we believe that expanding coverage to people and giving 
them choice is a sound decision for America in regards to 
helping people get health care coverage. We are in agreement 
with that. As it presently stands, this would have to be at an 
enhanced rate above Medicare. That is why we say that, you 
know, if the model is Medicare, that is not going to work, but 
anything that starts to promote primary care as being a 
solution to that, that will work and that----
    Mrs. Blackburn. OK. Let me interrupt you with that. You say 
that it would be at an enhanced model above the rate of 
Medicare. So in other words, it is going to cost more?
    Dr. Epperly. Yes, but the----
    Mrs. Blackburn. OK. Now, yesterday, if I may interrupt you 
again, Secretary Sebelius said that this would be deficit 
neutral. So I am trying to figure out, and I asked her 
yesterday how she could say it was deficit neutral. We have not 
had one witness out of all the hearings we have done that has 
said they felt like this would be deficit neutral or would be a 
money saver. Everybody has said it is going to cost more.
    Dr. Epperly. I would say that it would be beyond deficit 
neutral in a positive way because where the savings will come 
from the system is in regards to reduced hospitalizations, 
reduced readmissions, more efficient----
    Mrs. Blackburn. OK. If I may interrupt you again, do you 
have any kind of model that shows that actually happens because 
you can look at TennCare in Tennessee, you can look at 
Massachusetts and you can see that that does not happen.
    Dr. Epperly. Yes, Community Care of North Carolina proved 
that. Other international studies have proven that as well. 
That is why when we talk about the value of primary care, we 
are saying that there are systems savings from across the 
existing system that will save the entire system money.
    Mrs. Blackburn. All right, but I can tell you that in 
Tennessee we found that did not happen, and so I appreciate 
your input.
    Dr. Williamson, I have got 15 seconds left. Medicare 
patients, senior citizens are just up in arms. They see that 
their care is going to be diminished somewhat, that savings 
from Medicare are going to go to pay for care for younger 
enrollees in this public plan. My seniors are coming to me and 
saying we are scared to death. What do I say to them? What is 
Medicare going to look like after this public plan goes in 
place?
    Dr. Williamson. I don't see anything in the discussion 
draft that gives me hope that we are moving in the right 
direction in terms of payment. I think that private contacting 
and empowering patients to buy their own health care. I don't 
think we should ever take away a patient's right to pay for 
their own health care, and if we do that, we are committing a 
colossal mistake.
    Mrs. Blackburn. Thank you. I yield back.
    Mrs. Christensen. Thank you. The Chair now recognizes 
Congresswoman Harman for 5 minutes.
    Ms. Harman. I thank you, Dr. Christensen, and point out 
that our committee benefits a lot from the fact that many 
members are medical doctors and nurses and have extensive 
medical backgrounds. I hope the panel is impressed that we 
actually, some of us, others here know a great deal about this. 
In my case, I don't have either of those but I am the daughter 
of a general practitioner who actually made house calls to 
three generations of patients before he retired in Los Angeles 
and I am the sister of an oncologist/hematologist who was the 
head of that practice at Kaiser in San Rafael, California, 
before he semi-retired. He is younger than I am, so go figure. 
But he did win the healer of the year award in Marin County for 
his compassionate treatment of patients, so I love listening to 
a bunch of docs and experts who put that on the front burner.
    I come from Los Angeles County, as you just heard. We are 
extremely concerned, if not panicked, about the President's 
proposed cuts in DSH payments. Listening to this panel and 
listening to you, is it Dr. Gabow or----
    Dr. Gabow. Yes.
    Ms. Harman. And reading your excellent testimony, I think 
your bottom line is, you don't want cuts on the front end, you 
want to see how all this works and phase in cuts later once the 
efficiencies take hold. Is that what you are saying?
    Dr. Gabow. That is correct.
    Ms. Harman. Thank you. And on this point, Madam Chair, I 
would like permission to put a letter in the record from the 
board of supervisors of the county of Los Angeles talking about 
the DSH----
    Mrs. Christensen. Without objection, it will be admitted 
into the record.
    [The information appears at the conclusion of the hearing.]
    Ms. Harman. Thank you. Well, I would just like to invite 
the panel on this subject to address, and starting with you, 
Dr. Gabow, and it seems like you may have a bit of laryngitis. 
Am I right?
    Dr. Gabow. Congresswoman, I have a chronic voice problem--
--
    Ms. Harman. Oh, my goodness.
    Dr. Gabow [continuing]. Spastic dysphonia, and the 
treatment for it is Botox but it doesn't do anything for my 
wrinkles.
    Ms. Harman. As my kids would say, I think that is more 
information than we need. But I appreciate this. I hope I am 
not stressing you, but I would really like the record to be 
more complete on this subject because I think it is an urgent 
subject for at least our large metropolitan areas and one this 
committee has to take very seriously, and based on the comments 
I heard from the minority side, I think everyone here generally 
agrees about this. Yes?
    Dr. Gabow. Congresswoman, I think all of the safety-net 
institutions would be very concerned if disproportionate share 
funding were cut at the front end of this process. We rely 
heavily on disproportionate share funding to cover not only our 
uninsured patients but also the gap between what Medicaid pays 
us and our costs. So I think that the timing of this issue is 
really critical, and as I said earlier, I think what we have 
learned from expansions in the past with Medicaid and SCHIP is 
that it takes a long time to enroll certainly highly vulnerable 
populations. They are vulnerable in so many ways that 
enrollment is not an easy process so it is going to take a 
period of time to really get to full coverage even with this 
bill so I don't think we can cut DSH at the front.
    Ms. Harman. I realize I only have 48 seconds left, so let 
me just expand the question in case anyone else wants to answer 
it as well. One of my personal issues, since I focus on 
Homeland Security issues generally, is surge capacity in our 
hospitals in the event of a terror attack or a large natural 
disaster, and so my question is, what is the relationship 
between the ability of our level I trauma centers which are 
located in many of our DSH hospitals, what is the relationship 
between the ability of our level I trauma centers to be 
available in the event of terror attack or a natural disaster 
and the proposed cuts in DSH?
    Dr. Gabow. Congresswoman, I think you are right, that these 
are related in that many of the trauma centers are at the 
disproportionate share hospitals and also many of the pre-
hospital care services and burn units so that much that you 
would need in disaster are located in these safety-net 
institutions so they need to be preserved and you can't 
destabilize them financially at the beginning of the process 
and still preserve those critical resources.
    Ms. Harman. Thank you very much.
    Mrs. Christensen. Thank you. The Chair now recognizes Mr. 
Pitts for 5 minutes.
    Mr. Pitts. Thank you, Madam Chairman.
    Dr. Ulrich, if a large number of private-payer patients 
were to shift into the public plan and the public plan is paid 
based on Medicare rates, what would be the effect on your 
ability to continue to offer the same level of services that 
you provide today?
    Dr. Ulrich. Well, it would be impacted extremely negatively 
and probably fairly rapidly. It would be beyond my capacity to 
give you an exact timeframe but it would be disastrous, I 
think, is a fair word to use.
    Mr. Pitts. Now, are you treating a large number of 
Medicare- or Medicaid-eligible patients in your part of 
Wisconsin?
    Dr. Ulrich. Absolutely. If I can enlarge on that just a 
second, there already is a problem as you are describing. In 
certain parts of the service area that we provide, we comprise 
about 33 percent of the physicians. We are caring, however, for 
70 percent of what we call fixed payer, which is Medicare or 
Medicaid patients. Why? Because other providers are not 
choosing to take care of those patients. So this is already 
happening. This is not----
    Mr. Pitts. So how are you surviving now if you----
    Dr. Ulrich. Well, you know, we try to watch our costs as 
closely as we can. I found it necessary to try to branch into 
ancillary revenue streams, try to sell the electronic medical 
record. We do food safety with Cargill, with Hormel, et cetera 
because I am not confident that just providing health care is 
going to be a way to sustain our organization.
    Mr. Pitts. Dr. Williamson, each year fewer and fewer 
physicians are willing to accept Medicare and Medicaid 
patients. From your perspective as a practicing physician, 
could you tell us why you think this is?
    Dr. Williamson. I think as has been said, it is becoming 
more and more impractical to do that. I think inertia plays a 
large role here. Doctors have done it for a long time. It is 
becoming less and less practical because the Medicare and the 
Medicaid payment systems have not kept pace with the cost of 
providing care, and physicians want to keep taking care of 
these patients, we want to keep doing that, and so what you are 
seeing across the Nation are doctors basically doing the very 
best they can to control costs and keep functioning in this 
environment, but as I said, it is a house of cards. Some 
doctors are retiring early. They are getting out of medicine. 
They are going into other ancillary revenue streams because 
these payment systems simply are not adequate to cover the 
costs of providing care and moving more patients onto those 
types of payment schedules is going to adversely impact 
everybody's health care in this country, not just those 
patients that are taking--that are enrolled in the public 
option.
    Mr. Pitts. Now, if we allowed more people to purchase 
health care services with untaxed dollars instead of relying so 
heavily on third-party payers for routine health care services, 
do you think that we could solve many of our problems faced 
today by consumers or providers of health care services?
    Dr. Williamson. Congressman, I think you just hit the nail 
on the head. Right now what we are trying to do is solve a 
problem for uninsured patients. That is what all this is about. 
We wouldn't be sitting here if we weren't dealing with this 
issue. I think that by making it feasible for every person to 
own and control their own insurance policy is the way to solve 
this problem, and I know that we can do that with the tax 
system, with tax credits, tax subsidies. We can put the control 
back into the hands of the patients so that the government 
doesn't have to orchestrate this massive machine that we are 
looking at right now that is going to not attend adequately to 
the needs of the individual patient. I believe by restructuring 
the tax system, we can take care of the uninsured patients and 
we can solve this problem without putting private insurance 
companies out of business and taking away the ability of 
individuals to purchase their own health care.
    Mr. Pitts. Dr. Wright, if you could respond, polling has 
suggested that over 95 percent of the American people support 
the right to know the price of health care services before they 
go in for treatment. What do you view as the major barriers to 
the American people getting the price and quality information 
that they want and they need?
    Dr. Wright. I think there has just not been enough 
transparency in the pricing structures. It is Byzantine at the 
very least. It is difficult to figure out. Even within a 
practice often most of us have no idea what an individual 
patient is paying for a service, so I think the system would 
clearly benefit from additional transparency.
    Mr. Pitts. And how would the patients, the providers, the 
taxpayers benefit by public disclosure price and risk adjusted 
quality?
    Dr. Wright. Well, I think it lends to the--it is one 
component of their decision-making process. I would not 
uncouple pricing information from quality information because 
cheap care may not necessarily be the best care. On the other 
hand, the best care can be less expensive than we are 
delivering it now.
    Mr. Pitts. What about the agency that reports price and 
risk adjusted quality information to be completely separate 
from the Department of Health and Human Services? Do you see 
any conflicts of interest with HHS reporting on their own 
programs?
    Dr. Wright. No, I don't.
    Mr. Pitts. My time is up. Thank you very much, Madam Chair.
    Mrs. Christensen. Thank you, Mr. Pitts. The Chair now 
recognizes Mr. Gordon for 5 minutes.
    Mr. Gordon. Thank you, Madam Chair.
    Last week the President put forth a challenge to find ways 
to reduce the number of medical liability suits without capping 
malpractice awards. I agree with the President. I think if you 
are going to be able to try to reduce the cost of health care, 
you have got to get all the inefficiencies out and this is 
certainly one area. PriceWaterhouseCooper estimates there is 
$280 billion spent in defensive medicine. We can't wrench all 
that out but surely there is some savings that can be made 
there. That is why I am drafting medical malpractice reform 
alternative legislation responding to the President's 
challenge. The bill encourages States to step outside the box 
and test so-called alternatives like health courts and ``I am 
sorry'' methods. Also, I think that this will help lower the 
cost of defensive medicine and I think it will compensate 
patients faster and be more fair. In my home State of 
Tennessee, we enacted a certificate of merit requirement last 
October that has already proven that there has been a 4 percent 
reduction in malpractice premiums. Earlier you were all asked 
about whether you would think that malpractice reform should be 
a part of the overall reform, and you agreed. So I want to 
quickly ask you to say why and what savings you think we might 
be able to achieve. Dr. Epperly, why don't we start with you?
    Dr. Epperly. First, I applaud you for doing this. I think 
it is the right step in the right direction.
    Mr. Gordon. Don't applaud me. Let us just move on and tell 
me why it is good.
    Dr. Epperly. Oh, oK.
    Mr. Gordon. No, no, no, no, tell me why. Please tell me why 
it is good.
    Dr. Epperly. Oh, oK. I think it is a step in the right 
direction. If there is not a relationship with patients, the 
default is to do more to patients, not less so that you cover 
yourself. That is why the relationship is critical. If we don't 
get reform in place, then people that don't have that 
relationship will continue to order every test known to man to 
try to diagnose the problem.
    Dr. Williamson. I agree completely. I think the costs are 
hidden but they are very, very real and I think they are 
gigantic. Physicians order expensive tests to rule out 
conditions that they don't suspect but might occur randomly in 
one in several thousand, and if someone gets $10 million from a 
lawsuit and it occurs in an incidence of one in 10,000, if you 
don't screen for that you are statistically going to lose 
money. And so you are exactly on target here. We must have real 
medical liability reform. I will tell you in Georgia in 2005, 
we enacted a very effective tort package. The number of suits 
in Georgia are down by 40 percent now. We only had three 
professional liability carriers in Georgia. We now have 
something like in the teens, and we have a cap on non-economic 
damages, not total damages but only non-economic damages so 
that economic----
    Mr. Gordon. We are not talking about caps here. We are 
thinking about things less than that.
    Dr. Ulrich?
    Dr. Ulrich. I would agree with what both gentlemen before 
me said. The reality is that, you know, having to pay some 
dollars out in those unfortunate circumstances is an actual 
cost and without some relief from that we will continue to bear 
those costs.
    Mr. Gordon. Dr. Wright?
    Dr. Wright. I also agree. I think the burden of this is 
quite large and I particularly like the idea that you would 
test various options, various approaches to controlling the 
tort problem.
    Mr. Gordon. What we want to do is give incentives for 
States to experiment and let us find out what might work.
    Dr. White?
    Ms. White. The American Nurses Association does have some 
concerns about caps. They have a position statement that----
    Mr. Gordon. OK. We are not talking about caps. I said 
practices short of caps.
    Ms. White. OK. Well, they have a position statement that 
they can make available to the committee.
    Mr. Gordon. But they would support malpractice reform short 
of caps? You raised your hand earlier.
    Ms. White. Yes. I mean, it----
    Mr. Gordon. Dr. Gabow?
    Dr. Gabow. As a governmental entity, we have governmental 
immunity. In the broader discussion, I think that it is very 
important to do malpractice reform and I think your idea of 
experimenting with health courts is a very good one.
    Mr. Gordon. Mr. Hawkins, earlier you said you weren't 
personally affected but that is not the question, it is for the 
system overall.
    Mr. Hawkins. Yes, and as a matter of fact, if I can, one 
important thing that--a couple of members of the committee here 
have sponsored legislation to extend the Federal Tort Claims 
Act, FTCA coverage, that health center clinicians get today to 
clinicians who volunteer at health centers.
    Mr. Gordon. Well, that will be a part of the bill in terms 
of emergency rooms. I think they should be considered as first 
responders.
    Mr. Hawkins. Yes, I would just say we know for a fact----
    Mr. Gordon. And Mr. Yarwood--oh, I am sorry. OK. You are 
saying you know for a fact that it helps?
    Mr. Hawkins. That many local physicians and clinicians 
would volunteer time at a health center if this issue were 
addressed.
    Mr. Gordon. Mr. Roberts?
    Mr. Roberts. I think from a pharmacy's perspective, it is 
not as large an issue but still we would be supportive.
    Mr. Gordon. Mr. Yarwood?
    Mr. Yarwood. It is a huge issue. We talked about this 
before.
    Mr. Gordon. Ms. Fox?
    Ms. Fox. We absolutely agree.
    Mr. Gordon. And if I could go back, since I have a little 
more time, concerning those individuals that have the 
hospitals. Are you finding it a problem now to get specialists 
to come into the emergency room because of the medical 
malpractice problem? Yes, ma'am, go ahead.
    Dr. Gabow. Because of medical malpractice, we aren't 
because we have governmental immunity and our physicians are 
employed so we have no problem getting coverage and we don't 
pay extra for that coverage.
    Mr. Gordon. But it is because they are already covered? 
Yes. OK. My time is up and I thank you for your advice.
    Mrs. Capps [presiding]. The Chair now recognizes Mr. 
Shadegg for questions.
    Mr. Shadegg. Thank you, Madam Chair.
    Dr. Wright, I want to begin with you. I also want to follow 
up with Dr. Ulrich because he mentioned a word that I think is 
very important. He talked about the incentives in the current 
policy or health care system. Under the tax code in America 
today, businesses can buy health insurance tax-free. 
Individuals have to buy it with after-tax dollars, making it at 
least 30 percent more expensive. You were just asked, and I 
want to follow up, a question by Mr. Pitts about transparency. 
I guess my concern about transparency is that until we enable 
consumers, individual people, to buy health insurance on the 
same tax-free basis that businesses can do it, I don't see how 
a consumer has the motivation to look at transparency, that is, 
to say if my employer provides me with health care and he or 
she pays for it, I don't see what the motivation is for me to 
go research the cost of a particular procedure at one hospital 
versus another or one doctor for another or the quality 
outcomes. Because I agree with you, I think that both cost and 
quality are things consumers want to know but only if they are 
a part of a marketplace where those factors can make a 
difference to them. Would you agree?
    Dr. Wright. I am not a pricing expert. I am barely a 
quality-of-care expert. I understand your point. I am greatly 
concerned about the number of people who are not covered at 
this point in time.
    Mr. Shadegg. Me too.
    Dr. Wright. I know you are, and so I guess most of my 
priority in terms of getting this fixed has been directed at 
them.
    Mr. Shadegg. Dr. Ulrich, is that one of the incentives that 
concerns you?
    Dr. Ulrich. Yes, certainly, and if I can expand on that 
just briefly?
    Mr. Shadegg. Please.
    Dr. Ulrich. If we look at the quality equation, that is the 
outcomes of patient care and the patient-physician interaction 
being the numerator, costs being the denominator, quality being 
the end product of that, the concern I have is this, is that 
currently we don't pay for that. We absolutely need to move to 
that model, but what hinders us now is the fact that patients 
don't understand necessarily what quality is. We did some 
market research, and what patients tell us is that look, you 
guys are all the same. You all went to medical school, you all 
did residencies so there is really very little to pick between 
you. When in fact for those of that work in the industry, there 
are differences, so the question before us, how do we now 
educate our patients so that they can make fully informed 
decisions relative to that quality equation.
    Mr. Shadegg. Dr. Williamson, I think if I gather your 
testimony correctly, you think that is exactly the point. If we 
empowered or allowed, just permitted people to buy their own 
health insurance policy and therefore to shop for it and to be 
involved in the selection of the plan and the selection of the 
doctor, they would be motivated to use transparency, cost data, 
quality data, and make the market much more competitive, 
bringing down costs and causing quality to go up?
    Dr. Williamson. Absolutely, and I think it would raise 
quality on two levels. It would raise quality on the national 
level in terms of saving money in the entire system and it 
would raise the quality that the individual patient perceives. 
Even though patients may not be able to judge scientific 
quality, they do vote with their feet, and I think if we had 
transparency, I think doctors are going to have to compete with 
each other, and if we can do what you have suggested which is 
to empower patients to buy with the same tax advantage that 
employers have now, their own health insurance policies and 
control that, they then control their medical decision making 
and that is the best way to keep costs down and ensure good 
patient care.
    Mr. Shadegg. The health care policy I have advocated says 
that we should tell every American that has employer-provided 
health care that they can keep it and they can keep the 
exclusion, but every American that doesn't have employer-
provided health care would get a tax credit. Those Americans 
who can't afford to buy their own health care would get a 
refundable and advancable tax credit to go out in the market 
and buy what they want. We would then bring consumer choice to 
the entire health care industry.
    I would like every member of the panel to tell me what 
other thing in our society somebody else buys for us. I mean, I 
struggle with this question, and I don't understand it. Our 
employers buy our health care insurance. They don't buy our 
auto insurance, they don't buy our homeowners insurance, they 
don't buy our suits. I don't buy my employees lunch. But why in 
health care do we decide that only employers can buy it? Is 
there something else that somebody on the panel can remember or 
can think of that is of that dimension where your employer buys 
it for you and you are just kind of a pawn in the whole system? 
Dr. Williamson?
    Dr. Williamson. I can't answer the question but I can tell 
you where it came from, and it came from the notion of pooling 
risk. Patients realize that if I get really sick, I am going to 
need a lot of money, and so they went together and they pooled 
their money and then what happened is, over time they have lost 
control of that pool of money and that is where all this is 
coming from. The patients have turned over to others the 
ability to make their health care decisions for them by 
allowing them to pay for it.
    Mr. Shadegg. So if we empower them to be able to buy their 
own health care if choose it from their employer or out on the 
market and we empower poor people to do that who can't afford 
it by giving them a refundable tax credit, we would also need 
to create new pooling mechanisms, would we not?
    Dr. Williamson. I completely agree with you.
    Mr. Shadegg. Thank you very much.
    Mrs. Capps. Thank you very much, and we will turn to Mr. 
Green for his questions, and I will just say probably this is 
our last series of questions because the vote has been called 
and your panel can be excused. You really set a record for 
endurance. I have to thank each of you.
    Mr. Green. Madam Chairman, some of us were here last night 
at 7:00. Well, you were too, I think, and we started at 9:30 
yesterday morning and finished some time after 7:00.
    Mrs. Capps. Be thankful you weren't on that last panel.
    Mr. Green. Yes, you will at least get out before dark.
    Mr. Hawkins, you and I have been working with 
Representative Tim Murphy since we reauthorized community 
health centers program last year on a bill we introduced, the 
Family Health Care Accessibility Act of 2009. The bill would 
extend Federal Tort Claim Act coverage to volunteers by deeming 
these volunteer practitioners at health centers as employees of 
the federal government. These volunteers would have to be 
licensed physician or licensed clinical psychologists and 
unpaid in order to qualify. This seems like an easy solution to 
the lack of primary care physicians in some areas, especially 
in medically underserved areas where community health centers 
are located. Yesterday the GAO released a report stating that 
the lack of Federal Tort Claims Act coverage for volunteer 
practitioners can be a barrier for volunteers who wish to 
dedicate their time at a federally qualified health center. Can 
you elaborate on how the extension of the FTCA coverage to 
licensed physicians or other licensed practitioners would help 
increase the number of volunteers at federally qualified health 
centers?
    Mr. Hawkins. Sure, Mr. Green, and thank you for raising 
that issue. In fact, just a couple of minutes ago we were 
discussing the issue of malpractice and I----
    Mr. Green. I thank my colleague, Congressman Murphy, for 
bringing it up.
    Mr. Hawkins. That is oK. I specifically alluded to this 
legislation which you and Mr. Murphy have collaborated on in 
the past and continue to collaborate on. I can't tell you not 
only for primary care, Mr. Green, but even for urologists, 
dermatologists. You know, the biggest frustration that health 
center clinicians who are virtually all primary care today 
express is the barriers and difficulty they face getting 
specialty care, diagnostics, even hospital admits for the 7.5 
million uninsured people we serve in particular, not 
exclusively but in particular. Allowing FTCA coverage to extend 
to individuals who, as you note, come into the health center 
and donate their time, do not charge the patient, don't charge 
the health center, would be a phenomenal benefit and boon and 
would provide for much more fully integrated care and better 
health outcomes.
    Mr. Green. And we discovered this problem in Texas with 
Hurricane Katrina with all the evacuees. In our federally 
qualified health centers, we had medical professionals who 
couldn't volunteer in Texas because they weren't covered, and 
we realize now that it is a way we can provide for our 
federally qualified health centers.
    The discussion draft also addresses the issue of residency 
training in offsite locations like FQHCs, but it still 
allocates the funds to the hospitals and not to the offsite 
locations. Do you believe the language in the draft should make 
it easier for federally qualified health centers and other 
offsite residency training programs to start up and operate 
residency programs? And again, we have an example in my 
district of a federally qualified health center has a 
partnership with Baylor College of Medicine in Houston, and 
they do it, and what I would like to do is see if we can get a 
number of medical schools, because I want primary care 
physicians to know they can make a living at a federally 
qualified health center in a community-based setting.
    Mr. Hawkins. Not only that, Mr. Green, but I am honored to 
be part of a panel today that includes Denver Health, a 
community health center, as well as a public hospital----
    Mr. Green. Congresswoman DeGette has preached to me for 
years about Denver Health.
    Mr. Hawkins. And the great work that Dr. Gabow has done. 
Also, residency training program, Marshfield Clinic, which has 
a community health center embedded in it, doing residency 
training and Ted Epperly, Dr. Epperly, whose family medicine 
residency training program in Boise, Idaho, is also a federally 
qualified health center. Perfect examples. Now, all are working 
locally with their medical schools and with teaching hospitals 
to ensure, because those residents, even family medicine, have 
to have med-surg residency inpatient based so it can't be done 
independently. At the same time, the vast bulk of family 
medicine residency training, pediatric residency training, even 
general internal medicine residency training can be done in an 
ambulatory care site. More than 300 health centers today across 
the country are engaged in residency training programs. They 
have rotations of residents through them and everyone is 
willing to step up and do more. All that is needed is the 
resources to be able to do so.
    Mr. Green. And if we know we have chronic need for primary 
care doctors, then this is a way we can do that and hopefully 
expand it.
    One last question in my last 6 seconds. The discussion 
draft includes additional funding through the Public Health 
Investment Fund, and as many on the committee know, we have 
been asking for additional funds for federally qualified health 
clinics for years. How do you intend to use the new funds when 
you provide more services like dental and mental health and 
would it also help build more FQHCs? Because we know we need 
that in our country.
    Mr. Hawkins. I think there are two or three quick points to 
make on that. Just last month, the Government Accountability 
Office, GAO, issued a report that pointed out that almost half 
of federally designated medically underserved areas in this 
country have no health centers, not a one. There are 60 million 
people out there today across this country, some of whom have 
insurance and yet do not have a regular source of preventive 
and primary care, no family doctor, no medical or health care 
home. So the need is great. It runs in tandem with the 
extension of coverage that this bill would provide but takes it 
that one step further, turning the promise of coverage into the 
reality of care through providing a health care home. The 
expansion of coverage to serve more people as you noted very 
importantly the expansion of medical care to include oral 
health and mental health services so crucially important, all 
of that will be afforded through the new resources in this 
bill.
    Mr. Green. Thank you.
    Mrs. Capps. Thank you again to the panelists, and we are in 
recess for the next panel to begin after this series of votes. 
It is eight votes, but after the first one apparently is 2 
minutes per vote so it should go fairly quickly hopefully. 
Thank you very much.
    [Recess.]
    Mr. Pallone. The Subcommittee on Health will reconvene, and 
our next panel is on employer and employee views. Let me 
introduce the panel, from my left is Kelly Conklin, Mr. 
Conklin, who is the owner of Foley-Waite Custom Woodworking, 
Main Street Alliance, and then we have John Arensmeyer, who is 
founder and CEO of Small Business Majority. We have Gerald M. 
Shea, who is the assistant to the president of the AFL-CIO, 
Dennis Rivera, who is the health care chair for the SEIU, John 
Castellani, who is president of the Business Roundtable 
Institute for Corporate Ethics, John Sheils, who is senior vice 
president for the Lewin Group, and Martin Reiser, who is 
manager of government policy for Xerox Corporation, I guess 
representing the National Coalition on Benefits. And you know, 
we ask you to speak for about 5 minutes, your written testimony 
becomes part of the record and then we will have questions from 
the panel.
    So I will start with Mr. Conklin. Thank you for being here.

    STATEMENTS OF KELLY CONKLIN, OWNER, FOLEY-WAITE CUSTOM 
WOODWORKING, MAIN STREET ALLIANCE; JOHN ARENSMEYER, FOUNDER AND 
CEO, SMALL BUSINESS MAJORITY; GERALD M. SHEA, ASSISTANT TO THE 
  PRESIDENT, AFL-CIO; DENNIS RIVERA, HEALTH CARE CHAIR, SEIU; 
 JOHN CASTELLANI, PRESIDENT, BUSINESS ROUNDTABLE; JOHN SHEILS, 
  SENIOR VICE PRESIDENT, THE LEWIN GROUP; AND MARTIN REISER, 
   MANAGER OF GOVERNMENT POLICY, XEROX CORPORATION, NATIONAL 
                     COALITION ON BENEFITS

                   STATEMENT OF KELLY CONKLIN

    Mr. Conklin. Thank you, Chairman Pallone, Ranking Member 
Deal and other members of the committee for inviting me to 
appear today. My name is Kelly Conklin and I co-own with my 
wife, Kit, an architectural woodworking business in Bloomfield, 
New Jersey. My purpose today is to explain how the House tri-
committee's health reform proposals might affect small 
companies like ours.
    To start, I think the draft legislation is right on target. 
I believe it will receive broad support in the small business 
community. Before I go any further, let me provide some 
background. My wife and I opened Foley-Waite in 1978 in a 700-
square foot shop in Montclair, New Jersey. In 1985 we expanded, 
hired four employees and started offering health insurance. The 
premiums were about 5 percent of payroll and we paid it all. 
Today we employ 13 people, occupy 12,000 square feet of space 
and serve some of the most influential people in the world, and 
we fork over $5,000 a month in health insurance premiums, close 
to 10 percent of payroll and one of the largest single expenses 
in our budget. Practically speaking, we offer coverage to 
attract and retain skilled employees but like the majority of 
small companies, we do so because it is the right thing to do 
for our workers and if we don't offer coverage, we are just 
passing our obligation and our share of the cost on to someone 
else.
    Cost is by far the single most important driver in making 
basic decisions regarding health care. That applies whether it 
is a small firm like mine or the United States Congress, and no 
system that tends to dance around the cost issue can succeed.
    April is the month I dread, not for taxes but for health 
insurance renewal nightmares. Every year is worse--
unpredictable rate hikes, unaffordable premiums, an 
administrative tangle that is our system. In 3 years, we have 
had three different insurance companies. Most recently, Horizon 
Blue Cross Blue Shield raised our rates 25 percent. Now we have 
Health Net. That means new primary care physicians, and for my 
wife, who has a chronic illness, a new doctor who knows nothing 
of her medical history. It is very frustrating. There are no 
quality, affordable health care options available for small 
businesses.
    In reading the discussion draft, it is apparent the 
committee is determined to control cost. Responsible employers 
understand we will all be better off in a system where 
employers and individuals contribute a reasonable amount toward 
assuring our common health and well-being. That is why I 
support the draft provisions requiring employees and 
individuals to pay their fair share. For too long, the small 
business community has paid too much for too little. We 
sacrifice growth, financial security and the peace of mind of 
our employees and their families in the name of protecting 
private insurers from meaningful competition. The private 
health insurance market has failed to contain costs, enhance 
efficiency or improve outcomes. It fails to provide coverage to 
millions. Half measures warmed over, more of the same second 
chances for the health insurance industry won't fill the 
yawning gaps in our patchwork coverage. We need a guarantee 
that individuals and small companies will have real choices and 
affordable coverage options.
    I commend the committee for including a strong public 
health insurance option in this legislation. With a public 
option, small businesses will have leverage, real bargaining 
power and guaranteed backup and greater transparency. Most 
importantly, by creating genuine competition and restoring 
vitality to the market dynamic, this proposal will bring about 
the kind of broad-based changes in the private insurance 
industry Main Street is clamoring for. For a small business 
like mine, bringing down health insurance premiums can be the 
difference between growth and sitting tight. Two years ago we 
were interested in buying a building. It represented growth 
potential, financial security and long-term equity. We were 
looking at around $5,000 a month in mortgage payments as 
opposed to our rent of around $3,500. If our health insurance 
premiums had been closer to our rent and not the future 
mortgage, we might be in that building today. We work in a 
competitive marketplace. All the time there are new competitors 
looking to take business away. We find savings, improve 
efficiency, invest in equipment and personnel. That is how it 
is for us and that is how it will be for the health insurers if 
a public option is available.
    Transparency is critical. It is time for the insurance 
companies to come clean and in plain English explain where our 
premium money goes, to say up front what is covered and what is 
not. It is time to put a halt to cost containment by denial, 
copays and hidden charges. The draft discussion addresses this 
need by creating a health insurance exchange to offer real 
coverage choices to allow us to actually know where our premium 
dollars are being spent. We can provide access to both 
preventive and therapeutic care for everyone. We are encouraged 
by the provisions reforming common practices in the current 
insurance market. Ending lifetime and annual benefit limits, 
discriminatory coverage and rating policies and creation of a 
basic benefit are all important and necessary parts of a 
complete reform package. These are full measures designed to 
provide real relief. If enacted, they will represent a 
watershed for American health care and a godsend to the small 
business community.
    This committee working with its counterparts to develop the 
tri-committee proposal has done yeoman's work taking on and 
meeting an extremely complex set of issues. I will not be alone 
in supporting this extraordinary effort. I am a member of the 
New Jersey Main Street Alliance, a coalition of over 450 small 
businesses working for health reform that will finally give us 
access to quality health care we can afford. I have canvassed 
small businesses, and when I say ``and we support a public 
option,'' they take the pen out of my hand and the New Jersey 
MSA has a new member. Small businesses have seen your 
leadership and with this document you have delivered. Now the 
real fight begins. We need you to enact this proposed 
legislation and bring about health reform that works for us and 
our employees this year so we can do our part for economic 
recovery. Thank you, Mr. Chair.
    [The prepared statement of Mr. Conklin follows:]





    Mr. Pallone. Thank you, Mr. Conklin.
    Mr. Arensmeyer.

                  STATEMENT OF JOHN ARENSMEYER

    Mr. Arensmeyer. Thank you, Chairman Pallone, Ranking Member 
Deal and members of the committee. Small Business Majority 
appreciates this opportunity to present the small business 
perspective on the House tri-committee draft health care reform 
plan. We support the effort to move this legislation through 
Congress expeditiously, and thank you for bringing a proposal 
forward in such a timely manner.
    Small Business Majority is a nonprofit, nonpartisan 
organization founded and run by small business owners and 
focused on solving the biggest single problem facing small 
businesses today, the skyrocketing cost of health care. We 
represent the 27 million Americans who are self-employed or own 
businesses of up to 100 employees. Our organization uses 
scientific research to understand and represent the interests 
of all small businesses. I have been an entrepreneur for more 
than 20 years including 12 years owning and managing an 
Internet communications company. Together with the other senior 
managers in our organization, we have a total of 70 years 
running successful small businesses ranging from high tech to 
food production to retail. We hear stories every day from small 
business owners who can't get affordable coverage and for whom 
health care is a scary, unpredictable expense. Louise Hardaway, 
a would-be entrepreneur in Nashville, Tennessee, had to abandon 
her business stream after just a few months because she 
couldn't get decent coverage. One company quoted her a $13,000 
monthly premium for her and one other employee. Others such as 
Larry Pearson, owner of a mail order bakery in Santa Cruz, 
California, struggle to do the right thing and provide health 
care coverage. Larry notes that, ``The tremendous downside to 
being uninsured can be instant poverty and bankruptcy, and that 
is not something my employees deserve.'' Our polling confirms 
that controlling health care costs is small business owners' 
number one concern. Indeed, on average, we pay 18 percent more 
than big businesses do for health care coverage.
    An economic study that we released earlier this month based 
on research by noted M.I.T. economist Jonathan Gruber found 
that without reform, health care will cost small businesses $24 
trillion over the next 10 years. As such, we are pleased to see 
that the House bill addresses key cost containment measures 
such as expanded use of health IT, transparency, prevention, 
primary care and chronic disease management.
    Our polling shows that 80 percent of small business owners 
believe that the key to controlling costs is a marketplace 
where there is healthy competition. To this end, there must be 
an insurance exchange that is well designed and robust. We are 
very pleased that the committee's bill proposes a national 
insurance marketplace with the option for state or regional 
exchanges that adhere to national rules. Moreover, we were 
encouraged by the committee's proposal that there be 
standardized benefit packages along with guaranteed coverage 
without regard to preexisting conditions or health status, a 
cap on premiums and out-of-pocket costs and marketplace 
transparency.
    We understand that a balanced set of reforms will require 
everyone to participate. Sixty-six percent of small business 
owners in our recent polls in 16 States for which we released 
preliminary data this week support the idea that the 
responsibility for financing a health care system should be 
shared among individuals, employers, providers and government. 
It should be noted that respondents to our surveys included an 
average of 17 percent more Republicans at 40 percent than 
Democrats at 23 percent while 28 percent identified as 
independent.
    According to the results of the economic modeling done for 
us by Professor Gruber, comprehensive reform that includes even 
modest cost containment measures and a well-designed structure 
for employer responsibility will offer vast improvement over 
the status quo. A system with appropriate levels of tax 
credits, sliding scales and exclusions will give small 
businesses the relief they need, potentially saving us as much 
as $855 billion over the next 10 years, reducing lost wages by 
up to $339 billion and restoring job losses by up to 72 
percent. We are very pleased that the committees have addressed 
some of the affordability concerns of the smallest businesses. 
Professor Gruber has modeled specific scenarios described in 
detail in our report and we look forward to working with you to 
ensure the best balance between the need to finance the system 
and our ability to pay.
    Finally, another issue of great concern to us is the unfair 
tax treatment of the 21 million self-employed Americans. Under 
the current tax code, self-employed individuals are unable to 
deduct premiums as a business expense and are required to pay 
an additional 15.3 percent self-employment tax on their health 
care costs. We encourage that this inequity be rectified in the 
final bill passed by the House.
    In closing, health care premiums have spiraled out of 
control, placing our economy and the fortunes of small business 
in peril. Health care reform is not an ideological issue, it is 
an economic and practical one. We are encouraged by the overall 
approach of this bill and look forward to working with you to 
make it a reality this year. Thank you.
    [The prepared statement of Mr. Arensmeyer follows:]





    Mr. Pallone. Thank you, Mr. Arensmeyer.
    Mr. Shea.

                  STATEMENT OF GERALD M. SHEA

    Mr. Shea. Good afternoon, Chairman Pallone and 
Congresswoman Capps. I really appreciate the opportunity to 
share the views of the AFL-CIO on this critically important 
issue.
    I want to start by saying a hearty congratulations on 
producing a very good draft bill. I think you really responded 
to what the American people have asked for, and we look forward 
to working with you over the coming weeks to get that bill 
enacted.
    You have decided to build health reform based on the 
current system, therefore based largely on the employment-based 
system, since that is the backbone of our health coverage and 
health financing, and I want to direct my remarks to that 
today, and I hope that the experience I bring, which is the 
experience of unions that bargain benefits for 50 million 
workers each year, will be of some benefit to you. And the main 
thing I have to say is, if you are going to proceed down this 
path, and we certainly support it, then job number one is 
stabilizing employment-based coverage. It has proved remarkably 
resilient in the face of high cost pressures but it is in 
fragile shape today. From 2000 to 2007, we lost five full 
percentage points on the number of 18- to 64-year-old working 
Americans who were covered, and the underinsured rate, people 
who have insurance but really can't afford to get care under 
it, shot up from 16 percent to 25 percent in the last 4 years. 
So despite the fact that it is still hanging on, employment-
based coverage is really eroding very rapidly, and to stabilize 
that coverage, we would suggest that you focus first of all on 
cost, secondly on having everyone involved in coverage and in 
the system, and thirdly, and I don't mean these in rank order, 
they are really all important, thirdly, reform of the delivery 
system.
    Let me start with participation because in some ways that 
is the simplest. If you are going to base this on employment-
based coverage, we think it makes simple sense, as you have 
done in your bill, to require that everyone, every individual 
participate and take responsibility to some extent, certainly 
responsibility for their own health status, and every employer 
to participate, and that is included in your bill, and the 
benefits of this are simple. It helps bring people into the 
system, it does stabilize the employment-based coverage, it 
helps reduce the amount of federal tax dollars that you have to 
spend because everybody who is covered by an employer plan will 
not be dependent on monies that you have to raise and put into 
this bill for subsidies. It levels the playing field between 
employers who now do provide and those who don't. And there 
really are just three categories of workers in terms of their 
insurance coverage. The vast majority, as you know, get 
insurance coverage at work, some 92 percent of the employers of 
50 or above workers provide health insurance. There are some 
employers who don't provide insurance but certainly are well 
enough off to do that. The example of the Lobby Shop in 
Washington comes to mind. And then there are a group of low-
wage, small employers who really need a lot of help to do this. 
Our suggestion is that everyone be included in this, no 
exemptions, because once you start exempting people, we think 
you are going to run into distortions in the marketplace as now 
exist, but we do think it is appropriate, as you have done, to 
provide tax subsidies for employers with low wage and small 
numbers of employees and I would emphasize that we don't think 
there are just small numbers of employees, it actually it is 
some measure of the financial stability or success of the firm 
that should be taken into account.
    Secondly, in terms of controlling costs, the most important 
thing we can do is to change the delivery system. If the 
Institute of Medicine estimate of 30 percent waste in the 
system is anywhere near correct, we could easily pay for health 
reform and cover all of the uninsured if we can get a 
substantial amount, not all of that but a substantial amount of 
that waste out of the system. So that is the most important 
thing, and your bill includes a number of good provisions on 
that. We are working with your staff because we think they 
could be strengthened in a number of areas but we think you 
have made a very good start. However, in the short term, that 
is really not going to do the job. You are going to need to do 
something else, and there are only two options in our view as 
to how to do this in the short term. One is to do it by 
regulation. You could do global budgets or set rates, and the 
other is to introduce competition into the marketplace that now 
doesn't exist, and you have chosen the idea of competition 
through a public health insurance plan and we strongly support 
that. I would just point out that there is an additional 
advantage of a public health insurance program in that it can 
be a leader in reform of the system as Medicare is now. I deal 
with a lot of employers and a lot of unions who have wanted to 
change the delivery system for the better over the past few 
years but it wasn't until Medicare started to change their 
payment rates that this really started to happen.
    And then lastly, looking at the delivery system, I think, 
as I said, that there is plenty of money in it to pay for 
reform, but we are not going to get that money back very 
quickly and some people are talking about having to pay for 
reform totally out of the current money in the system, which we 
think is just very unrealistic. We think you have to look 
outside for additional monies, and if you take the view that 
you have to look inside, you may well get to the very dangerous 
territory of the Senate Finance Committee talking about 
taxation of benefits, which we think would be a disastrous 
approach. It is unfair to the people involved since they 
already pay an arm and a leg, many of them, for health 
coverage, and it is unfair in terms of the inequities built 
into this, workers who are older, groups that have families, 
groups that have more retirees will have much higher costs. And 
then there is the simple political dynamic of this. If you want 
to throw a monkey wrench into public support to health reform, 
this would be the perfect way to do it because in the process 
you would really, really turn the apple cart upside down in 
employment-based coverage.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Shea follows:]





    
    Mr. Pallone. Thank you, Mr. Shea.
    Mr. Rivera.

                   STATEMENT OF DENNIS RIVERA

    Mr. Rivera. Thank you. I am chair of SEIU Health Care, the 
1.2 million health care workers who are committed to reforming 
our Nation's broken health care system. We represent members 
like Pat DeJong of Libby, Montana, who works as a home care 
aide. Pat and her husband Dan were ranchers but had a hard time 
finding affordable coverage and were uninsured when he was 
diagnosed with Hodgkin's lymphoma in the year 2000. The medical 
bills piled up for Pat and Dan, eventually forcing them to sell 
the land they loved and that has been in Dan's family for 
generations. Dan succumbed to cancer and Pat remains uninsured. 
This is America. We can and we must do better for hardworking 
families like the DeJongs. Americans are ready to fix health 
care and they know that this is the year it must happen. Now it 
is up to you to deliver Pat and the millions who face the 
consequences of our broken health care system with a real 
choice of affordable, quality, private and public health care 
coverage. SEIU's 1.2 million health care workers in hospitals, 
clinics, nursing homes and in homes in communities are at the 
bedside every day witnessing high-price families pay for the 
delay and skip medical treatments. The uninsured are not just a 
statistic. They are hardworking people, people such as Pat, who 
despite caring for those who cannot care for themselves, cannot 
afford health care coverage for herself.
    The discussion draft includes many essential elements that 
would promote coverage and access, cost containment and improve 
quality and value for American families. A strong public health 
insurance option is vital to ensuring consumer choice and 
access. The public plan will drive down the cost of insurance 
by competing with private insurance and lowering overall costs.
    Medicaid expansion--we support increase in Medicaid 
eligibility for families up to 133 percent of federal poverty. 
The discussion draft will also improve Medicaid payments to 
primary care practitioners to address concerns about access to 
needed services by Medicaid beneficiaries. We caution the 
committee that safety-net providers and systems must be 
protected to provide access and support to low-income 
communities and to maintain a mission that includes trauma care 
and disaster preparedness. Special payment to these facilities 
such as the disproportionate share payments must be maintained 
as coverage expands. In addition, essential community providers 
must be included in insurance plans that serve Medicaid 
beneficiaries and individuals eligible for health care credits.
    Health care reform needs to work for everyone including the 
4 million American citizens who reside in Puerto Rico, and we 
urge Congress to include Puerto Rico and all the territories in 
all parts of health care reform. SEIU is pleased to see that 
the committee has recognized the need to improve the treatment 
of Puerto Rico and the territories under Medicaid by increasing 
the caps and federal matching rates. While this is an important 
step in the right direction, it falls short of resolving the 
longstanding inequities in federal health care programs that 
have been hurting the people of Puerto Rico for decades.
    Shared responsibility. Employers, individuals and 
government must all do their part to make sure we have a 
sustainable and affordable system that covers everybody. For 
employers that do not provide meaningful coverage to their 
employees, they must pay into a fund. This pay-or-play 
requirement is necessary to ensure individuals can meet their 
responsibility to obtain affordable coverage with special 
support provisions to provide small businesses with tax credits 
and access to an insurance exchange to help them purchase 
coverage for their employees.
    Affordability. Individuals' responsibility must be 
augmented by measures to ensure affordability. We commend the 
committee for offering federal financial assistance to 
individuals and families with low and moderate income and those 
with high health care costs relative to their income to 
guarantee affordability.
    Eliminating disparities--We congratulate the committee for 
recognizing disparities in access to quality health care. No 
one should be discriminated for preexisting conditions. No one 
should be discriminated for being low income, minority, 
disabled or aged.
    Workforce. As coverage grows, so much the health care 
workforce. Today there are chronic shortages in almost every 
area of health care from primary care physicians to nurses to 
long-term-care workers. Health care reform to be effective must 
include a diverse, well-trained workforce that is working in 
the appropriate setting across the delivery system and is well 
distributed in both urban and rural areas.
    This is your moment, your moment to ensure that Pat DeJong 
and millions of other hardworking Americans do not have to wait 
any longer in America for quality, affordable health care 
coverage. The time is now. We cannot wait.
    [The prepared statement of Mr. Rivera follows:]





    Mr. Pallone. Thank you, Mr. Rivera.
    I wanted to apologize to Mr. Castellani because I said that 
you represented the Business Roundtable Institute for Corporate 
Ethics, and apparently it is just the Business Roundtable.
    Mr. Castellani. I am president of the Business Roundtable. 
I am a member of the board of directors of the Business 
Roundtable Institute for Corporate Ethics. That is probably----
    Mr. Pallone. Oh, I see. OK. Well, thanks for clarifying 
that.

                  STATEMENT OF JOHN CASTELLANI

    Mr. Castellani. Thank you, Mr. Chairman. I am here on 
behalf of the members of the Business Roundtable who are the 
chief executive officers of America's leading corporations. 
Collectively, they count for more than $5 trillion in annual 
revenues and 10 million employees but most importantly they 
provide health care for 35 million Americans. I appreciate the 
invitation to testify and I share the urgency of this committee 
and the fellow panelists that health care reform must be 
addressed now.
    Today I want to focus on key three messages. First, we need 
to get health care costs under control. Second, we must 
preserve the coverage for those 132 million Americans who 
receive that coverage from their employer. And third, we need a 
reformed insurance marketplace so that individuals and small 
employers can afford and find affordable coverage.
    Let me address the draft legislation that you have before 
the committee. First, let me thank you and the committee of 
moving forward on health care reform. We view that as very 
positive and necessary and we want to be constructive in what 
we believe will work and what we believe will not. We support 
the provisions that reform the insurance market so that there 
are more affordable coverage options. The bill also includes a 
requirement that all Americans get health insurance coverage 
and includes auto-enrolling for individuals into SCHIP or 
Medicaid if indeed they are eligible. We support both of those 
provisions and also support offering subsidies to low-income 
Americans who cannot afford coverage. The changes that you have 
included in the Medicare programs and other efforts to make our 
health care system more efficient are very positive. Medicare 
payments do need to be adjusted and we will provide the 
committee with comments on these and other issues.
    We do, however, have significant concerns about two major 
issues in the draft legislation and hope that the committee 
will consider some revisions. First, ERISA should not be 
changed if reforms are to be built on the employer-based 
system. The proposal before you would change some of the ERISA 
rules. For example, it would impose minimum benefit packages on 
our employees. Large employers design innovative plans 
including wellness and prevention initiatives that have been 
tremendously successful in helping employees take greater 
control over their own health and yet such programs which we 
believe are critical to the success of health care reform would 
be jeopardized by a new federally mandated benefit law.
    Second, we are very concerned about public plan proposals 
that would compete in the private marketplace. As large 
employers, we are concerned that our employees will suffer from 
additional cost shifting that come from inadequate government 
repayment to the providers. For that reason, we are concerned 
that the kind of cost shifting that we are dealing with now 
would be exacerbated. Further, the government plan could erode 
existing worker coverage if employees seek subsidized lower 
priced public option that would diminish the people in our 
plans and would leave employer-sponsored coverage with more 
expenses, most cost for both employers and employees.
    Innovation, which we think is the key to modernizing our 
health care system and getting our costs under control, 
benefits improvements and how best to care for patients, we 
believe come best from the private marketplace. We need to 
preserve the energy and the commitment to improve our health 
care market and we are concerned that government plans cannot 
do that as well as the private sector. We urge the committee to 
instead create even stronger rules to make the private 
insurance marketplace more competitive and we want to help in 
that effort.
    Business Roundtable believes that the search for bipartisan 
consensus can begin by honoring the principles that we have 
outlined in our written testimony and by crafting reform that 
is consistent with the uniquely American principles that drive 
our economy: competition, innovation, choice and a marketplace 
that serves everyone. On behalf of our members, we pledge to 
work with you and all the members of the committee to find 
workable solutions that let people keep what they have today in 
a reformed health care system that works better for everyone. 
Thank you.
    [The prepared statement of Mr. Castellani follows:]





    
    Mr. Pallone. Thank you.
    Mr. Sheils.

                    STATEMENT OF JOHN SHEILS

    Mr. Sheils. Hello. Good afternoon, Mr. Chairman. My name is 
John Sheils. I am with the Lewin Group, and I have specialized 
over the years in estimating the financial impact of health 
reform proposals. We got your bill on Friday and immediately 
went about doing some preliminary estimates on coverage and the 
impact on provider incomes. Allison is going to help me with 
some slides.
    [Slide.]
    The first slide, the system that the bill would establish 
begins with, we have new health insurance exchange. The 
exchange would provide a selection of coverage opportunities. 
Most of them are private coverage that we are familiar with but 
it would also offer a new public plan. The impact that this 
program will have on coverage is going to be drive by the 
groups that you are permitted to enroll. The program would 
allow individuals, self-employed and small firms, at least in 
the first year, to go through the exchange to obtain their 
coverage. In the third year, the newly established commissioner 
would have the authority to open the exchange to firms of all 
sizes. The new public plan, we predict, will attract a great 
many people because the premiums in the public plan will be 
much lower than for private insurance, and because of that, we 
think that a great many people are going to be attracted to it. 
Let us discuss that a little bit.
    [Slide.]
    On the next slide, we summarize some of the payment rates 
on the left side. You are using the Medicare hospital 
reimbursement methodology, and under Medicare, payments are 
equal to about 68 percent of what private payers have to pay 
for the same services. For physicians' care, you pay about--
well, Medicare pays about 81 percent of what private insurance 
pays. You are going to be adding another 5 percent to that, so 
we are looking at about 85 percent of private payers. And we 
also have some information here on what happens to insurance 
administrative costs in the exchange. The public plan will not 
have to worry--need an allowance for profits and it will not 
pay commissions for brokers and agents.
    [Slide.]
    The next chart shows what happens to premiums. For family 
coverage for the enhanced benefits package described in your 
legislation, in the private sector it would cost about $917 per 
family per month. Under the public plan, it would cost about 
$738 per family per month. That is savings of about $2,200 a 
year, and we think that is going to draw a lot of people into 
the public plan. Next page.
    [Slide.]
    On the right-hand side, we illustrate what happens to 
coverage when the plan is open to all firms. The program would 
reduce the number of uninsured by about 25 million people. 
There would be an increase in Medicaid enrollment of about 16 
million people but we find 123 million people going into the 
public plan. That is a reduction in private coverage of about 
113.5 million people. That is about 66 percent of all privately 
insured persons. This of course is if and when the plan is 
opened up to firms of all sizes. If it is limited to just firms 
less than 10 workers as in the first year, you still get a 
reduction of about 25 million people uninsured, still 16 
million people with Medicaid coverage but private coverage 
would drop by about 20 million people. The public plan coverage 
would be 29 million people. Next chart, please.
    [Slide.]
    This chart summarizes what happens to provider incomes 
under the plan. On the right-hand side, we have the scenario 
where all firms are eligible to participate in the program. 
Hospital margin, which is hospital profit, net income 
basically, would be reduced by about $31 billion because of 
that. That is about a 70 percent reduction in hospital margin. 
Physician net income would go down by about $11 billion. That 
comes to, in terms of net income, that is an average of about 
$16,000 per year reduction in net income per physician. On the 
left-hand side, we show what is happening in the small firms, 
and this is really interesting because under this scenario 
provider incomes actually go up. For instance, hospital margin 
goes up by about $17 billion. Much of this has to do with the 
fact that we will have reduced uncompensated care and they will 
be paid for services they were providing for free before, and 
there will be new services they will provide to newly insured 
people. The physician net income would go up by about $10 
billion, and the increase in income there is largely driven by 
the fact that you are going to increase payments for primary 
care under the Medicaid program.
    That sums it up, and I am out of time so I will turn it 
over to my colleague here.
    [The prepared statement of Mr. Sheils follows:]





                   STATEMENT OF MARTIN REISER

    Mr. Reiser. Mr. Chairman and members of the committee, I 
want to thank you for the opportunity to testify about 
proposals to reform the U.S. health care system. I am here 
today on behalf of the National Coalition on Benefits, a 
coalition of 185 business trade associations and employers that 
have joined together to work with Congress to strengthen the 
employment-based system.
    The NCB supports health care reform that improves health 
care quality and reduces costs. The NCB recently wrote 
President Obama applauding his commitment to comprehensive, 
bipartisan health care reform. We expressed our shared view 
that a strategy to control costs must be the foundation of any 
effort to improve the health care system. I have included that 
letter in my written testimony.
    For many years, the American people have sent two clear 
messages to elected officials. First, Americans want to see 
change and improvements in both cost and access to health care, 
and second, Americans like the health benefits they receive 
through their employer. The NCB believes the American people 
are right on both points. We do need change, however, such 
change should not erode the part of the health care system that 
is working. The employer-sponsored model works well because it 
allows the pooling of risks and because group purchasing lowers 
health care costs, enabling those who are less healthy to 
secure affordable coverage for themselves and their families. 
ERISA and its federal framework allows employers to offer 
equal, affordable and manageable benefits regardless of where 
the employees live and work and without being subject to the 
confusing patchwork of mandates, restrictions and rules that 
vary from State to State.
    Yet as good as it is, the system is increasingly at great 
risk. As President Obama has said, soaring health care costs 
make our current course unsustainable. The National Coalition 
on Benefits completely agrees. Unfortunately, we are concerned 
that the legislative proposal released last week does not 
provide meaningful cost savings for the overall system. In an 
effort to expand coverage, cost containment has not received 
the priority it demands. For several years, employers have 
worked to make clear the issues that health care reform must 
properly address to preserve the employment-based system, 
control costs and lead to our support. To date, we have not 
seen legislative proposals where each of these core issues have 
been adequately resolved. I will briefly discuss our concerns 
on ERISA, the employer mandate and the public plan.
    If the objective is to build upon the employer-based system 
that successfully covers more than 170 million Americans, then 
employers must have the ability to determine how best to meet 
the needs of their employees. Legislation should not include 
changes to ERISA or other laws that would risk hurting those 
who are highly satisfied with the health care coverage they 
currently receive. The NCB opposes provisions that alter the 
federal ERISA law remedy regime. The existing structure 
encourages early out-of-court resolution of disputes and 
provides a national uniform legal framework to provide both 
employers and employees with consistency and certainty. The 
draft of the legislation would replace the successful structure 
with differing remedy regimes depending on where the employers 
and employees attain health coverage. All these differing 
bodies of law are likely to result in contradictory decisions 
about plan determination and would expose employers who obtain 
coverage to the exchange to unlimited state law liability. In 
other words, these legislative provisions would weaken the 
employer-based system.
    We are also concerned about proposals that would limit the 
flexibility of employers at a time when our country needs 
employers to create jobs and invest in future growth. Employer 
mandates including requirements to pay or play are not the 
answer to the health care problem because they undermine our 
ability to address 2 key goals of health care reform, coverage 
and affordability. On the public plan, we do not believe a 
public plan can operate on a level playing field and compete 
fairly if it acts as both a payer and a regulator. A public 
plan that would use government-mandated prices would result 
directly in a cost shift to other payers and thus would do 
nothing to address the underlying problems that make health 
coverage unaffordable for many. We already experience that cost 
shift today as Medicare, the largest payer in the United 
States, consistently underpays providers.
    In summary, we remain concerned about any provisions that 
would make health care more costly for employers and employees, 
to stabilize our employer-based system of health coverage or 
restrict the flexibility of employers to provide innovative 
health plans that meet the needs of their employees. As 
Congress moves forward to formal consideration of the 
legislation, we want to continue to work with all members of 
Congress to enact reforms that not only allow Americans to keep 
the coverage they have today if they like it, and for most 
Americans that means their employer-based coverage, but make it 
possible for them to count on it being there tomorrow when they 
need it.
    [The prepared statement of Mr. Reiser follows:]





    Mr. Pallone. Thank you, and thank you all. I am going to 
start, and I am going to try to get a lot in in my 5 minutes 
here so bear with me if you don't mind. Mr. Shea, you expressed 
concern about taxing health care benefits. And you know, and 
you acknowledge in your testimony, this came from the Senate, 
not from the President, not from the House, needless to say. My 
concern is that, you know, a stated purpose of this reform is 
to let people keep what they have, and of course that implies 
employer, not only for employer benefits, but whoever has an 
insurance policy that they have. So I mean if you just want to 
tell me briefly what the consequences would be. I mean I know 
everything is on the table, but this is something that I am 
concerned about. Just briefly.
    Mr. Shea. What was it that somebody said about some things 
are moving off the table, but we hope this is in that category. 
The main thing that would happen is destabilized employment 
coverage which, as I said, is exactly the opposite direction 
for where we need to go because it would change the 
relationship between employees and employers around this very 
important part of their compensation. Some employees who are 
younger might say, well, gee, I really don't need to be part of 
the group plan. I am going to go off since it is now taxed 
money. Secondly, it would penalize certain groups of workers 
because of their health status essentially. We looked at health 
funds----
    Mr. Pallone. I am going to stop you because, you know, I 
appreciate what you are saying but I have got to ask Mr. Rivera 
a question. He stressed the pay to play requirements for 
businesses and, of course, we get criticisms of this, and, you 
know, a suggestion that, you know, it is going to hurt 
business. Why do you think the pay to play requirement is 
necessary for, you know--why do you think it is a good idea 
basically?
    Mr. Rivera. Because we believe at this moment some of the 
employers--the employers who basically are providing health 
care are basically subsidizing those who are not providing 
health care. For example, on average health insurance is about 
between $1,300 to $1,500 more for the cost of a family 
insurance, and those who don't provide health care coverage to 
their employees are basically on the free ride here. That is 
basically it.
    Mr. Pallone. OK. And what about the public option? You 
know, you said you are supportive of it. Obviously, it is in 
the discussion draft. Are insurance market performance enough 
to drive down costs and ensure coverage for all or do you think 
the public option is an essential piece of the reform?
    Mr. Rivera. We believe that it is an essential part of the 
reform, sir, and we believe that it will be a very important 
contribution to lowering the cost of health care. And basically 
this is America where we all can compete and this is another 
way of competing to lower the cost, sir.
    Mr. Pallone. OK. Mr. Sheils, I am going to you last here. I 
have about 2 minutes left. You criticize the public option and 
just for purposes of full disclosure the study you mentioned, 
my understanding, and tell me if I am wrong, is it was 
completely funded by an insurance company. You said in your 
written testimony you are the senior vice president of the 
Lewin Group and your group is--my understanding is your group 
is 100 percent funded by United Health Group, one of the 
largest insurance companies in the country. Is that accurate?
    Mr. Sheils. We are owned by United Health. We have a 36-
year tradition of doing----
    Mr. Pallone. But it is 100 percent owned by United Health.
    Mr. Sheils. I would like to finish.
    Mr. Pallone. Well, let me get to the next thing and you 
probably can respond to it----
    Mr. Sheils. Anyway, about 2 years ago and at that point we 
were--but our work is completely independent. We have complete 
editorial control over our work.
    Mr. Pallone. But I mean the group is 100 percent funded by 
United Health, right?
    Mr. Sheils. Well, we are a consulting firm. We are funded 
by the work we negotiate with the clients, so I work for the 
Commonwealth Fund, I work for Families, USA, I work for Blue 
Cross/Blue Shield.
    Mr. Pallone. Well, what about this study?
    Mr. Sheils. This study?
    Mr. Pallone. Yes.
    Mr. Sheils. This study was done on our own nickel.
    Mr. Pallone. But who funded it?
    Mr. Sheils. Well, we just did our own nickel. We did it out 
of our firm's overhead.
    Mr. Pallone. Did United Health directly or indirectly pay 
for it because they are funding you? I am just trying to get an 
answer to that.
    Mr. Sheils. You could say it that way but United Health did 
not review any of our materials.
    Mr. Pallone. OK. The only reason I mentioned it is our 
committee conducted an investigation of United Health and we 
found that the company had incredible profitability. In 2004 
their net income was $2.6 billion, 2005 it grew to $3.3 
billion, 2007 it went up to $4.7 billion. Even last year at the 
height of the financial collapse, the company's net income was 
$3 billion. And then in 2005 the CEO of United Health, William 
McGuire, was the third highest paid CEO in the country 
according to Forbes magazine. He resigned in 2006 after the SEC 
launched an investigation involving the back dating of stock 
options, but United Health gave him a severance pay of $1.1 
billion, which was stunning to me. I mean do you think it is 
appropriate for United Health to pay the CEO more than a 
billion dollars severance?
    Mr. Sheils. I don't have--if I were at the pay level where 
I would even know this stuff, it would be a much different 
spot. We were a firm that was bought by Genex which is owned by 
United Health. We don't get involved in anything like that and 
there is nobody in our firm who ever sees income of that type. 
You can only imagine how surprised we were when 2 years ago we 
were bought. They quickly assured us that they wanted us to 
maintain editorial control of our work to continue our 36-year 
tradition of non-biased, objective, non-partisan work.
    Mr. Pallone. All right. Thank you.
    Mr. Sheils. That is all I am about.
    Mr. Pallone. I appreciate that. Thank you. Mr. Whitfield.
    Mr. Whitfield. Thank you, Mr. Chairman. And I want to thank 
all of you on the witness panel for being with us today. We 
genuinely appreciate your testimony as all of us attempt to get 
through this legislation and understand as best we can what the 
ramifications and implications of the legislation will be. We 
hear a lot of discussion about the public plan, the public 
option, and I know some of you are opposed to it, some of you 
support it. What I hear most of all from members of the 
committee the concern is that if you have a public plan many 
people will leave the private plan, their employer plan, and go 
join that plan because the costs are lower, which is certainly 
understandable. But eventually you can basically destroy the 
employer plans because everyone is going to leave and then you 
will end up with one big government plan.
    And maybe that is OK except the Medicare system can be 
criticized in many ways, particularly because of the cost 
escalations and I am saying that because Medicare is basically 
a U.S. government plan and if this public option goes the way 
some people will say that is going to be a big government plan. 
And I will make one comment. In 1965 when they started the 
Medicare program the Congressional Budget Office did a forecast 
that in 1990 that plan would cost $9 billion. It turned out to 
be almost $200 billion by 1990, so that is an astronomical 
miscalculation. So, Mr. Shea, you represent the AFL-CIO?
    Mr. Shea. Yes, sir.
    Mr. Whitfield. OK. Well, tell me, the argument that I made 
that if it is less expensive more people are going to move over 
there and it is going to weaken the private system. Does that 
concern you or do you think that that argument has merit?
    Mr. Shea. Well, as I said, Congressman, we start out saying 
that we need to address cost containment just like others on 
the panel said that is job number 1. If we don't control these 
costs nothing else is going to be done in health care. So how 
do you do that? Well, there is several ways to do it but the 
public health insurance plan is one. You can calibrate the 
rates in the public insurance plan. This plan proposes Medicare 
rates. You could do Medicare plus 10 percent or you could do 
halfway between private. That would all affect this. But the 
notion is to put some competition in the insurance market that 
now doesn't display any competition. What we have are really 
close relationships in my view between insurers and providers, 
and that is the problem that we have to change. It was what Mr. 
Conklin was talking about. We are just trapped by this. So 
there are other ways to do it but this is what the competitive 
model is----
    Mr. Whitfield. OK. Thank you. There are other ways to do 
it. Mr. Reiser, will you make a comment on the argument that I 
put out there that people are making?
    Mr. Reiser. The concern that we have about the public plan 
option is Medicare currently underpays, and there is a 
significant cost shift onto the private employers which is a 
big problem in the current system. A public plan option, we 
believe, would exacerbate that, particularly a public plan 
option as outlined in the proposal that would pay Medicare 
rates so that would just exacerbate the system. The second 
problem that we see with it is if people do leave the employer 
pool, that is going to weaken our risk pool and lead to higher 
costs for the remaining employees, and over time will weaken 
and potentially destroy the employment-based system.
    Mr. Whitfield. Yes, sir, Mr. Rivera.
    Mr. Rivera. One of the things that we have in New York 
State is a health care plan which provides health care for 
health care workers in the greater New York metropolitan area, 
and we pay about $8,500 for family insurance. Upstate New York 
where only one of the insurance companies basically dominates 
the market, we pay close to $17,000 so basically the idea of 
the public plan is to come into markets where basically are 
concentrated by only one insurance company, and there is a case 
of Maine, New Hampshire, and you can see high cost areas where 
basically the lack of competition that basically insurance 
companies don't come into those areas and the cost of health 
care goes up.
    Mr. Whitfield. Mr. Castellani, I know the Business 
Roundtable is comprised of very large companies but what are 
your views on the pay or play provisions of this bill?
    Mr. Castellani. Well, pay or play is almost an academic 
issue for us because indeed on the surface all of our members 
provide health care, and we want to continue providing it. The 
problem that we see with the concept of pay or play is that we 
need to bring into the healthcare system all those people who 
are currently not covered or can't afford to be covered because 
we are paying for them through the kind of cross subsidies that 
Mr. Reiser referred to. We do not see the merit of forcing 
companies to buy something that they cannot afford, 
particularly the small businesses. And so pay or play we think 
can be dealt with if we provide the kind of competition that 
both Mr. Rivera and I think all of us would agree on but we 
think it is best provided through reforms in the insurance 
market because in addition to what Mr. Reiser said, that is, 
the public option plan exacerbates the cost shift. It 
potentially erodes our risk pool and causes younger, healthier 
people to leave, quite frankly, and get a lower premium.
    But it also does something else that hurts what we all want 
and we all talk about, and that is we see much more innovation 
in terms of delivery, in terms of wellness, in terms of 
prevention, in terms of quality, in terms of information 
technology, the kinds of things that will reduce costs and 
increase quality coming out of the private sector. We are 
concerned that a government run program as we see now in 
Medicare and Medicaid just doesn't have the ability to 
innovate, so we also lose out on the ability to gain from those 
innovations.
    Mr. Whitfield. Thank you. I think my time has expired.
    Mr. Pallone. Mrs. Capps, our vice chair.
    Mrs. Capps. Thank each of you for your presentations. It 
has been a good panel. You waited a long time, many of you, 
because it has been a very long day of presentation and 
different panels on this topic of health care reform. I have 
questions for two of you because there is not enough time, only 
5 minutes, and my first question will be for Mr. Rivera with 
SEIU. In your testimony, Mr. Rivera, you expressed that 
individual responsibility must be augmented by measures to 
ensure affordability. It seems fair to think that our health 
care system should meet hard-working Americans halfway. For 
this reason, SCIU supports affordability credit for families 
between 133 percent and 400 percent of the federal poverty 
line. Why do you believe it is necessary to offer these credits 
for families up to 400 percent of the poverty level?
    Mr. Rivera. Part of the problem that we have is the 
incredible cost of health care these days. For example, in the 
case of SEIU almost 50 percent of the members of our union 
basically live on very meager means, less than $35,000, so when 
you take into account on one hand the high cost of health care 
and the disposable income you can see that basically in order 
to make it meaningful you have to have subsidies.
    Mrs. Capps. So you are talking about your work force, hard-
working men and women with raising a family and trying to have 
a quality of life in this country, not at all luxurious, but 
still they are doing essential work in their communities and 
they should have a decent health care system, and so you are 
wanting to provide----
    Mr. Rivera. As a matter of fact, the overwhelming majority 
of Americans who don't have health care coverage are working 
people who make more money than to qualify for Medicaid and are 
not enough to qualify for Medicare and then the question that 
they have----
    Mrs. Capps. Which shows you one of the disparities that the 
premiums are so expensive that you really--if you are going to 
have your own private insurance plan, self-employed or 
whatever, you have to be upper middle class or wealthy in order 
to pay for it, and that is one of the major challenges that we 
face in this country right now. I am sure you would say that. 
Are there some other protections? We are talking about middle 
class, right, or at least what we want to consider as the 
middle class, the working class, the hard-working people who 
keep this country going whether in small businesses or in large 
companies providing labor or providing management. What other 
projections do you believe are necessary to make health care 
more affordable for the middle class? This is a big question, 
but I want to also move on to another subject.
    Mr. Rivera. I think the fundamental question that we have 
is that we are spending 17\1/2\ percent of our gross domestic 
product on health care, and if we do not--and I think my 
colleague, Mr. Shea, was talking about it, if we don't resolve 
the problem of the cost controls we are not going----
    Mrs. Capps. I see other people nodding your heads. Is this 
sort of a given that this is one of the major challenges that--
and one of the reasons that you are participating is because we 
need reform to deal with this in some aspect. I appreciate 
that. You are a very diverse group, I might add. I think there 
is quite a cross section here. That is interesting. I would 
like to now turn for the last couple minutes to you, Mr. 
Sheils, just some particular questions about what you were 
talking about. Your analysis suggested a public option can get 
lower premiums than private plans. Some of our colleagues are 
making the--come to the conclusion that this disparity--that a 
private plan is not even going to be able to compete with the 
public option. Does your model assume that private insurers and 
large employer purchases are simply price takers with no 
ability to add value or change behavior in a competitive 
market? In other words, it is so monolithic in that private 
world that there is no ability to compete?
    Mr. Sheils. Well, we don't conclude that they cannot 
compete. We conclude that there are only certain types of plans 
that could survive, and those would be integrated delivery 
systems like some of the better HMO type models. I would like 
to explain that though because there are some key issues here. 
Right now a lot of the insurers get price discounts with 
providers.
    Mrs. Capps. Right.
    Mr. Sheils. Having to do with the fact that they make 
volume discounts. They say to a hospital I will bring you all 
100,000 of my people for their hospital care if you will give 
me a break. Now if everybody goes to the public plan and the 
private health plan only has 10,000 people left in it----
    Mrs. Capps. The public plan is not going to be able to 
offer that, is it? That is pretty competitive.
    Mr. Sheils. I wanted to finish my--my point is if there is 
only 10,000 people left in the private insurance plan then they 
are not going to be able to negotiate discounts that are as 
deep as what they can get today.
    Mrs. Capps. And that is the only way they can be 
competitive.
    Mr. Sheils. Right.
    Mrs. Capps. I would hope that there would be a lot more 
creativity within the private sector. I will get to you but--
but you said I could have a little more time because of that 
terribly disruptive moment there. Anyway, maybe you or someone 
else would comment about some of the larger markets like Los 
Angeles, New York City, private plans sitting below Medicare 
fee for service levels. How do you factor that into it and then 
I will open it up if there is time?
    Mr. Sheils. Well, there are places where there are smaller 
disparities between Medicare and private, and then there are 
places where there is much larger disparity. In those areas 
where you have large disparities, we get quite a bit of shake 
up. In areas where there is little disparity it doesn't really 
show us very much of a change.
    Mrs. Capps. Another comment on this with the other----
    Mr. Shea. Just on the whole dynamic. I think what is 
important to bear in mind about the Lewin analysis is that it 
is based on the prices. Your point is just price taking. 
Employers, and you could ask people on this panel, employers 
make decisions based on more than price in health care. This is 
a very----
    Mrs. Capps. Is that a valid point? May I ask for 
corroboration?
    Mr. Pallone. One more and then I think we got to move on.
    Mrs. Capps. OK. I would hope so because I would hope that 
we would have a little more creativity in the private market. 
We actually need that competition because this is too big for 
anyone's response. Many of us feel that way, and I think that 
is a feature of the public option is that it will be 
competition and it will be a competitive market place. In my 
congressional district it isn't competitive at all. It is rural 
and there is only one private provider. So, you know, this is a 
thoroughly needed situation. I will yield back, Mr. Chairman.
    Mr. Pallone. Mr. Gingrey.
    Mr. Gingrey. Mr. Chairman, thank you. Let me direct my 
question to Mr. Castellani of the Business Roundtable. Mr. 
Castellani, could you explain to us how the public plan 
proposals would undermine the private insurance industry that 
many Americans are very happy with, and I am not--quite 
honestly, I have read some of your testimony, and I am not sure 
where you are on this public plan proposal. In the interest of 
full disclosure, I am concerned about it so that is the reason 
for my question.
    Mr. Castellani. Yes, sir. What we are concerned about is 
not that it would undermine although it would the private 
insurance but it would undermine our ability as employers to 
provide health care for our employees through the private 
insurance market. And it is for the reasons that we have 
discussed here and it is primarily three. We do agree with 
competition. What Congresswoman Capps was addressing is what we 
think is part of the solution. We need greater competition, but 
that competition has to be on a level playing field. If a 
government plan exists and it has all the elements of a private 
plan except it is not required to pay its investors back a fair 
return on their investment, the taxpayers in this case, then it 
can and will by definition have a lower premium cost. So the 
first effect is we would lose people who could qualify and 
would move to that lower premium from our plan.
    As a result of that, they will tend to be younger and tend 
to be healthier employees. Our costs go up because we would 
lose that spectrum of our risk pool that allows us to provide 
an affordable product for all of our employees.
    Mr. Gingrey. Now, Mr. Castellani, you are speaking from the 
perspective of the Business Roundtable?
    Mr. Castellani. From the payers, yes.
    Mr. Gingrey. From the Business Roundtable?
    Mr. Castellani. Correct.
    Mr. Gingrey. And we are talking about the payers and there 
are probably 270 million lives covered through employer-
provided health insurance. My numbers here say most of the 177 
million Americans who have employer-based coverage say they are 
happy with the coverage they receive. President Obama, God 
bless him, has promised to ensure that those folks can keep 
what they have. I think that is almost a quote. He likes the 
word folks. Those folks can keep what they have. I have heard 
him say it many times. Do you think that the public plan could 
lead to Americans losing their current coverage because of an 
unfair playing field that would be established by a public 
plan?
    Mr. Castellani. Yes, I think it runs that risk.
    Mr. Gingrey. All right. Well, I tend to agree with you. Now 
describe for the committee and for everyone in the room what 
are some of the unfair aspects that could be attributed to a 
public plan that we are concerned about, that you are concerned 
about, that the Business Roundtable is concerned about?
    Mr. Castellani. Well, as I had answered previously, a lower 
premium cost would be attractive to some of our own employees 
for which we provide coverage now. If they leave the system, we 
have a reduced risk pool and the nature of that risk pool, the 
nature of our employees could leave us with a more costly and 
fewer number of lives to cover. The second thing that it does 
is by its design in this draft legislation it does not fully 
reimburse for cost, so another large player in addition to 
Medicare and Medicaid that does not fully reimburse for cost 
because it is a situation, for example, you are a hospital. The 
government is not going to pay any more, Medicare and Medicaid 
is not going to pay any more, the uninsured can't pay any more. 
There is only one person left paying and that is the employers, 
so it exacerbates the cost shift, makes our cost potentially 
greater rather than what we are all trying to achieve which is 
more affordable health care at lower cost trajectories than we 
have now.
    The third thing it does is it hurts us in the long term and 
that is that fundamentally government programs are not able to 
innovate at the kind of rates and with the kind of creativity 
that we see in the private sector with competition, and we need 
that kind of innovation to bring down the trajectory of cost so 
it hits us 3 ways in raising our----
    Mr. Gingrey. I had one more, Mr. Chairman. I can't see the 
clock.
    Mr. Pallone. It keeps going off. Go ahead.
    Mr. Gingrey. OK. Thank you, Mr. Chairman. I appreciate your 
indulgence. Just one more question, Mr. Castellani. Under this 
draft proposal, a tri-committee draft proposal, did you see 
anywhere that describes what would happen if the public plan 
did not set the premiums and the cost-sharing high enough to 
cover its cost? Was there a provision that described what 
happens if the public plan--if their reserves are not high 
enough, for example, and indeed was there anything in the draft 
that describes where those reserves would come from and how 
they would compare with the reserves that were required of the 
private insurance, health insurance plans, that they are 
competing with.
    Mr. Castellani. I don't believe they were--at least in my 
reading of it and analysis of it, they weren't specified. They 
say there are reserves. Reserves would be provided for. But the 
one thing that is missing even whatever levels they would be 
provided at and the networks would be provided at in the public 
plan the one thing that is missing is a fair return on the 
people who invest in the capital that allows that public option 
to exist. If you don't have that, you always have accost 
advantage.
    Mr. Gingrey. Well, I thank you very much, and I am sure my 
time has probably already expired. Mr. Chairman, thank you for 
your indulgence. I appreciate it, and I yield back.
    Mr. Pallone. Thank you. I think that is the end of our 
questions. Thank you very much. We appreciate it. I know it 
keeps getting later. We have one more panel. You may get, as I 
think you know, you may get some additional written questions 
within the next 10 days and we would ask you to get back to us 
on those. Thank you very much. And we will ask the next panel 
to come forward. I think our panel is seated. And I know the 
hour is late, but we do appreciate you being here, and I am 
told we may also have another vote so we will see. We will try 
to get through your testimony. This is the panel on insurer 
views. And beginning on my left is Howard A. Kahn, who is Chief 
Executive Officer for L.A., I assume that is Los Angeles, Care 
Health Plan. L.A. OK. Karen L. Pollitz, who is Project Director 
for the Health Policy Institute at Georgetown Public Policy 
Institute, Karen Ignagni, who is President and CEO of America's 
Health Insurance Plans, and Janet Trautwein, who is Executive 
Vice President and CEO of the National Association of Health 
Underwriters. I don't think I have to tell anyone here that we 
try to keep it to 5 minutes, and your written testimony will be 
included complete in the record. I will start with Mr. Kahn.

  STATEMENTS OF HOWARD A. KAHN, CHIEF EXECUTIVE OFFICER, L.A. 
  CARE HEALH PLAN; KAREN L. POLLITZ, PROJECT DIRECTOR, HEALTH 
  POLICY INSTITUTE, GEORGETOWN PUBLIC POLICY INSTITUTE; KAREN 
 IGNAGNI, PRESIDENT AND CEO, AMERICA'S HEALTH INSURANCE PLANS; 
AND JANET TRAUTWEIN, EXECUTIVE VICE PRESIDENT AND CEO, NATIONAL 
               ASSOCIATION OF HEALTH UNDERWRITERS

                  STATEMENT OF HOWARD A. KAHN

    Mr. Kahn. Thank you, Chairman Pallone, members of the 
committee. Thank you. The need for national health care reform 
has never been greater. As the CEO of L.A. Care Health Plan, 
America's largest public health plan, I am here to provide 
information about our model and how a public health option has 
worked in California for more than a decade. L.A. Care is a 
local public agency and health plan that provides Medicaid 
managed care services. We opened our doors in 1997 as the local 
public plan competing against a private health plan, Health Net 
of California, Inc. L.A. Care strongly supports the concept 
that public plans can provide choice, transparency, quality, 
and competition. L.A. Care competes on a level playing field 
against our private competitor. Plans must have enough funding 
to endure provider payments and operate under the same set of 
rules.
    L.A. Care has always been financially self-sustaining and 
has never received any government bailout or special subsidy. 
L.A. Care serves over 750,000 Medicaid beneficiaries and has 64 
percent of the Medicaid market share in Los Angeles. The 
competition between L.A. Care and Health Net has resulted in 
better quality and system efficiencies. For example, as part of 
our efforts to distinguish ourselves in the market place, L.A. 
Care attained an excellent accreditation from NCQA, validation 
that it is possible to provide quality care to the poorest and 
most vulnerable in our communities. There are 7 other public 
plans like L.A. Care in California providing health coverage to 
Medicaid beneficiaries. In all of these counties, the public 
plans compete against private competitors.
    Two and a half million Medicaid beneficiaries are provided 
health services through this model. California has other public 
plan models as well. Congresswoman Eshoo, a member of this 
subcommittee, is very familiar with the enormously successful 
county organized health system which she and I helped create 
within her district. Our provider network includes private and 
public hospitals and physician groups, non-profits, for-
profits, federally qualified health centers, and community 
clinics. Our subcontracted health plan partners include some of 
the biggest private health plans, Anthem Blue Cross and Kaiser 
Permanente, as well as smaller local plans. In addition to 
Medicaid, L.A. Care operates a CHIP program, Medicare Advantage 
special needs program, and a subsidized product for low income 
children.
    What makes L.A. Care, a public health plan, different? L.A. 
Care conducts business transparently. We are subject to 
California's public meeting laws so all board and committee 
meetings are open to the public. L.A. Care answers to 
stakeholders, not stockholders. Its 13-member board includes 
public and private hospitals, community clinics, FQHCs, private 
doctors, Los Angeles County officials and enrollees. Our 
enrollees actually elect 2 of our board members resulting in a 
strong consumer voice. Part of our mission is to protect the 
safety net. When Medicaid managed care began there was fear 
that FQHCs and public hospitals would lose out. Through several 
strategies over 20 percent of L.A. Care's enrollees have safety 
net providers as their primary care home. In Los Angeles large 
numbers of people will remain uninsured under even the most 
ambitious health care reform proposals, and the safety net will 
continue to need our support.
    Local public plans like L.A. Care protect consumer choice. 
Since we started, 3 private health plans serving this 
population in Los Angeles have gone out of business. L.A. 
Care's stability has ensured that Medicaid beneficiaries 
continue to have continuity and choice. Local public plans 
raise the bar on performance and quality in their local 
communities. L.A. Care offers a steady calendar of provider 
education, opportunities that improve provider practices and 
the quality of care. Our family resource center serves over 
1,200 people, most of whom are not our plan members. While 
defining a public plan option is still underway, we recommend 
against creating a monolithic national public plan. Health care 
is, and will continue to be, delivered to local markets which 
vary in terms of population and competition, infrastructure, 
community need, and medical culture.
    California recognized years ago the need to lower cost and 
improve quality and develop local plan options for Medicaid 
that have been supported by each successive Administration, 
both Democrat and Republican. With regard to the health 
insurance exchange, L.A. Care supports allowing states to 
create their own exchange. We appreciate the recognition that 
Medicaid beneficiaries have special needs and so are not 
included at first. However, we strongly recommend excluding 
Medicaid beneficiaries completely as they are among the most 
vulnerable to care for and present unique challenges. 
California's local public plans are successful local models 
that should be considered. Let us build on what is working in 
health care and focus on fixing what is broken. Thank you.
    [The prepared statement of Mr. Kahn follows:]





    Mr. Pallone. Thank you. Now let me mention that we do have 
votes, but I would at least like to get one or possibly two of 
the testimony in, so let us see how it goes. Ms. Pollitz next.

                 STATEMENT OF KAREN L. POLLITZ

    Ms. Pollitz. All right. Thank you, Mr. Chairman, members of 
the committee. First, I would like to congratulate you on the 
tri-committee draft proposal. It contains the key elements 
necessary for effective health care reform and at this time I 
am sure you are going to get the job done. The proposal 
establishes strong new market reforms for private health 
insurance with important consumer protections, a minimum 
benefit package, guaranteed issue, modified community rating, 
elimination of pre-existing condition exclusion periods. These 
rules apply to all qualified health benefit plans including 
those purchased by mid-size employers with more than 50 
employees. Today, mid-size firms have virtually no protection 
against discrimination. When a group member gets sick premiums 
can be hiked dramatically at renewal forcing them to drop 
coverage and with no guaranteed issue protection finding new 
coverage is not an option.
    I commend you for not including in the bill exceptions to 
the employer non-discrimination rule that would allow employers 
and insurers to substantially vary premiums and benefits for 
workers through the use of so-called wellness programs. 
Clearly, wellness is an important goal but ill-advised 
regulations issued by the Bush Administration cynically hid 
behind it to allow discrimination against employees who are 
sick through the use of non-bona fide wellness programs that 
penalize sick people but do nothing else to promote good 
health. Another good feature of the tri-committee bill is the 
requirement of minimum loss ratios of 85 percent, which will 
promote better value in health insurance. The bill grants broad 
authority to regulators to demand data from health plans in 
order to monitor and enforce compliance with the rule, and it 
creates a health insurance ombudsman that will help consumers 
with complaints and report annually to the Congress and 
insurance regulators on those complaints.
    Another key feature in the bill is the creation of a health 
insurance exchange and organized insurance market with critical 
support services for consumers. The exchange will provide 
comparative information about plan choices and help with 
enrollment appeals and applications for subsidies. The exchange 
will negotiate with insurers over premiums to get the best 
possible bargain and importantly consumers and employers who 
buy coverage in the exchange will also have that choice of a 
new public plan option. I know you have talked today about the 
cost containment potential of such an option. It is all 
important that a public option would offer consumers an 
alternative to private health plans that for years have 
competed on the basis of discrimination against people when 
they are sick. Just last week, your committee held a hearing on 
health insurance rescissions that discussed people who lost 
their coverage just as they started to make claims.
    At the Senate Commerce Committee hearing yesterday, a 
former officer of Cigna Insurance Company testified on common 
industry practices of purging employer groups from enrollment 
when claims costs get too high. I would like to submit his 
testimony for your hearing record today. When consumers are 
required to buy coverage having a public option that doesn't 
have a track record of behaving in this way will give many 
peace of mind. And I left the rest of my statement in the 
folder. Isn't that terrible? There we are. I got it. I got it. 
I am so sorry. Second, a public plan will promote transparency 
in health insurance market practices. In addition to data 
reporting requirements on all plans, with a public plan option 
you will be able to see directly and in complete detail how one 
plan operates, and if private insurers continue to dump risk 
after reform it will be much easier to detect and sick people 
will have a secure coverage option while corrective action is 
taken.
    Mr. Chairman, in my written statement I offer several 
recommendations regarding the draft bill and will briefly 
describe just a few of them for you now. First, the benefit 
package, the benefit standard in your bill does not require a 
cap on patient cost sharing for care that is received out of 
network and it really needs one. Also, the benefit standard 
does not specifically reference as a benchmark that Blue Cross/
Blue Shield's plan that most members of Congress enjoy. Many 
have called on health reform to give all Americans coverage at 
least as good as what you have. It is not clear whether your 
essential benefits package meets that standard but if it 
doesn't, it should, and if that raises the cost of your reform 
bill, it will be a worthwhile investment to raise that 
standard.
    Over the next decade, our economy will generate more than 
$187 trillion in gross domestic product and we will spend a 
projected $33 trillion on medical care. The stakes are high and 
it is important to get this right. The second rules governing 
health insurance must be applied equally to all health 
insurance. As drafted in your bill, some of the rules that will 
apply in the exchange might not apply outside of the exchange. 
Further, there is no requirement that insurers who sell both in 
and out of the exchange to offer identical products at 
identical prices. If the rules aren't parallel risk 
segmentation can continue. As an extra measure of protection, 
the tri-committee bill provides for added sanction on employers 
if they dump risks into the exchange and similar added 
sanctions should apply to insurers.
    Another problem with non-parallel rules is the exemption 
for non-qualified health benefit plans and limited benefit 
policies called accepted benefits. Health care reform is your 
opportunity to end the sale of junk health insurance and you 
should do it. And, finally, Mr. Chairman, with regard to 
subsidies, the bill creates sliding scale assistance so that 
middle income Americans with incomes up to 400 percent of the 
poverty level won't have to pay more than 10 percent of income 
towards their premiums. But as charts in my written statements 
show, some consumers with income above that level could still 
face affordability problems, especially those who buy family 
coverage and baby boomers who would face much higher premiums 
under the 2 to 1 A trading. I hope you will consider phasing 
out the A trading and also setting affordability premium cap so 
that no one has to spend more than 10 percent of income on 
health insurance. Thank you.
    [The prepared statement of Ms. Pollitz follows:]





    Mr. Pallone. Thank you. I don't want to cut you short, Ms. 
Ignagni, so you can all wait until we come back. Hopefully, we 
won't be too long. I would say 20 minutes or so. Thank you.
    [Recess.]
    Mr. Pallone. The hearing will reconvene, and we left off 
with Ms. Ignagni. Thank you for waiting.

                   STATEMENT OF KAREN IGNAGNI

    Ms. Ignagni. Thank you, Mr. Chairman, members of the 
committee. It is a pleasure to be here, and having watched the 
hearing all day I just want to congratulate you. It is a 
wonderfully diverse group of people that you have assembled and 
you all should be congratulated. It was terrific to watch it. I 
think in the interest of time recognizing you have been here 
all day, I want to make just a couple of points. First, on 
behalf of our industry, we believe that the nation needs to 
pass health reform this year. We don't believe that the 
passionate debate on which direction or form that should take 
in any way should deter getting this done. It needs to happen. 
And to that end, I think it is somewhat disappointing that the 
focus generally in the press and here in Washington had been 
almost exclusively on the question of whether to have a 
government-sponsored plan or not. And I think in many ways one 
could say that it is obscuring the broad consensus that exists 
and indeed that I believe you built on in the legislation in 
several important areas.
    First, we see several important areas. First, we see a 
consensus on improving the safety net and making it stronger. 
Second, providing a helping hand for working families. Third, a 
complete overhaul of the market rules. We have proposed an 
overhaul. You have imbedded it in this legislation. We firmly 
support it and congratulations for it. We think it is time to 
move in a new direction and we are delighted you are doing 
that. Next, a responsibility to have coverage. We think that is 
very important because, in fact, the market and many of the 
questions today about how the market works today really can be 
answered because until Massachusetts passed legislation 
requiring everybody to participate the industry grew up with 
the rules that are no longer satisfactory to the American 
people, and the opportunity to get everyone in and 
participating is an opportunity to charge a new course.
    Next, the concept of one-stop shopping for individuals and 
small employers. Next, investments in prevention and chronic 
care coordination. Next, addressing disparities. Bending the 
cost curve. A number of the witnesses have talked about that 
today. We believe it is integral to moving forward. And, 
finally, improving the work force creating new opportunities 
and looking at where we have deficits and attending to them. 
The committee's draft contains many and all--actually all of 
these elements, and we commend you for it. Moreover, we feel 
that we have to seize the moment as a country and build on this 
consensus that will accomplish what has eluded the nation for 
more than 100 years and that is to pass health care reform.
    The government-sponsored plan shouldn't be a roadblock to 
reform, and the key concept of introducing a government-run 
plan is that it would compete on a level playing field, but 
that is not what would happen. And, Mr. Chairman, as I sat here 
today, I thought of an analogy, and just to reduce it to a 
clear and hopefully very direct way to explain our concerns, I 
want to make an analogy to a race between 2 people, one that 
makes the rules and at the same time says to the other 
competitor this is my 50-pound backpack and I want you to carry 
it. Cost-shifting for Medicare and Medicaid is that backpack 
for our health plans and we can't take it off in this race. The 
government plan will run without that encumbrance. Moreover, it 
will add weight to the backpack. We now pay hospitals 132 
percent on average nationally of costs about 46 percent above 
Medicare rates. That has implications for preserving the 
employer-based system. We believe you cannot under those 
circumstances implications for hospitals and physicians who 
have long expressed concerns about Medicare rates and the 
adequacy or not adequacy--not being adequate, and the 
implications for the deficit which are not being taken into 
account.
    We believe that the most important message we can convey is 
that we have tools and skills to provide. Indeed, we have 
pioneered disease management and care coordination. We 
pioneered opportunities for individuals to be encouraged when 
their physician finds it acceptable to substitute generic 
drugs. We are recognizing high quality performance in hospitals 
and physicians, and we are moving down a path of showing 
results. Imbedded in our testimony are some of those results, 
which are very specific and very measurable about what we are 
doing and how we are doing a better job. We can help with 
traditional Medicare. We can bring more of those tools, but we 
hope that you will recognize the 50-pound backpack and the 
weight as we explain our concerns with a government-sponsored 
program.
    The most important message I can convey to you today is not 
to let what people disagree on threaten the ability to pass 
reform this year. Our members have proposed and are committed 
to a comprehensive overhaul of the current system. We have 
appreciated the opportunity to discuss key features of the bill 
with your staff, and we pledge our support to work to achieve 
legislation that protects consumers and provides health 
security to patients. Thank you very much.
    [The prepared statement of Ms. Ignagni follows:]





    Mr. Pallone. Thank you. Ms. Trautwein.

                  STATEMENT OF JANET TRAUTWEIN

    Ms. Trautwein. Thank you very much. And being the last 
witness of the day, I will try to not repeat everything that 
everyone else has said. What I would like to do is I agree with 
everything Ms. Ignagni has just said except that I do want to 
say one thing, and that is that the details matter. And one of 
the things that our members do for a living is we look at a lot 
of the details, and I feel it incumbent to bring up a couple of 
those because I think we do need to make sure that we get these 
things straightened out before we move forward. I do want to 
stress that we don't want to not move forward. We want health 
reform and we want it done correctly. I do want to mention a 
couple of things to illustrate to you that we have got to get 
some of these things that may appear to be small straight 
because they could have huge implications.
    First of all, I want to mention the rating provisions in 
the bill, and I want to stress I am not talking about the no 
pre-existing conditions. I am not talking about the no health 
status rating. I am not talking about anything like that. I am 
talking about specifically the modified community rating 
provisions. Currently the bill uses something called an age 
band of 2 to 1. I am not going to go into details about that 
except to tell you that it is too narrow. And, Mr. Chairman, I 
would like to use your own state for an example of it being too 
narrow. New Jersey recently went to 3\1/2\ to 1 age bands 
because what they had was too narrow already and it wasn't 
affordable for people. The gentleman on the last panel that 
talked about New Jersey rates of $13,000, they are in a 
situation of 2 to 1 age bands, and that is one of the reasons 
why it is too expensive. So we want to make sure that we 
establish bands that allow wide enough adjustments to make it 
affordable for more people so that we don't end up losing a lot 
of the young person participation.
    In addition, one of our very specific concerns has to do 
with the fact that this bill tends to lump all groups that are 
what we call fully insured together, whether they are a group 
of 10 people, 50 people, or 200 people, and the modified 
community rating provisions apply to all of them. Today, groups 
of over 50 on a gradual basis use their own claims experience, 
and when I talk about claims experience, I don't mean 
perspective health status ratings where they fill out a health 
statement in advance. I mean that the group develops community 
rates based on the experience of their own group of employees. 
It is very cost effective. It allows them to keep their rates 
low over time, and I would point out this is not a market that 
has problems today. These are not the people that are knocking 
on your doors telling you that they have a problem.
    And I would encourage you to not eliminate that ability for 
them to do that because the rate shock to the employers in that 
category will be fairly significant. I would also like to point 
out that the grandfathering provisions really need to be 
improved, and there are a couple of areas that I am thinking 
are probably just mistakes, it is a draft, inside the bill that 
ought to be changed. The provision, first of all, is too strict 
for individuals. It only allows them to add family members and 
frequently these policies are reviewed on an annual basis and 
other minor adjustments need to be made. For example, a person 
that has an HAS qualified plan has a legal adjustment to be 
made relative to the deductible on an annual basis, and the 
bill doesn't really allow for that. And then groups, of course, 
are not really grandfathered. They have a phase-in period over 
5 years, and we would be hopeful that groups could keep their 
coverage longer than that period of time.
    The one thing I want to talk about that I don't think 
anyone else has mentioned has to do with risk adjustment. This 
is something that we look at a lot. We are very involved with 
risk adjustment and reinsurance plans to make sure that they 
are stable. I am very concerned that the risk adjustment that 
is suggested is not adequate for starting up this program.
    The risk adjustment suggested is more something you would 
do once your exchange had been in effect for a period of time 
and it would adjust risks among the plans inside the exchange. 
It doesn't account for what is going to happen initially when 
we have lots of people entering the system, many of whom may 
have serious health conditions. For example, the way that your 
bill is written today on day one of guarantee issue every 
single person in this country that is in a high risk pool will 
come immediately into that pool, so we got to have something to 
mitigate the cost of those high risks coming in so that you 
don't end up with something you don't want which is a pool that 
results in costs that are higher instead of lower, so again 
these details are important that we get them straightened out 
correctly.
    I would be remiss if I didn't say something else about the 
public program. Like many of the people that have talked here 
today, we are very worried about a government run public 
program. I want to talk specifically about the cost shifting. 
There are a lot of things that we have concerns about but we do 
definitely see the impact of cost shifting. We all have heard 
the statistic but I think it bears repeating again. Almost 
$1,800 a year for the average family of 4 is a direct result of 
today's cost shifting without a new public program. And I want 
to mention one other thing. I see that I am out of time but I 
want to mention this very quickly. We have heard state premium 
taxes mentioned here many times today, but I want to kind of 
put a face on that because in New Jersey alone state premium 
taxes are $503 million annually to the state and they are not 
dedicated to insurance. They have gone to other programs.
    We have programs in North Carolina, Connecticut, Kentucky, 
Pennsylvania, North Dakota that were state premium taxes from 
firefighter programs. They buy equipment to fight fires and so 
these funds, I don't think the states can do without this 
revenue source. It is another example of how we are not going 
to have a level playing field and we need to think this through 
a little bit more carefully. And I have additional information 
but I am out of time so I will go ahead and stop now.
    [The prepared statement of Ms. Trautwein follows:]





    Mr. Pallone. Thank you. And, as I mentioned earlier, I 
think I did, that whatever your written testimony is or data 
that is attached to it, we will put in the record in its 
entirety. I wanted to--let me start with Ms. Pollitz. The 
discussion draft takes the step of prohibiting discrimination 
in insurance based on a person's health status, things such as 
disability, illness or medication history. However, you know, 
as we are trying to close the door on that with this bill, some 
are proposing others, and I am not entirely sure what you said, 
but I know that you said that, or at least in your written 
testimony, that insurers should--I am talking about Ms. 
Trautwein now, that insurers should continue to be able to 
alter premiums based on a person's past claims experience, and 
the way I understand it that employers would be permitted to 
change a person's premium not necessarily on their health 
status but on certain activities like wellness programs and 
those kind of things. I don't want to put words in your mouth.
    Ms. Trautwein. What I meant is not what I----
    Mr. Pallone. Sure. Go ahead.
    Ms. Trautwein. We want health status rating to go away for 
individuals.
    Mr. Pallone. Right, but you said that the employers----
    Ms. Trautwein. But we are talking about employer groups 
there they look at all of their employees, de-identified 
information, and they calculate what their anticipated claims 
are for the next year. This is done all the time. And then they 
figure out how much they need for reserves and things like that 
and they develop a rate based on their particular group and it 
is a very, very cost effective way of doing it. It results in 
lower rates for the employees, not higher. That is why we were 
asking for that.
    Mr. Pallone. I just want to make sure, and I am not trying 
to put words in your mouth, Ms. Trautwein. I am just trying to 
understand that I want, you know, employers be able to have 
wellness programs certainly but it just seems to me we have to 
insure the persons who are, you know, unable to achieve a 
specific physical or other goal and not penalize and therefore 
somehow health status comes back again. But I am not just 
talking about Ms. Trautwein's testimony. I am just talking 
about in general that we are trying to eliminate a lot of these 
things. Let me just ask you this, Ms. Pollitz. Can you discuss 
the role of employer wellness program and what sort of 
protections we can be sure to include to promote the positives 
without allowing this discrimination and what it would mean for 
people if insurers were able to use claims experience and 
ratings. Again, I am not entirely clear on what Ms. Trautwein 
was saying so maybe this is not fair, but hopefully between the 
two of you, you can answer my question.
    Ms. Pollitz. I think those are 2 separate things.
    Mr. Pallone. OK.
    Ms. Pollitz. Just very quickly on the wellness programs. 
You are right. I think there is a lot of interest. At 
Georgetown there are a lot of great programs, sponsored walks, 
time off, free exercise classes in the building, stuff like 
that, so I think there is a great deal of creativity and good 
intentions and good results in a lot of employer-sponsored 
wellness programs. But there are other programs that even take 
on the name incenta care that all they do is just apply health 
screenings, make you take certain health tests, and if you 
flunk them, that is it. Your benefits get cut, your deductible 
gets raised, or your premium gets hiked by a lot, and there is 
nothing else. There is no classes. There is no help. There is 
no nothing. So I think a return to the original notion under 
the old Clinton Administration regs for non-discrimination 
establish some standards for bona fide wellness programs, you 
know, some indication that there actually is wellness 
promotion, disease prevention activities going on, 
opportunities to participate, giving employees opportunities to 
participate that doesn't kind of come out of their hide.
    Privacy considerations, employers are not covered entities 
under HIPA privacy rules. All that health screen information 
that goes in, people are very worried about that. And so that 
is the first thing, and then whatever rewards there are, I 
think it is important to just keep that separate from the 
health plan because otherwise it----
    Mr. Pallone. Do you agree with her, Ms. Trautwein, because 
if you do then I don't need to pursue this any longer.
    Ms. Trautwein. Well, I sort of agree with her. The plan 
that she talked about that is not a real wellness program, we 
are not in favor of those. That is not what we are talking 
about.
    Mr. Pallone. OK.
    Ms. Trautwein. We are talking about very unique programs 
where each person designs their own goals. Somebody might be in 
a wheelchair and the other person might be a marathon runner.
    Mr. Pallone. OK.
    Ms. Trautwein. That would be silly.
    Mr. Pallone. I don't want to prolong it. I think we have--
--
    Ms. Trautwein. I think we agree. I do think you could have 
some incentives relative to people meeting the goals that they 
have established for themselves though.
    Mr. Pallone. OK. Now let me ask Karen the second question, 
and then I will quit. Mr. Shadegg, he is not here, I hate to 
mention him with his not being here, but I am, Mr. Shadegg and 
others have suggested that it would make sense to allow 
insurers to get licensed in one state and sell those license 
products and others. I have always been worried about that, and 
I know insurance commissioners don't like it. Can you tell me 
under this new national market place what would your thoughts 
be on a proposal like that? Did I say Karen? Either one of you. 
I meant Ms. Pollitz but you can answer it too, Ms. Ignagni.
    Ms. Ignagni. Thank you, Mr. Chairman. I didn't mean to step 
in. I thought you were directing----
    Mr. Pallone. No, go ahead.
    Ms. Ignagni. Actually just on the last question, I do think 
there is a combination as you are suggesting. I do think it 
makes a great deal of sense to have a permissible corridor of 
activities that could be done in the context of wellness and I 
think you are right to pursue it. There have been some major 
advances in the employer context that I think we could take 
advantage of and if you would like, Ms. Pollitz----
    Mr. Pallone. No, go ahead. Why don't you start with Ms. 
Pollitz and then we will come back to you.
    Ms. Pollitz. I will be happy to answer.
    Mr. Pallone. All right. This idea that you allow insurers 
to get licensed in one state and sell the products in another, 
I have always thought that was a dangerous thing, you know.
    Ms. Pollitz. The experience has been that that is a 
dangerous thing in association health plans. This is where you 
see this happening a lot and it is very dangerous and it 
creates opportunities for fraud.
    Mr. Pallone. But in addition now we have this national 
proposal in the draft so how does that all fit in with that?
    Ms. Pollitz. Well, now you have got a national proposal, 
but in your proposal a requirement to sell anywhere outside or 
inside of the exchange the first requirement that is listed is 
that you have to be state licensed, so you still need to--you 
have to have a license. You need to work with licensed agents. 
You need to meet solvency standards. All of those things are 
established at the state level. You don't need to replace those 
at the federal level and you haven't in your bill, but I think 
you need that close accountability so someone need to be 
watching the health plans all the time, otherwise, there is 
great nervousness about selling back and forth. Just the last 
thing I would mention, and I think it was mentioned in some of 
the written testimony, I think there may be a little bit of 
drafting imprecision about sort of what are the federal rules 
that apply across the board and then what other sort of state 
rules or rules under the old HIPAA structure that apply and 
that you probably need to straighten out a little bit in the 
next draft, but you don't want a situation where a health plan 
can be licensed in one state and operate under one set of rules 
but then be able to sell somewhere else under a different set 
of rules. If your national rules become completely across the 
board always the same, you still need to be state licensed but 
then this whole notion of selling across state laws I think 
won't matter.
    Mr. Pallone. And if you want to comment on----
    Ms. Ignagni. Thank you, Mr. Chairman. I think this is a 
tremendous opportunity to look very carefully at the regulatory 
structure and take a major leap forward. Having everyone in 
allows the complete overhaul that is baked into the proposal 
now, guarantee issue, no pre-existing conditions, no health 
status rating. We ought to specify those guidelines at the 
federal level, have uniformity and consistency, not re-regulate 
them at the state level, which is causing a great deal of 
confusion now in the market with same function regulated at 
different levels by different entities. We should take this 
opportunity to make it clear so that consumers can feel 
protected and know that the health plans will be accountable. 
We are very comfortable with that. We would have this enforced 
at the state level. States have done a very good job at 
maintaining solvency standards, consumer protections, et 
cetera. We think that is the right balance.
    We don't believe that--and we have some advice in our 
testimony but the drafting of the legislation in terms of these 
regulatory responsibilities. We think it is absolutely clear 
and key for consumers to understand how they will be protected, 
where they will be protected, and what the standards are. And 
we have such duplication and confusion now in the system it is 
very, very difficult for consumers to feel protected, so I 
think this is an opportunity to take a major step forward and 
really respond to that.
    Mr. Pallone. OK. Thank you. Mr. Burgess is next.
    Mr. Burgess. Let me just be sure I understand something 
now. The new public government run program is going to have to 
be licensed in all 50 states? I guess that is a maybe. This new 
public plan, this new government plan----
    Ms. Pollitz. I would defer to your own staff on that. It is 
a federal program.
    Mr. Burgess. Right. Medicare is a federal program. It is 
sold across state lines and it is not licensed individually to 
every state.
    Ms. Pollitz. I don't see the requirement that it has to be 
licensed by states. It is a federal program.
    Mr. Burgess. Right. So it seems to me that if Ms. Ignagni's 
group wants to develop something that meets certain criteria 
that it ought to be afforded the same courtesy to be sold in 
every state.
    Ms. Pollitz. Well, I don't know that that is a courtesy. I 
think it is just an administrative faculty.
    Mr. Burgess. The same administrative faculty then, but we 
will not call it a courtesy. It just strikes me as we have got 
2 sets of rules here, one for the public sector and one for the 
private. That seems inherently unfair. This is not what I 
intended to talk about but I am not following. Where is the 
inherent fairness in the--Ms. Ignagni has already talked about 
carrying a 50-pound weight on her back because she has got to 
carry the freight, the cross subsidization from the federal 
programs, the freight they are not paying in the first place 
and then on the other hand are we creating a product that is 
just by definition she can't compete with it because it is 
something that could be sold without regard to state insurance 
regulation. Ms. Ignagni, is that your understanding? Is that 
your understanding of this new public plan?
    Ms. Ignagni. I know the remedies. I would yield to counsel 
but I understand that the remedies are federal remedies, and I 
think the entity is charted at the federal level but I wouldn't 
want to be presumptuous in that regard.
    Mr. Burgess. Ms. Trautwein, you are the national 
organization. Do you have an opinion about this?
    Ms. Trautwein. Oh, yes, sir. We have a very--that is what I 
said in my testimony that we are very concerned about the fact 
that a playing field would never be level. On one is the 
payment, which I spoke about in my oral testimony. The other is 
the rules. Its regulation at the state level is what we have to 
meet. Having state premium taxes, state regulation, state 
remedy. That is not the way the bill reads at present.
    Mr. Burgess. Maybe I will figure out a way to say this more 
clearly and submit it in writing. Ms. Ignagni, I just have to 
say maybe I am a little bit disappointed after the group of six 
met down at the White House, and I know my own professional 
organization was part of that. And we came out of there with, 
what was it, a trillion dollars, 2 trillion dollars in saving 
over 10 years, and part of those savings was administrative 
streamlining, which presumably is one claim form instead of 50 
or 60, which we have to deal with now. I did see it reported, 
but I am also going to assume that perhaps there is one 
credential form rather than filling out 50 different 
credentialing forms every January and taking 2 or 3 full-time 
equivalents to have them do that in a 5-doctor practice. Why 
the hell didn't we do that a long time ago?
    Ms. Ignagni. Well, sir, that is a fair point, and we have 
been working now over a 4-year period. As you probably know, we 
set up a separate entity to actually take on this issue of 
simplification in the ways the banks took on the ATM 
technology. We have worked with physicians. We have worked with 
all the specialty societies. We have worked with hospitals, the 
different types of hospitals to make sure that we were going to 
get the language right. We have taken our time doing it to make 
sure we had that language right in a way that physicians, 
physician groups, and hospitals felt satisfied that we are 
actually solving the problem. So now that we did that, we were 
able to step forward and say we are not only taking the 
responsibility of moving forward, we are not going to be doing 
it voluntarily. We are very committed to legislation. We have 
said that. We want to make sure it is uniform across our 
industry. We are comfortable with that, and we will help you 
draft it.
    Mr. Burgess. Let me ask you because you have been up here a 
long time and you know the rules we live under with the 
Congressional Budget Office, and a $2 trillion score, whatever 
it is, over 10 years, the Congressional Budget Office is going 
to look at that and say if this is something you were supposed 
to be doing anyway then we just calculate it into the base line 
and there in fact is no new money to spend. How are you going 
to deal with that?
    Ms. Ignagni. This is a very important question you are 
asking. First, until we made the announcement no one said from 
our industry that we were going to be regulated for this, that 
it would be not only committed to legislation, we would support 
it and help draft it, so that is a material difference, number 
1. Number 2, for the $2 trillion goal to be achieved, as you 
know well, it is going to take an interdependence among all the 
stakeholders to achieve that. There are 4 key areas of savings 
if we are going to bend the curve as a nation, we have to take 
seriously. One is administrative simplification. We need to 
make sure that not only everything we have committed to, but 
where we go in the future is the right direction for hospitals 
and physicians that they can achieve----
    Mr. Burgess. You have no argument from me about that. I do 
wonder how we are actually going to get the dollars savings 
scored by--we all know, we talked about the Medicare 
prescription drugs. It is much more cost effective to treat 
something at the front end. Then when the target is destroyed 
and yet the Congressional Budget Office is never going to score 
that as an actual savings. It actually scores it as an expense 
because you are going to be treating more people by virtue of 
the fact you are treating disease at an earlier point.
    Ms. Ignagni. Well, we have some ideas on both. Let me just 
quickly----
    Mr. Burgess. We are about out of time. I am going to submit 
some other questions in writing. I would just say this. You see 
what a fluid situation this is, and please forgive me, Mr. 
Chairman, just close your ears for a minute. Pay no attention 
to the man behind the curtain. Things are in such flux. Don't 
be quick to give things up. By all means, work with us, but 
don't go to the White House waving the white flag as the first 
volley. In fact, it can be counterproductive. It is just my 
opinion. I will return it to the chairman.
    Ms. Ignagni. Sir, if you will allow me to just--Mr. 
Chairman, just a quick point.
    Mr. Pallone. Sure.
    Ms. Ignagni. I will be delighted to--you have some very 
important technical questions. I will be delighted to submit 
that for the record, but you ask now, the last point you have 
made is more in the category of right road, wrong road, so let 
me give you a very direct answer. If you look at the Council of 
Economic Advisors report unless we truly bend the cost curve in 
a sustainable way not only will we not be able to afford the 
new advances we want to make in getting everybody covered, we 
won't be able to afford the current system. We participated in 
an effort with the hospitals, the physicians, as you know, with 
the SEIU, farm and the device companies to take our seat at the 
table to say as stakeholders, as private sector entities, we 
could take part of the responsibility of stepping up and saying 
we have skills we can bring to the table to get this problem 
solved.
    That is what our plans do. That is the point that we are 
making here. Mrs. Capps had asked a question earlier to Mr. 
Castellani about what is the legacy of the private sector. The 
legacy of the private sector is that we have brought disease 
management care coordination. We are now recognizing physicians 
and hospitals, as you know, recognizing high quality 
performance. We brought the skills to do that. Patient decision 
support, personal health records, helping physicians not have 
to sort through loads of paperwork. We are proud of that. We 
pioneered those tools. We are implementing it. And similarly 
with administrative simplification, we are the key domino to 
make that happen. We have taken that very seriously, which is 
why we participated in this effort to try to contribute to this 
major goal.
    Mr. Pallone. That sounds like a good----
    Mr. Burgess. Briefly reclaiming my time.
    Mr. Pallone. You don't have any left.
    Mr. Burgess. It is obvious that there have not been people 
willing to work with you on that for the last 7 years that I 
have been here. I just cannot tell you how distressed I am that 
there was never this willingness to work when our side was in 
power, when a different president was in the White House. I 
feel personally affronted by this, and it is ironic that you 
were just at the point now where your industry is going to be 
delivering on the promise that we all knew it could do, and I 
don't know what the future holds for you, because there are 
many people, we have heard it over and over again in this 
committee this week, that a single payer system is what is down 
the road for the United States of America.
    Mr. Pallone. All right, let us get moving.
    Mr. Burgess. And all of the things that you have done with 
care and coordination disease management, that may be something 
you have developed only to find it is never really fully 
implemented to use in the private sector.
    Mr. Pallone. All right, Dr. Burgess.
    Mr. Burgess. We could have done a much better job with 
this. I yield back.
    Mr. Pallone. I don't want to be tough because I kind of 
like the dialogue, but we need to move on. Mrs. Capps.
    Mrs. Capps. I find it interesting too, but I really want to 
commend you all for the last panel of the day and think there 
ought to be some kind of medal. Do we design medals for the 
last panel? This is our fourth day of hearings too so if we 
seem a little kind of flat you will understand, I hope. But 
this is one I wanted to state in particular because you are so 
key in what you represent to us getting this right, and that is 
the goal and that is exactly where we all are. And, Ms. 
Ignagni, I appreciate you taking us down saying we have got so 
much we can agree on unless at least agree we don't agree. I 
don't agree with you on many things, and you know that, but 
that is OK. We can talk. I want to tell you, Ms. Pollitz, you 
hold the bar very high, and we are going to try to get as close 
as we can to the standards you are giving us. And, believe me, 
I have constituents who are reminding me of that every single 
day when I go home, which is a good thing. This is all across 
the map. But everybody's attention is now focused on health 
care, and I salute that. It is about time.
    Mr. Kahn, I have suburban counties north of your region but 
I am a big fan, as you know, because now I can boast that each 
of the 3 counties, I represent part of the 3, now has a county 
operated program, and that yesterday we were able to get Mr. 
Freeland, who speaks very highly of you, to testify as a 
provider. It is now called CenCal. And they were one of the 
first to get a waiver and there are some really exciting 
options that can be brought to the table now. Call them what 
you want but they are going to help us deliver care. I have a 
tough--I want to share what it is like to be a member of 
Congress and have the phone ring and hear a story, and you know 
this. But I just want to bring it out and make sure that it is 
on the record. This panel gives me the chance to relay the 
story of the constituent whose situation really illustrates why 
we need to bring honest competition into the insurance market. 
I represent a little town called Carpinteria, a rural part of 
Santa Barbara County.
    A young woman is a good member of part of a non-profit 
community organization. She has a 12-year-old daughter who was 
born with spina bifida and needs surgery to replace a stent in 
her brain. Her mother's income places her mother just over the 
threshold to--she is not able to qualify for Medicaid. We call 
it the Healthy Families, the SCHIP expansion, in California. 
Though her mother's employer does provide coverage the young 
girl is covered under the plan but this plan specifically 
states that it will not cover the surgery she needs for her 
life because spina bifida is a pre-existing condition. Ms. 
Ignagni, I am going to start with you. I would like to have 
comment for as much time as I have, and I don't want to go over 
time, but this plan that this mother has in rural--parts of my 
district there is one option in much of it, one private plan, 
and there are at most in Santa Barbara County, I think 2, maybe 
3, at the moment, so she can't shop around very much.
    She called my office because she is beside herself. This 
denial is for a condition that this young woman was born with, 
and this surgery is needed to relieve the pressure of fluid on 
her brain. People have been talking about pre-existing 
conditions in the private sector for a very long time. This is 
real time. This is happening today in my constituency.
    Ms. Ignagni. And, Mrs. Capps, I think there is no 
legitimate answer to your question but to say this is why we 
have worked so hard to propose change in the comprehensive 
proposal----
    Mrs. Capps. It hasn't happened yet.
    Ms. Ignagni. It has not happened yet because we have a 
system now where people purchase insurance if they are doing it 
individually when----
    Mrs. Capps. No, this is part of her employment, but let 
me----
    Ms. Ignagni. If it is part of an employer then guarantee 
issue----
    Mrs. Capps. A non-profit organization with very minimal 
amount that they can spend for employee-covered care but let me 
see what some other comment is. Maybe, Mr. Kahn, if this young 
mom was working for this non-profit which abounds in Los 
Angeles as well, what option might she have?
    Mr. Kahn. Well, Congresswoman, and, by the way, you have a 
beautiful area that you cover. Your district is beautiful and 
you did have the first of all the country organized health 
systems there. The problem is a structural one which is the way 
our regulations and our markets are set up right now that an 
individual or if they are in a very small group perhaps because 
usually pre-existing conditions are not excluded from group 
coverage. It may be such a small group, however, that it is. 
That could be----
    Mrs. Capps. Less than 10 employees.
    Mr. Kahn. So knowing the situation, that could be the case. 
And under the current system, to be perfectly honest with you, 
there is no good answer for that situation for the individual 
or in a small group like that. That is the problem with the 
system right now and why I think we all agree we have to change 
the system. Now depending on our income level, it is----
    Mrs. Capps. It is not very high.
    Mr. Kahn. Not very high. They could actually become 
eligible for Medicaid if they spend down enough depending on 
what her income level is.
    Mrs. Capps. Pretty big price to pay.
    Mr. Kahn. And it is a very big price to pay, but that is 
the problem is that we have a broken system right now that 
needs to be fixed, and that is why we are all here because of 
those kinds of situations covered and not covered.
    Mrs. Capps. Our reform legislation being a remedy?
    Mr. Kahn. Absolutely. I think that the solutions that are 
being addressed----
    Mrs. Capps. From both the private sector and this public 
option of course.
    Mr. Kahn. Well, I think what we are talking about is reform 
of the rules around coverage, and indeed you would accomplish 
that because once everyone is covered then the pre-existing 
conditions issue should really go away. The problem right now 
is that--and we don't do individual coverage. We serve only low 
income people.
    Mrs. Capps. Right. Right.
    Mr. Kahn. But the problem with the system right now is that 
where people are not covered, they decide once they get sick 
they need coverage and that is why there is underwriting. I am 
not defining it. It is just--there are no bad guys in this 
play. Unfortunately, it is bad structures. It is a bad system.
    Mrs. Capps. Right, which is why it calls for intervention 
from us. I am not looking for support for that, and I applaud 
this is finally the moment that all the stars are aligned. I 
think we would all agree that we are going to--not everybody is 
going to be maybe pleased with the outcome, but we are going to 
make progress. And I am just so hopeful that we can do it in a 
very bipartisan way.
    Ms. Ignagni. And, Mrs. Capps, I would be happy if you think 
it is appropriate to help with your office and see if we can 
look into the case and see if there is anything that can be 
done. As a mother, I would be delighted to do that.
    Mr. Pallone. Thank you. Mr. Whitfield.
    Mr. Whitfield. Thank you, Mr. Chairman, and thank you all 
for your testimony. One of the common reasons given for having 
a public option is the fact that there is not competition 
particularly in rural areas, and there is probably an obvious 
reason for this that I don't understand but in the prescription 
drug benefit under Part D of Medicare in my rural district of 
Kentucky there were like 42 different plans offered to Medicare 
beneficiaries, so why are there so many plans offered as a 
prescription drug benefit but not plans competing with each 
other on the other sector. Would someone answer that for me?
    Ms. Pollitz. Prescriptions are a little different just 
because you don't need the provider network. I mean if there 
are pharmacies nearby or even mail order pharmacy it is easier 
to ensure the costs of prescriptions.
    Mr. Whitfield. So it is the fact that there is a lack of a 
provider network and putting that together?
    Ms. Pollitz. I would expect. I am not familiar with your 
district but prescriptions are a more kind of national market 
than other health care.
    Mr. Whitfield. OK.
    Ms. Ignagni. I think, Mr. Whitfield, one of the things that 
we have observed is that often there are products available but 
in particularly rural areas if individuals don't have a broker, 
for example, they haven't been presented with the information, 
they don't know where to go, which is why one of the first 
things that we suggested is this concept of having an organized 
display on a site, it could be a state site, of the health 
plans that are available in every part of every state and 
organized it so people can understand what is available. That 
would be, I think, a major step forward.
    Mr. Whitfield. Mr. Kahn, would you want to say something?
    Mr. Kahn. Thank you, Congressman. I would just add that the 
challenge in rural communities beyond the pharmacy situation is 
that if you are the one hospital in town, you probably don't 
have to negotiate so it is not very attractive for a health 
plan. That is why you don't have competition. Now I will say 
though that in California we have a number of our public plans 
that compete with private plans, and some of those are in rural 
areas as well, Kern County, for example, and so there is 
competition but again by the nature of that market because all 
health care is local still and it probably will be for the most 
part under the reform, so it depends on that market. Ms. 
Ignagni and Mr. Trautwein, you all are both involved in 
associations that represent companies that I am sure provide a 
lot of group insurance plans to rather large employers. Are you 
at all concerned that employers because of this public option 
being available might just say, you know, to save money we are 
just not going to provide health insurance anymore?
    Ms. Ignagni. We are concerned about that, sir, and we are 
also concerned about employers seeing the differences in the 
numbers. As I indicated in my oral testimony there would be 
very little available or left in the private sector because the 
incentives are so compelling, and I think there is a strong 
value in having the best of both, doing a better job in the 
safety net and then doing a better job as we have talked about 
in proving the----
    Mr. Whitfield. Does this draft bill provide the protection 
that is necessary to protect the private sector?
    Ms. Ignagni. Well, I think that it is not--we were very 
concerned, as we indicated, that we would not see a private 
sector sustained because the playing field isn't level. If you 
pay at Medicare rates, it is such a major differential that 
that there is no way to sustain a private sector.
    Mr. Whitfield. OK.
    Ms. Pollitz. But, Congressman, just to add, under the bill 
if an employer buys through the exchange they have to agree to 
let their employees pick the plan and if they elect not to 
offer coverage and to pay the fee then the employees still get 
to pick the plan so there is no way that employers can opt to 
put people in any of the plans available in the exchange. It is 
always up to the individuals.
    Mr. Whitfield. Are you saying that employers cannot just 
decide to refuse to offer a plan?
    Ms. Pollitz. Employers first make an election are they 
going to play or pay. Are they going to offer a plan or are 
they going to pay, and if they are outside of the exchange they 
could offer a plan and they would only have the choice of 
buying private plans, and then if they come into the exchange 
it becomes kind of a defined contribution but the employees get 
to pick the plan that are offered between public and private.
    Mr. Whitfield. Ms. Trautwein.
    Ms. Trautwein. I just wanted to add to that there is 
language in the bill that after a period of time even employees 
that are a part of a program where there is an employer-
sponsored plan can elect to spin off of that plan to go into 
the exchange. This is a direct threat to employer-sponsored 
coverage. We are very concerned about this because you have to 
maintain a decent participation level inside an employer group 
to have that balance of risk that I was talking about earlier. 
So I think that that is something that we should really look at 
whether that is a good idea to keep that in the bill language.
    Mr. Whitfield. I guess my time has expired. Can I just ask 
one other question? I know you have been here for hours but 
just one other question. Ms. Trautwein, in your testimony you 
talked about it is critical that there be a financial backstop 
to accompany reforms of the individual and group insurance 
markets, and I was curious what do you mean precisely by 
backstop?
    Ms. Trautwein. Well, it could take many different forms. It 
is kind of what I talked about earlier, this idea of 
reinsurance. You know, some states today use a high risk pool 
to backstop their individual market but it doesn't have to be 
that. It is just something to make sure that we address the 
cost of high risk individuals. This is a particular problem 
during the first 5 years, I am guesstimating that amount, 
because it is going to take us a while to get the hang of this 
individual mandate and enforcing it. We won't have everybody in 
overnight and so there will still be initially adverse 
selection, the same that we have today in this market, and we 
have got to do something to make sure that those high cost 
cases don't make the cost of coverage go up for everybody else 
so we are not trying to wreck the proposal. We are saying you 
need to have this thing in here to stabilize your proposal so 
you will not have these unintended consequences.
    Mr. Whitfield. Thank you, Mr. Chairman.
    Mr. Pallone. Thank you. And I know different members 
mentioned that they are going to submit written questions and 
we ask them to get them to you within the next 10 days or so 
and get back to us as soon as you can.
    Mr. Burgess. Mr. Chairman, I was also supposed to ask 
unanimous consent that the Blue Cross/Blue Shield data be made 
part of the record.
    Mr. Pallone. Yes, let me see. I have something too here. I 
am glad you mentioned it. I almost forgot. So you have, what is 
this, Blue Cross/Blue Shield, you called it?
    Mr. Burgess. Yes. Ms. Fox testified--as part of her 
testimony she----
    Mr. Pallone. I am told that it already has been but if it 
hasn't, then we will do it. And I also have to submit for the 
record this study by Health Care for America Now showing that 
94 percent of the country has a highly concentrated insurance 
market. This is from the American Medical Association so 
without objection we will enter both of these in the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Pallone. Thank you very much. I thought this was very 
worthwhile. It is a complex issue but we appreciate your input 
and your optimism as well. It is very important so thank you 
very much. And the 3-day marathon of the subcommittee is now 
adjourned, without objection is adjourned.
    [Whereupon, at 6:45 p.m., the Subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]








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