[Senate Hearing 111-453]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 111-453
 
          ADDRESSING UNDERINSURANCE IN NATIONAL HEALTH REFORM

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



                                HEARING

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                                   ON

            EXAMINING ADDRESSING UNDERINSURANCE IN NATIONAL 
                             HEALTH REFORM

                               __________

                           FEBRUARY 24, 2009

                               __________

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                                Pensions


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          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

               EDWARD M. KENNEDY, Massachusetts, Chairman

CHRISTOPHER J. DODD, Connecticut
TOM HARKIN, Iowa
BARBARA A. MIKULSKI, Maryland
JEFF BINGAMAN, New Mexico
PATTY MURRAY, Washington
JACK REED, Rhode Island
BERNARD SANDERS (I), Vermont
SHERROD BROWN, Ohio
ROBERT P. CASEY, JR., Pennsylvania
KAY R. HAGAN, North Carolina
JEFF MERKLEY, Oregon


                                     MICHAEL B. ENZI, Wyoming
                                     JUDD GREGG, New Hampshire
                                     LAMAR ALEXANDER, Tennessee
                                     RICHARD BURR, North Carolina
                                     JOHNNY ISAKSON, Georgia
                                     JOHN McCAIN, Arizona
                                     ORRIN G. HATCH, Utah
                                     LISA MURKOWSKI, Alaska
                                     TOM COBURN, M.D., Oklahoma
                                     PAT ROBERTS, Kansas
                                       

           J. Michael Myers, Staff Director and Chief Counsel

     Frank Macchiarola, Republican Staff Director and Chief Counsel

                                  (ii)



                            C O N T E N T S

                               __________

                               STATEMENTS

                       TUESDAY, FEBRUARY 24, 2009

                                                                   Page
Bingaman, Hon. Jeff, a U.S. Senator from the State of New Mexico, 
  opening statement..............................................     1
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming, 
  opening statement..............................................     2
Schoen, Cathy, MS, Senior Vice President, The Commonwealth Fund, 
  New York, NY...................................................     4
    Prepared statement...........................................     6
Shearer, Gail, MS, Director of Health Policy Analysis, Consumers 
  Union, Washington, DC..........................................    29
    Prepared statement...........................................    31
Rowland, Diane, D.Sc., Executive Vice President, The Henry J. 
  Kaiser Family Foundation and Executive Director, The Kaiser 
  Commission on Medicaid and the Uninsured, Washington, DC.......    38
    Prepared statement...........................................    41
Turner, Grace-Marie, President, Galen Institute, Alexandria, VA..    58
    Prepared statement...........................................    60
Casey, Hon. Robert P., Jr., a U.S. Senator from the State of 
  Pennsylvania...................................................    68
Alexander, Hon. Lamar, a U.S. Senator from the State of Tennessee    70
Hagan, Hon. Kay R., a U.S. Senator from the State of North 
  Carolina.......................................................    72
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah......    73
Burr, Hon. Richard, a U.S. Senator from the State of North 
  Carolina, prepared statement...................................    76
Coburn, Hon. Tom, a U.S. Senator from the State of Oklahoma......    79

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:
    Senator Brown, prepared statement............................    82

                                 (iii)


          ADDRESSING UNDERINSURANCE IN NATIONAL HEALTH REFORM

                              ----------                              


                       TUESDAY, FEBRUARY 24, 2009

                                       U.S. Senate,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:00 a.m. in 
Room SD-430, Dirksen Senate Office Building, Hon. Jeff 
Bingaman, presiding.
    Present: Senator Bingaman, Casey, Hagan, Enzi, Alexander, 
Burr, Hatch, and Coburn.

                 Opening Statement of Senator Bingaman

    Senator Bingaman. OK. Why don't we go ahead and get 
started. Senator Hatch is here and I'm told that Senator Enzi 
may be able to be here. But it's not clear at this point.
    I thank everyone for coming. As everyone knows there's a 
great desire on the part of the Obama administration and the 
Congress to develop comprehensive health reform legislation 
this year. The legislation is intended to focus on expanding 
health insurance coverage to all Americans and improving the 
quality of our health care system and controlling the costs of 
health care.
    As part of developing this legislation, Senator Kennedy has 
asked me to lead efforts here on our committee to develop some 
of the coverage proposals. And I'm very glad to do that. As we 
all know there are 45 to 47 million Americans currently 
uninsured.
    This number is expected to grow as the economic 
difficulties continue. The case for expansion of health care 
coverage is highlighted by the report that was released 
yesterday by the Institute of Medicine entitled, ``America's 
Uninsured Crisis--The Consequences of Health and Health Care.'' 
The report notes that there is a compelling case for action, 
that health insurance matters and that expanding health care 
coverage for all Americans is essential.
    Today's hearing, however, is focused on an even more 
complex problem. And that is the problem of underinsurance. 
Underinsurance is the term used to describe the problems that 
many Americans with health insurance may face in meeting their 
health care expenses. Some experts define underinsurance as an 
insured individual whose family medical expenditures total 10 
percent or more of their income or whose health plan includes 
deductibles greater than 5 percent of their income.
    This first coverage hearing is on the issue of 
underinsurance because it's a subject that's often ignored in 
health coverage discussions. But it does impact a very large 
segment of the American population. These are hard working 
Americans who pay every month for health insurance benefits. 
However, when they or their children become ill and rely on 
those benefits they discover that the coverage either is not 
comprehensive or they end up having a very significant out-of-
pocket cost that they did not anticipate.
    Underinsurance occurs because health insurance plans may 
have significant cost sharing requirements. It occurs because 
certain conditions or treatments may be excluded from coverage 
often as pre-existing conditions. This is particularly 
problematic in the individual insurance market.
    And finally plans may have overall limits on benefits that 
fall far short of an enrollee's needs such as a cap on the 
total number of days an enrollee may stay in a hospital or 
aggregate lifetime limits on the total payments that may be 
made for a particular service. In the end these insured 
individuals may be left with thousands upon thousands of 
dollars in health care expenses. Of course extending a very 
rich benefit package to everyone may lead to over utilization 
of unnecessary health care which could then, of course, further 
drive up cost. The question of the right balance between 
underinsurance which can lead to individual financial risk or 
avoidance of needed health care and the resulting poor health 
outcomes that come from that and over insurance which can drive 
up health care costs is a difficult one, but one that obviously 
needs to be addressed if we're going to enact comprehensive 
health care.
    Let me stop with that. I see Senator Enzi is here. Let me 
call on him for any comments that he's got. Then of course 
we'll hear from the witnesses and hopefully have some questions 
for them.
    Senator Enzi, thank you for being here.

                   Opening Statement of Senator Enzi

    Senator Enzi. Thank you, Mr. Chairman, for holding this 
hearing today on health insurance and the issue of the 
underinsured. I look forward to working with members of the 
HELP Committee and all members of the Senate to exact 
meaningful health care reform legislation this year. That was a 
challenge we were given at the White House Economic Summit 
yesterday.
    All of the speakers mentioned that health care is one of 
the main economic factors that we have to deal with and should 
be a priority. We do have a task force that's working on that 
which is a couple of people from each of the committees that 
are affected. And you'd be surprised how many committees are 
affected by it.
    This, of course, is the committee of jurisdiction for the 
health care. I appreciate all the hearings that we've been 
having in this committee. I have been assured that whatever 
product any task force comes up with will come through regular 
process which means through this committee. And that always 
results in a better product.
    This committee has gone from being one of the most 
contentious committees to being one of the most productive 
committees. I think it's because of the work that we do in 
committees. I do miss the days of roundtables, however. And 
hope that we'll go back to roundtables.
    Hearings have a different meaning in the Senate. Because of 
the way that they're set up, we bring in people to make 
specific points. Whereas in the roundtables we bring in people 
that have--15 or 20 people--that have actually been involved in 
solving the issue and they have an interchange between 
themselves as well as stating what they've done. That's helped 
us a number of times in bills that we've drafted. I hope that 
we'll add some of those to the repertoire.
    We all emphasize and empathize with the stories that we'll 
hear in today's testimony about patients who could not afford 
their health care. We all support protecting individuals and 
families from catastrophic health care costs. At the same time 
we need to be careful that in trying to solve this problem we 
don't make matters worse.
    We know that while having the best of intentions many past 
health care reform efforts to protect consumers have actually 
increased costs and caused many of these same consumers to lose 
their health insurance. The single greatest challenge in 
reforming our health care system is rapidly escalating costs. 
Last Friday USA Today reported that many individuals who 
purchased their own health insurance faced double digit premium 
increases in 2008 with some plan premiums increasing by 20, 30 
and in one case 56 percent.
    These increases aren't sustainable. And we don't address 
the problem that is driving this cost growth more and more. 
Americans will lose their health insurance if we continue that.
    We also know that when consumers bear some of the costs of 
their health care, total spending is reduced. It's common sense 
that we're more vigilant with our own money than if someone 
else is paying the bill. And this is especially true in health 
policy.
    Going all the way back to the Rand Study in the 1970s, we 
know that reasonable cost sharing reduces spending without 
adversely impacting the quality of care. Anyone needing further 
proof of this, look no further than our recent experience with 
health savings accounts. Health savings accounts require 
consumers to pay for more routine services. And as a result 
health savings accounts have seen premium increases that have 
been dramatically lower than other types of insurance.
    There are many factors that impact an individual's decision 
to purchase health insurance. Certainly cost plays an important 
role. But plan design and personal preference play a role too.
    A 25-year-old male and a 55-year-old female have different 
health needs. And would probably have very different ideas of 
what they're willing to pay for health insurance. We need a 
private health insurance market that can deliver choices of 
high quality products to all types of people. Not a one-size-
that-fits-all federally determined solution.
    While we all agree that patients should be protected 
against catastrophic costs, we should not adopt reforms that 
limit consumer's choices or try to develop the Federal one-
size-fits-all approach to cost sharing. I believe the most 
important thing Congress can do to increase access to 
affordable, high quality health insurance is to create an 
environment that forces private health insurance companies to 
innovate on ways to better control costs and compete for our 
business.
    I think that's one of the messages that the President 
delivered yesterday as well--that we do have to work with 
public and private companies and get the costs under control. 
It's the costs that are driving us crazy and that are forcing, 
particularly small businesses, out of the market.
    Mr. Chairman, I thank you again for bringing us together 
today. I look forward to hearing the testimony of our witnesses 
and the question and answer period.
    The Chairman. Alright. Why don't we go ahead? We have four 
excellent witnesses today. Let me introduce them, if they'll 
just come forward.
    Cathy Schoen is the Senior Vice President with the 
Commonwealth Fund in New York.
    Gail Shearer is the Director of Health Policy Analysis with 
the Consumers Union.
    Diane Rowland is the Executive Vice President with the 
Henry J. Kaiser Family Foundation and Executive Director of the 
Kaiser Commission on Medicaid and the Uninsured.
    And Grace-Marie Turner is the President of Galen Institute 
in Alexandria.
    So thank you all very much for being here. Why don't we 
start with you, Ms. Schoen if you would go ahead and give us 
the main points we need to understand that you'd like to make. 
We'll hear from all witnesses and then have some questions.

   STATEMENT OF CATHY SCHOEN, MS, SENIOR VICE PRESIDENT, THE 
                COMMONWEALTH FUND, NEW YORK, NY

    Ms. Schoen. Thank you, Mr. Chairman and committee members 
for the invitation to testify on the underinsured and 
implications for national reform. Rising health care costs and 
stagnating cuts have fueled steep erosion in insurance coverage 
across the Nation. In addition to steady increases in the 
number of uninsured we're seeing a surge in the number of 
adults who are underinsured, poorly protected in the event of 
illness although they're insured all year long.
    Current trends are saddling individuals and their families 
with medical debt that can last for years and putting their 
health at risk. Insurance reforms are central to improving 
health system performance. But the way we design these reforms 
is critical both for assuring access, addressing cost concerns 
and addressing quality concerns.
    In my remarks and prepared testimony I will briefly 
summarize trends, discuss consequences and then discuss some 
design principles as you look toward insurance reform.
    First on trends. As we know the number of uninsured are up 
dramatically from 2000 to 2007. They're projected to increase 
to 61 million people by the end of the next decade. This 
doesn't count the people who churn in and out of coverage and 
our uninsured for part of the year.
    We've seen a surge in the number underinsured. Our study 
published last year in Health Affairs estimates 25 million 
adults were underinsured as of 2007. This is a 60-percent 
increase since 2003.
    We define the underinsured as adults who spent a high share 
of their income, 10 percent of their income, or more on medical 
care expenses not counting premiums or 5 percent if they are 
low income. We also use deductibles alone of 5 percent of 
annual income for one person in the definition. This erosion is 
moving up the income scale.
    There was a tripling in the percent of underinsured among 
adults in the middle-income range. In total an estimated 42 
percent of all adults under 65 are now uninsured or 
underinsured. This was before the current, severe recession.
    Compared to those with more adequate coverage we find 
underinsured and uninsured adults are much more likely to go 
without needed care because of costs, not following up on 
recommended care, not filling prescriptions for medication, not 
seeing doctors when sick. About half the underinsured and two-
thirds of the uninsured reported this going without care 
because of cost. Half of both groups also confront financial 
stress including long-term medical debt.
    Indeed the experiences of these two groups are increasingly 
similar. It's getting hard to tell an insured, underinsured, 
and an uninsured person from each other. The share of adults 
under 65 going without care because of cost is affecting the 
chronically ill as well.
    In our 2007 study we found those with chronic illnesses 
were not filling medications for their chronic diseases. With 
both the uninsured and underinsured highly likely to go to the 
hospital and go to the emergency room as a consequence.
    In our 2008 international study of eight countries, the 
United States stands out with half of all chronically ill 
adults. This is all, not just the under 65 going without care 
because of costs. We stand alone. And this rate was high for 
the insured as well as the underinsured.
    As was mentioned in your opening remarks this is because of 
an ongoing erosion in the content of insurance limits on 
benefits, higher deductibles. We know from the Rand Study that 
part of this is an incentive to reduce unnecessary care. But 
Rand as well as more recent studies found people are just about 
as likely to cut back on essential and effective care as 
discretionary care, particularly those with low incomes and 
chronically ill.
    More recently, studies who have focused on medications have 
found that people cut back on essential medications unless the 
benefit package is designed around value benefits. And this has 
led to higher hospitalizations, emergency room and even spikes 
in death. We're following behind other countries on preventing 
preventable deaths amenable to health care before age 75. We 
are now 19 out of 19 countries. Our rates of death came down 
slightly while other countries moved more rapidly. Our health 
is at risk.
    I won't cite you the statistics on financial stress other 
than to say we are seeing as of 2007, 72 million adults facing 
bad debt, long-term debt, bill collectors, going without basic 
necessities to pay for bills. This is up dramatically from 
2005. The rates among the middle income group now look like the 
low-income group did in 2001. This stress has all occurred 
before the current severe recession.
    As you turn to implications for insurance reform it's 
important to remember that design matters. It matters for the 
twin goals of health insurance, timely access to essential care 
and financial protection. But it also matters for providing a 
foundation for payment and system reforms to address the 
current cost dilemmas and value dilemmas we face in this 
country.
    The fractured insurance system we have makes it very 
difficult to design coherent payment policies. We all go in 
different directions. It erodes incentives to invest for the 
long-term. The multiple benefit designs churning in and out of 
coverage drive up insurance administrative costs as well as 
driving down and eroding incentives for the long-term.
    I've provided a list of design principles in my testimony. 
And I'll only list them briefly here, but would be happy to 
discuss them as you turn to how to design insurance for the 
twin goals of access and financial protection. We urgently need 
these reforms.
    We need to start discussing a minimum benefit floor. This 
was a discussion in Massachusetts about putting a floor under 
insurance so that we don't have insurance surprises where 
insurance fails us with an emphasis on value benefits covering 
essential care as well as catastrophic cost.
    We need to provide income-related premium assistance to 
make sure that that coverage is affordable. Pay particular 
attention to low-income individuals both for cost sharing and 
financial protection. Design of benefits should restrict the 
number of benefit variations both to make choice possible and 
to avoid risk selection. We need to have new mechanisms that 
allow people to keep their insurance as well as have choices as 
situations change.
    I'll end my testimony just to urge you that this is an 
urgent problem. If we do insurance reform, payment reform and 
system reforms, we have an opportunity to put the Nation on a 
much different track. A report released last week by the 
Commonwealth Fund's Commission on a high performance health 
system shows that we would be able to improve access, outcomes 
and costs, but we need to act soon. Thank you.
    [The prepared statement of Ms. Schoen follows:]
                 Prepared Statement of Cathy Schoen, MS
   Executive Summary--Insurance Design Matters: Underinsured Trends, 
         Health and Financial Risks, and Principles for Reform
    Thank you, Mr. Chairman, for the invitation to testify on the 
underinsured and the implications for national health reform. Rapidly 
rising health care costs and stagnant incomes have fueled steep erosion 
in insurance coverage across the Nation. In addition to steady 
increases in the number of people uninsured during the year, we are 
seeing a surge in the number of adults and families who are 
``underinsured''--those who are poorly protected in the event of 
illness although they are insured all year long. In the midst of a 
severe recession, current trends are saddling individuals with medical 
debt that can last for years. Although employer coverage remains the 
mainstay and primary source of insurance for working families, rising 
costs are stressing private businesses and public employers, leading to 
shifts of significant financial risk back onto families or drops in 
coverage. As a nation, we urgently need health reform to provide a more 
secure foundation for the future.
    Insurance reform is essential and central to improving national 
health system performance. Design matters. To provide a more secure 
foundation, coverage reforms must be designed to facilitate the two 
primary goals of health insurance--increasing access to care and 
providing financial protection. Insurance reforms are also key for 
providing a strong base for payment and other system changes that are 
needed to sustain coverage over time and improve the performance and 
value we get in return for our Nation's unparalleled expenditure on 
health. Moreover, insurance reforms could focus competition on better 
outcomes and added value. My remarks this morning and prepared 
testimony present recent trends, summarize studies regarding the 
consequences of inadequate coverage and gaps, and discuss design 
principles with the potential to move our system in new, more positive 
directions.
     erosion in coverage: rising number underinsured and uninsured
     From 2000 to 2007, a time of relatively low unemployment, 
the number of uninsured increased by 7 million. The number of uninsured 
is projected to reach 61 million over the next decade, assuming 
recovery from the current recession. And these estimates do not count 
all of those who lose coverage for at least part of the year.
     From 2003 to 2007, the number of adults who were insured 
all year but were underinsured increased by 60 percent. Based on those 
who incur high out-of-pocket costs relative to their income not 
counting premiums despite having coverage all year, an estimated 25 
million adults under age 65 were underinsured in 2007.
     Erosion in benefits is moving up the income scale. The 
percent underinsured nearly tripled among adults with annual incomes in 
the middle-income range. Although low-income adults are most at risk, 
more than one of four adults with incomes above 200 percent of poverty 
were either underinsured or uninsured in 2007. In total, 42 percent of 
all adults were in one of these two insurance groups.
     The underinsured were more likely to report limits on 
benefits, gaps in benefits, and higher deductibles than those without 
high costs relative to their income. At the same time, underinsured 
adults devoted a high share of their income to premiums.
    access, quality, and health at risk: consequences of inadequate 
                               insurance
     Compared to adults with more adequate coverage, 
underinsured and uninsured adults were far more likely to go without 
needed care because of costs--over half of the underinsured and two 
thirds of the uninsured went without recommended treatment, follow-up 
care, medications or did not see a doctor when sick. Half of both 
groups faced financial stress, including medical debt. Indeed, 
experiences were often similar.
     Providing evidence of the breadth of coverage erosion, the 
share of adults under age 65 who went without needed care because of 
costs increased sharply from 2001 to 2007, rising from 29 percent to 45 
percent. Rates were up across all income groups. Although typically 
insured all year, middle-income adults reported the steepest increases, 
jumping from 24 to 43 percent.
     Among adults with chronic diseases, half of the 
underinsured and more than 60 percent of the uninsured skipped 
medications for their conditions because of cost. Both groups were at 
higher risk of going to the emergency room or hospital than chronically 
ill adults who were insured all year and not underinsured.
     In the 2008 Commonwealth Fund eight-nation survey of 
adults with chronic conditions, the United States stands alone with 
half of all adults forgoing medications, not following up on 
recommended care or not going to a doctor when sick. Rates were high 
for the insured as well as the uninsured.
     These experiences reflect an ongoing insurance design 
shift away from pooling risk through premiums towards higher 
deductibles, limits, and cost-sharing.
     Although the design shift in part aims at incentives to 
avoid unnecessary care, studies repeatedly find that reductions are 
about equally likely to occur for effective as more discretionary care. 
Moreover, foregone care is most likely among those with low-incomes.
     Recent studies focused on medications find that caps and 
cost-sharing that do not take the value of care into account lead to 
adverse health outcomes, including complications from chronic disease, 
increased hospitalization, and spikes in deaths.
     A study of low-income Medicaid beneficiaries found that 
interruptions in coverage lead to increases in hospital admissions for 
ambulatory care-sensitive (potentially preventable) conditions. Yet, we 
fail to design such programs for continuity.
     Poor access undermines quality and effective care. The 
United States is falling behind other countries in reducing deaths from 
conditions amenable to health care. As of 2003, we ranked last among 19 
industrialized nations. Although the U.S. mortality rates declined 
marginally (4 percent), other countries improved much faster (16 
percent).
                financial stress and economic insecurity
    The sharp increase in the number of adults finding it difficult to 
pay medical bills or in debt is perhaps the most visible consequence of 
the deterioration in insurance coverage.


     In 2007, 41 percent of adults--72 million people--said 
they had problems paying their medical bills, faced bill collectors, or 
were in debt for medical care, up from 34 percent or 58 million in 
2005. The majority reported having insurance at the time these bills 
were incurred.
     The increase occurred across all income groups, though 
rates were highest among low- and moderate-income families. 
Underinsured or uninsured adults were most at risk.
     Among those reporting difficulty paying bills or debt, 29 
percent were unable to pay for necessities because of medical bills, 39 
percent had used up their savings, 30 percent took on credit card debt, 
and 10 percent added mortgages against their home.

    It is important to remember that this stress occurred during a time 
of relatively low unemployment, well before the current severe 
recession.
      moving in new directions: insurance and health system reform
    Extending affordable insurance to all and doing so in a way that 
ensures access and provides financial protection is critical to moving 
in a more positive direction. Coverage expansion and insurance reform 
are essential to addressing rising costs as well as concerns about wide 
variations in quality and health care delivery system performance. 
Fractured insurance makes it difficult to develop coherent payment 
policies that could align incentives with better outcomes and prudent 
use of resources. Unstable coverage, complex benefit variations, and 
fragmented markets also increase administrative costs and erode 
incentives to invest in population health for the long term.
    Attention to insurance design is essential to provide affordable 
coverage for all in a manner that ensures access to health care and 
financial protection. Needed reforms include:

     Setting a minimum floor and standard for health insurance 
with benefits designed to support access to effective care and 
protection when sick or injured.
     Providing income-related premiums to assure coverage is 
affordable.
     Establishing lower cost-sharing and ceilings on out-of-
pocket expenses for low-income families.
     Limiting the range of variation to facilitate choice and 
discourage risk segmentation. This would also facilitate the 
publication of useful comparisons.
     Ensuring access and renewal and prohibiting premium 
variations based on health risks. Coupled with risk-adjusted premiums, 
such insurance market reforms would focus competition on outcomes and 
added value.
     Structuring insurance choices through a national insurance 
exchange to help individuals and families choose coverage and stay 
continually insured.

    The design of insurance reforms should also aim to provide a more 
secure foundation for payment and system reforms. Without a 
comprehensive approach to improve the quality and cost performance of 
the U.S. health system, coverage expansions will be difficult to 
sustain.
    A recent report by the Commonwealth Fund Commission on a High 
Performance Health System illustrates the potential of an integrated 
set of strategies. The analysis indicates reforms to provide 
affordable, adequate coverage for all, align incentives with value, and 
invest in essential information systems and public health measures have 
the potential to achieve better access for all, improve health outcomes 
and reduce projected growth in national spending by $3 trillion through 
2020 (11 years) if reforms begin in 2010. National spending would 
continue to increase but at a much slower rate.
    Although politically difficult, there is an urgent need to move in 
a new direction. Wide public concern and stress on private business and 
the public sector make it increasingly clear that we cannot afford to 
maintain the status quo. Each year we wait, the problems grow worse. 
The Nation needs national leadership and public-private sector 
collaboration to forge consensus to move in positive directions. 
Insurance coverage reform, coupled with payment and delivery system 
changes, have the potential to bend the curve of our Nation's spending 
on health and put the Nation on a path to high performance. The time 
has come to act.
    Thank you for the opportunity to testify. This hearing could not be 
more timely.
                                 ______
                                 
    Thank you, Mr. Chairman, for the invitation to testify on the 
underinsured and the implications for national health reform. Rapidly 
rising health care costs and stagnant incomes have fueled steep erosion 
in insurance coverage across the Nation. In addition to steady 
increases in the number of people uninsured during the year, we are 
seeing a surge in the number of adults and families who are 
``underinsured''--these are adults who are poorly protected in the 
event of illness although insured all year long. Efforts to moderate 
premium increases have led to higher deductibles, increased cost-
sharing, and limits or caps on benefits. Shifting the costs onto 
individuals and their families away from pooling risk through premiums 
is threatening the health and economic security of the Nation. In the 
midst of a severe recession, current trends are saddling vulnerable 
families with medical debt that can last for years. Although employer 
coverage remains the mainstay and primary source of insurance for 
workers and their families, rising costs are stressing private 
businesses and public employers. The United States is already by far 
the most expensive health system in the world, and we are rapidly 
widening the gap. As a nation, we urgently need health reform, starting 
with insurance to provide a more secure foundation for the future.
    Coverage reform is essential. Yet, the way it is designed matters 
critically for facilitating access and providing financial protection 
when sick--the primary goals of health insurance. Insurance reforms are 
also key for providing a strong base for payment and other system 
reforms that would enable us to sustain coverage over time by improving 
the performance and value we get in return for our already high 
investment in the health system. Moreover, insurance reforms could 
focus competition on better outcomes and added value.
    In my remarks and prepared testimony, I present recent studies on 
the trends and consequences of the rising number of underinsured and 
then discuss insurance benefit design principles to move in a new 
direction with national health reform. In the discussion of trends, it 
is important to remember that all of these studies were conducted 
during a period of relatively low unemployment. Thus, they vastly 
understate the urgent need for reform to secure the Nation's health and 
economic well-being.
  steep erosion in coverage: rising numbers uninsured and underinsured
    Well before the current severe recession, coverage has been eroding 
for the under-65 population. The number uninsured increased by 7 
million people from 2000 to 2007, reaching 47 million--in a period of 
relatively low unemployment (Exhibit 1).\1\ The increase was 
concentrated among working-age adults. With a few exceptions, the time-
trend map of uninsured adults by State shows a loss in coverage across 
the country (Exhibit 2). Children's coverage--the only bright spot--
improved thanks to expansions to low-income families through the 
Children's Health Insurance Program (CHIP). Still, 8 million children 
remain uninsured, and many do not have continuous coverage. Our 
fractured insurance system and complex eligibility rules result in 
millions of adults and children moving in and out of coverage from job 
loss, shifts in employment, or other changes in income or family 
relationships. Even growing a year older, as in a 19th birthday, makes 
a difference.\2\ Those at risk of churning in and out of coverage as 
well as remaining uninsured for long periods are likely to experience 
considerable access problems and financial stress.
---------------------------------------------------------------------------
    \1\ C. DeNavas-Walt, B.D. Proctor, J.C. Smith, Income, Poverty and 
Health Insurance Coverage in the United States: 2007, U.S. Census 
Bureau, August 2008.
    \2\ J.L. Kriss, S.R. Collins, B. Mahato, E. Gould, and C. Schoen, 
Rite of Passage? Why Young Adults Become Uninsured and How New Policies 
Can Help, 2008 Update (New York: The Commonwealth Fund) May 2008.




    All projections indicate that without national policy action to 
stem the tide, the number of people who are uninsured at any moment in 
time will continue to increase rapidly. Assuming we recover from the 
current recession, projections estimate 61 million will be uninsured by 
2020 (Exhibit 1). These uninsured estimates do not count all the people 
who lose coverage for a period of time during the year: as of 2007, 
almost 30 percent of adults under age 65 were uninsured for some time 
during the year.\3\
---------------------------------------------------------------------------
    \3\ S.R. Collins, J.L. Kriss, M.M. Doty, and S.D. Rustgi, Losing 
Ground: How the Loss of Adequate Health Insurance is Burdening Working 
Families: Findings from the Commonwealth Fund Biennial Health Insurance 
Surveys, 2001-2007 (New York: The Commonwealth Fund) August 2008.
---------------------------------------------------------------------------
    Millions more are ``underinsured''--insured all year yet facing 
such high cost-sharing relative to income that they lack adequate 
financial protection when sick or injured. In our recent study of 
underinsured trends from 2003 to 2007, we defined adults as 
underinsured if they had insurance all year and had out-of-pocket 
expenses for medical care of 10 percent or more of their annual income 
or 5 percent if low income (under 200 percent of poverty) or whose 
deductible alone was 5 percent or more of income.\4\ Notably, this 
definition will miss those with inadequate coverage who were healthy 
during the year--in other words, the estimate is likely to be 
conservative.\5\
---------------------------------------------------------------------------
    \4\ C. Schoen, S.R. Collins, J.L. Kriss, and M.M. Doty, ``How Many 
are Underinsured? Trends Among U.S. Adults, 2003 and 2007,'' Health 
Affairs Web Exclusive (June 10, 2008):w298-w309.
    \5\ A financial definition of the underinsured builds on the 
seminal work of Pamela Farley Short. For early studies, see: P.F. Short 
and J. Banthin, ``New Estimates of the Underinsured Younger than Sixty-
five Years,'' Journal of the American Medical Association 1995, 274 
(16):1302-1306 and P.J. Farley, ``Who Are the Underinsured?'' Milbank 
Quarterly 1985, 63 (3): 476-503.
---------------------------------------------------------------------------
    Using this financial definition of the underinsured, as of 2007, 25 
million adults ages 19 to 64 were underinsured--a 60 percent increase 
from 2003 (Exhibit 3). Adding underinsured adults to those uninsured 
when surveyed or uninsured earlier in the year, more than 75 million--
two of five adults--were either underinsured or uninsured during 2007, 
a sharp increase since 2003. Low-income adults are the most likely to 
be underinsured or uninsured, yet middle- and higher-income families 
experienced the most rapid deterioration in protection (Exhibit 4). The 
percent underinsured nearly tripled for adults in families with incomes 
of 200 percent of poverty or more (annual family incomes of $40,000 or 
higher). As of 2007, more than one of four adults (27 percent) with 
incomes placing them solidly into the middle class was either 
underinsured or uninsured. Overall, lower-income adults have been 
hardest hit: nearly three-fourths (72 percent) uninsured or 
underinsured. These low-
income adults rarely have health insurance benefits through their jobs 
yet by working have incomes that make them ineligible for public safety 
net insurance programs in most States.\6\
---------------------------------------------------------------------------
    \6\ J.C. Cantor, C. Schoen, D. Belloff, S.K.H. How, and D. 
McCarthy, Aiming Higher: Results from a State Scorecard on Health 
System Performance (New York: The Commonwealth Fund) June 2007. See 
page 23.




  access and health at risk: consequences of inadequate insurance and 
                                  gaps
    The core goals of health insurance are to provide timely and 
affordable access to care and to protect against the costs of illnesses 
and injuries. The ongoing deterioration of benefits undermines both 
goals as benefit designs increasingly shift costs onto the budgets of 
individuals and families when sick.
    According to the same Commonwealth Fund 2007 study, one-fourth of 
underinsured adults reported deductibles of $1,000 or more compared to 
8 percent of insured adults not classified as underinsured. More than 
40 percent of underinsured adults paid 5 percent and one-fifth spent 10 
percent or more of their income for their insurance. Premiums are up 
but people are getting less coverage in return: compared to those with 
more adequate coverage, underinsured adults were less likely to have 
prescription benefits and more likely to have limits on the amount a 
plan would pay or on the number of visits allowed.
    Given higher cost-sharing and thinner insurance benefits, the 
underinsured as well as those uninsured are at very high risk of going 
without needed care because of costs. Controlling for income, health, 
and other demographic differences, more than half of underinsured and 
over two-thirds of uninsured adults went without recommended 
medications, follow-up care or treatment, or did not see a doctor when 
sick because of costs during the year (Exhibit 5). Underinsured rates 
of foregone care were often similar to rates reported by the uninsured, 
and cost-related access concerns were typically two to three times 
higher than reported by adults with more adequate coverage.


    As a whole, the share of non-elderly adults who went without care 
because of costs increased from 29 to 45 percent between 2001 and 2007. 
Rates increased across all income groups, yet moderate- and middle-
income adults experienced the more rapid increases (Exhibit 6). While 
most were insured all year, adults with incomes between $40,000 and 
$60,000 went without needed care due to costs at rates similar to those 
reported by low-income adults in 2001. This shift up the income scale 
further reflects the thinning of benefits.


    Multiple studies provide evidence that exposure to costs have 
negative effects on access to care for those with chronic conditions, 
undermining efforts to manage conditions and prevent complications.\7\ 
In the Commonwealth Fund 2007 survey, we focused on adults with any of 
four chronic conditions: high blood pressure, heart disease, diabetes, 
or asthma/other chronic lung conditions. Among these chronically ill 
adults, nearly half of underinsured adults and over 60 percent of those 
uninsured skipped doses or did not fill prescriptions for their chronic 
conditions (Exhibit 7). Lack of access to preventive, primary care, and 
ongoing care contributes to increased reliance on hospital emergency 
care (ER) or hospitalization. One third of underinsured chronically ill 
adults in the study went to the ER or were admitted to a hospital. 
Rates were similar to those reported by uninsured adults. Recent 
studies indicate over-crowding of ERs is a result of more insured as 
well as uninsured people turning to this safety net.\8\
---------------------------------------------------------------------------
    \7\ M.E. Chernew, A.B. Rosen, and A.M. Fendrick, ``Value-Based 
Insurance Design,'' Health Affairs, March/April 2007 26(2):w195-w203; 
M.E. Chernew, T. B. Gibson, K. Yu-Isenberg, et al., ``Effects of 
Increased Patient Cost Sharing on Socioeconomic Disparities in Health 
Care,'' Journal of General Internal Medicine, Aug. 2008 (8):1131-1136; 
D.P. Goldman, G.F. Joyce, J.J. Escarce, et al., ``Pharmacy Benefits and 
Use of Drugs by the Chronically Ill,'' Journal of the American Medical 
Association 291, no. 19 (2004): 2344-2350; M.D. Wong, R. Andersen, C.D. 
Sherbourne, et al., ``Effects of Cost Sharing on Care Seeking and 
Health Status: Results from the Medical Outcomes Study,'' American 
Journal of Public Health 91, no. 11 (2001): 1889-1894; Jonathan Gruber, 
The Role of Consumer Copayments for Health Care: Lessons from the RAND 
Health Insurance Experiment and Beyond (Washington, DC:Kaiser Family 
Foundation) October 2006.
    \8\ M.F. Newton, C.C. Keirns, R. Cunningham, et al., ``Uninsured 
Adults Presenting to U.S. Emergency Departments: Assumptions vs. 
Data,'' Journal of the American Medical Association, Oct. 2008 
300(16):1914-24. 


    Patient-reported experiences are consistent with and confirm a rich 
array of studies that find that cost-sharing, unless designed with a 
focus on value, can result in the insured foregoing essential and 
effective care, especially when costs are high relative to incomes. 
Those with low or modest incomes are particularly at risk. Early on the 
RAND health insurance experiment pointed to the need to design benefits 
carefully to encourage effective care.\9\ This seminal study found that 
cost-sharing reduced the likelihood of receiving highly effective care 
as well as more discretionary care (Exhibit 8). Access for low-income 
children and adults was particularly sensitive despite the fact that 
the RAND design capped financial exposure relative to income. Among 
those with chronic disease and low incomes, RAND found delayed or 
foregone care had adverse health effects.\10\
---------------------------------------------------------------------------
    \9\ K.N. Lohr, R.H. Brook, C.J. Kamberg,et al., ``Use of medical 
care in the Rand Health Insurance Experiment. Diagnosis- and service-
specific analyses in a randomized controlled trial,'' Medical Care, 
Sept. 1986 24 (9 Suppl):S1-87; K. Davis, Will Consumer-Directed Health 
Care Improve System Performance? (New York: The Commonwealth Fund) 
August 2004.
    \10\ J. Gruber, The Role of Consumer Copayments for Health Care: 
Lessons from the RAND Health Insurance Experiment and Beyond 
(Washington, DC: Kaiser Family Foundation) October 2006. 


    Recent studies reach the same conclusion, pointing to the 
importance of benefit designs that encourage effective and preventive 
care, including essential medications. A Canadian study assessing the 
impact of increased cost-shares for medications among the elderly and 
low-income, found a steep reduction in use of essential medications and 
a sharp increase in adverse events (complications and deaths) as well 
as increased use of the emergency department (Exhibit 9).\11\ In the 
United States, Hsu and colleagues at Kaiser Permanente found that 
placing a limit on pharmacy benefits led to patients skipping their 
blood pressure and other essential medications (Exhibit 10). 
Consequences included poorer adherence to drug therapy and worse 
control of blood pressure, lipid levels, and glucose levels.\12\ The 
study also found a spike in mortality. Moreover, cost savings from 
capping benefits were offset by increases in the costs of 
hospitalization and emergency room use.\13\
---------------------------------------------------------------------------
    \11\ R. Tamblyn, R. Laprise, J.A. Hanley, et al., ``Adverse Events 
Associated with Prescription Drug Cost-Sharing Among Poor and Elderly 
Persons,'' Journal of the American Medical Association, Jan. 2001 
285(4):421-29.
    \12\ J. Hsu, M. Price, J. Huang, et al., ``Unintended Consequences 
of Caps on Medicare Drug Benefits,'' New England Journal of Medicine, 
June 1, 2006 354(22):2349-59.
    \13\ See also, S.R. Collins, et al., A Roadmap to Health Insurance 
for All: Principles for Reform (New York: The Commonwealth Fund) 
October 2008.




    Preventive measures can avoid or delay the onset of many 
conditions. Nationally, we see broad evidence of failure to intervene 
early or provide preventive care--with gaps in coverage contributing to 
poor quality care. Adults in the United States receive the recommended 
screenings and preventive care for their age groups only half the 
time.\14\ Those uninsured for any time during the year are the least 
likely to receive preventive care but rates are also low among the 
insured (Exhibit 11). The underinsured and uninsured often delay or 
postpone care or go without essential medications and preventive care 
that could help prevent complications of chronic conditions. Only 63 
percent of uninsured adults with diabetes had their illness under 
control compared with 81 percent of insured adults with diabetes. In 
addition, uninsured adults reported their high blood pressure was under 
control at half the rates reported by insured adults.
---------------------------------------------------------------------------
    \14\ The Commonwealth Fund Commission on a High Performance Health 
System, Why Not the Best? Results from the National Scorecard on U.S. 
Health System Performance, 2008 (New York: The Commonwealth Fund) July 
2008.


    Gaps in coverage increase risks of complications over the longer-
term as well. McWilliams and colleagues found that among adults with 
chronic conditions, previously uninsured adults who acquired Medicare 
coverage at age 65 reported significantly greater increases in the 
number of doctor visits and hospitalizations and in total medical 
expenditures than did previously insured adults, with the difference 
persisting through age 70.\15\
---------------------------------------------------------------------------
    \15\ J.M. McWilliams, E. Meara, A.M. Zaslavsky, and J.Z. Ayanian, 
``Use of Health Services by Previously Uninsured Medicare 
Beneficiaries,'' New England Journal of Medicine, July 2007 357(2):143-
53.
---------------------------------------------------------------------------
    The leading chronic diseases--diabetes, asthma, congestive heart 
failure, coronary artery disease and depression--account for a 
disproportionate share of potentially preventable complications, severe 
acute conditions, and related co-morbidities. With early interventions 
to prevent the onset of disease or deterioration in health, the United 
States could substantially lower health risks and help people lead 
healthier, longer, and productive lives. Yet, current health insurance 
design incentives often run counter to goals of chronic care management 
and preventive care and incentives for physicians to improve.\16\
---------------------------------------------------------------------------
    \16\ M.E. Chernew, A.B. Rosen, and A.M. Fendrick, ``Value-Based 
Insurance Design,'' Health Affairs March/April 2007 26(2):w195-w203.
---------------------------------------------------------------------------
    Compared to other countries, we are losing ground. In a 2008 eight-
country survey that focused on chronically ill adults with recent care 
experiences, U.S. chronically ill adults are far more likely to go 
without needed care because of costs than do their counterparts in 
other countries.\17\ More than half of chronically ill U.S. adults did 
not see a doctor when they were sick or did not adhere to and follow up 
on recommended care (Exhibit 12). The U.S. rate is double to five times 
higher than rates of foregone care in seven other countries. U.S. rates 
were high for both insured and uninsured adults. In contrast to the 
United States, the other seven countries have a minimum benefit floor 
that is comprehensive. Two countries--Germany and France--have special 
provisions that cap total out-of-pocket spending relative to income for 
those with chronic conditions. Germany has a general provision that 
caps expenses at 2 percent and lower rate of 1 percent for the 
chronically ill or disabled. France lowers prescription costs for 
essential medications and covers care in full for those with serious 
and chronic diseases.\18\
---------------------------------------------------------------------------
    \17\ C. Schoen, R. Osborn, S.K.H. How, M.M. Doty, and J. Peugh, 
``In Chronic Condition: Experiences of Patients with Complex Health 
Care Needs, in Eight Countries, 2008,'' Health Affairs Web Exclusive 
(Nov. 13, 2008):w1-w16.
    \18\ I. Durand-Zaleski, ``The Health System in France,'' Eurohealth 
14, no. 1 (2008): 3-4; R. Busse, ``The Health System in Germany,'' 
Eurohealth 14, no. 1 (2008): 5-6.N.


    Those with chronic disease or acute conditions often end up 
admitted or readmitted to hospitals, with surgery or expensive 
procedures for preventable complications, such as amputations or kidney 
dialysis for diabetics. Too often instead of acting early to stop the 
onset of or complications associated with diabetes, we build dialysis 
centers and, for Medicare patients, cover the costs of treating end-
stage renal disease.\19\
---------------------------------------------------------------------------
    \19\ David Tuller, ``Overshadowed, Kidney Disease Takes a Growing 
Toll,'' New York Times, Nov. 18, 2008.
---------------------------------------------------------------------------
    Complications of chronic disease often result in potentially 
preventable hospitalizations, particularly in low-income communities 
with reduced access to primary care. As illustrated in the Commonwealth 
Fund National Scorecard, hospital admissions for ambulatory care-
sensitive conditions, such as diabetes, asthma and heart failure, are 
three to five times higher in low-income communities than in higher 
income areas (Exhibit 13).


    A recent study by Bindman and colleagues underscores the importance 
of continuous as well as adequate coverage. The study found that 
interruptions in Medicaid coverage were associated with sharply higher 
rates of hospitalization for conditions that could have been treated in 
a much less expensive setting or prevented (Exhibit 14).\20\ The 
probability of hospitalization for ambulatory-care sensitive conditions 
(e.g. asthma, diabetes, hypertension, pneumonia, ruptured appendix) was 
eight times higher for those with interrupted coverage--and four times 
higher after controlling for demographics. In this study of California 
Medicaid beneficiaries, 62 percent experienced an interruption in 
coverage during the study period between 1998 and 2002--the average 
duration of interruption was 25 months. Most became uninsured when they 
lost Medicaid.
---------------------------------------------------------------------------
    \20\ A. Bindman, A. Chattopadhyay and G. Auerback, ``Interruptions 
in Medicaid Coverage and Risks for Hospitalization for Ambulatory 
Sensitive Conditions,'' Annals of Internal Medicine, Dec. 2008 
149(12):854-60.


    Our failure to provide adequate coverage and ensure access as well 
as lack of emphasis and value for primary and preventive care 
undermines the health of the Nation. Despite spending far more of our 
national resources on the health system, the United States is failing 
to keep pace with other countries in reducing deaths from conditions 
that are potentially preventable with early access to timely and 
effective care. From 1997/1998 to 2002/2003 the United States fell to 
last place behind 18 other high-income countries on mortality amenable 
to health care before age 75 (Exhibit 15). This provides a sensitive 
measure of potentially preventable deaths, including children dying 
from infections and respiratory diseases before age 14, diabetic deaths 
before age 50, appendicitis, and screenable cancers. Although the U.S. 
rates declined by 4 percent, other country rates improved much faster 
with an average decline in mortality of 16 percent. The difference 
between the U.S. rate and the lowest rate countries amounts to 100,000 
potentially preventable deaths per year.


                financial stress and economic insecurity
    The financial and economic consequences of having inadequate 
insurance or being uninsured are immediate and often long-lived as 
medical debt accumulates. In our 2007 survey, 72 million adults ages 
19-64 (41 percent) faced problems paying their medical bills or were 
paying medical debt over time--an increase from 58 million (34 percent) 
in 2005 (Exhibit 16). The majority of adults (60 percent) with bill 
problems or debt had insurance at the time the healthcare expenses were 
incurred.\21\ This increase occurred across all income groups but 
especially among families with low and moderate incomes: more than half 
of adults with incomes under $40,000 reported problems with medical 
bills in 2007 (Exhibit 17). Adults with gaps in health insurance 
coverage or those underinsured were most at risk of having problems 
with medical bills: three of five reported any one medical bill problem 
or accrued medical debt, more than double the rate of those who had 
adequate insurance all year.
---------------------------------------------------------------------------
    \21\ S.R. Collins, J.L. Kriss, M.M. Doty, and S.D. Rustgi, Losing 
Ground: How the Loss of Adequate Health Insurance is Burdening Working 
Families: Findings from the Commonwealth Fund Biennial Health Insurance 
Surveys, 2001-2007 (New York: The Commonwealth Fund) August 2008.




    Of the estimated 50 million adults who were paying off medical debt 
in 2007, many were carrying substantial debt loads that had accrued 
over time. One-quarter of adults with medical debt were carrying $4,000 
or more in debt and 12 percent had $8,000 or more. More than one-third 
(37 percent) of adults with medical debt were carrying overdue bills 
from care received more than 1 year ago.
    In the face of mounting medical bills and debt, many adults are 
making stark trade-offs in their spending and saving priorities. Among 
adults who reported financial stress or accumulated debt in 2007, 
nearly one third (29 percent) said they had been unable to pay for 
basic necessities like food, heat, or rent because of medical bills; 39 
percent had used all their savings; 30 percent had taken on credit card 
debt; and 10 percent had taken out a mortgage against their home. Such 
actions were especially high among people who had spent any time 
uninsured or those underinsured. Nearly half of adults who had spent 
any time uninsured and reported medical bill problems had used all 
their savings to pay for their medical bills and two of five were 
unable to pay for food, heat, or rent. Underinsured adults made similar 
trade-offs: 46 percent said they had used all their savings, 33 percent 
took on credit card debt, and 29 percent were unable to pay for basic 
life necessities. In short, underinsured and uninsured adults are going 
without care and living with the financial stress of medical bills. The 
United States is unique among industrialized countries: it is possible 
to be insured all year yet face bankruptcy or exhaust savings for 
retirement or college if you get sick.
    To date, much of the erosion in more comprehensive coverage, 
including benefit limits has occurred in the small group and individual 
market. Although there has been a broad trend toward higher cost-
sharing, including higher deductibles and copayments for medications 
and other care, employees of small businesses have been particularly 
hard hit. Without the leverage and risk pool of large firms, small 
businesses tend to pay the same premiums or more for less comprehensive 
coverage.\22\ As employers try to ``buy down'' the cost of premiums to 
hold onto coverage, average deductibles for single coverage in PPO 
plans for small firms have quadrupled since 2000 (Exhibit 18).\23\ 
Similarly, those insured through the individual market tend to pay more 
and get less due to much higher administrative costs (including 
underwriting and marketing) and restrictions in benefits. Coverage 
equivalent to employer plans in the individual market--if available--is 
estimated to cost at least an additional $2,000.\24\ Plans in the 
individual market and small firm market are also more likely to place 
restrictions on benefits, including caps on the amounts plans will pay.
---------------------------------------------------------------------------
    \22\ J.R. Gabel and J.D. Pickreign, Risky Business: When Mom and 
Pop Buy Health Insurance for Their Employees (New York: The 
Commonwealth Fund) April 2004.
    \23\ G. Claxton, J. Gabel, B. DiJulio, et al., ``Health Benefits in 
2008: Premiums Moderately Higher, While Enrollment in Consumer-Directed 
Plans Rises In Small Firms,'' Health Affairs Web Exclusive (Sept. 24, 
2008):w492-w502.
    \24\ T. Buchmueller, S.A. Glied, A. Royalty, K. Swartz, ``Cost and 
Coverage Implications of the McCain Plan to Restructure Health 
Insurance,'' Health Affairs Web Exclusive (Sept. 16, 2008):w472-w481.


         moving in new directions: insurance and system reforms
    Extending affordable insurance to all and doing so in a way that 
ensures access and provides financial protection is critical to moving 
in a more positive direction. The United States leads the world on 
health care spending: at an expected 17 percent of gross domestic 
product (GDP) in 2009, we are an outlier and spending per person is 
double or more what other countries spend. With current trends, the 
share of GDP spent on health care is projected to increase to 21 
percent by 2020, at the same time millions more will lose basic access 
to care.\25\
---------------------------------------------------------------------------
    \25\ The Commonwealth Fund Commission on a High Performance Health 
System, The Path to a High Performance U.S. Health System: A 2020 
Vision and the Policies to Pave the Way (New York: The Commonwealth 
Fund) February 2009. 2020 estimates from the Lewin Group. International 
comparisons from OECD.
---------------------------------------------------------------------------
    Insurance reform is essential to address rising costs as well as 
growing concerns about wide variations in quality and health care 
delivery system performance. In addition to access concerns, the 
fractured insurance makes it difficult to develop coherent payment 
policies that could align incentives with better outcomes and more 
prudent use of resources. Further, insurance markets do not align 
incentives to reward added value--better outcomes as well as efficient 
use of resources.
    Discontinuous coverage increases administrative costs and erodes 
incentives to invest in population health and disease prevention for 
the long term. Further, competing private insurance plans can often 
gain at the margin by using benefit designs that segment patients by 
health risk or deny or limit coverage and care to the sickest. For 
instance, by limiting benefits for chemotherapy without regard to 
effective care or cost-sharing, insurance companies can lower premiums. 
Ten percent of the sickest share of the population account for 64 
percent of total national spending each year--the healthiest half 
account for only 3 percent (Exhibit 19).\26\ With such highly 
concentrated expenditures, there is a strong financial incentive to 
appeal to the healthier half of the population--even a small increase 
or decrease in the share of the sickest 10 percent enrolled with an 
insurer makes a difference. It is in no health plan's interest to 
advertise for the best outcomes for chronic conditions and in all 
plans' interests to appeal to young, healthier adults. Currently, we 
have no mechanism to counteract this market incentive.
---------------------------------------------------------------------------
    \26\ S.H. Zuvekas and J.W. Cohen, ``Prescription Drugs and the 
Changing Concentration of Health Care Expenditures,'' Health Affairs 
Jan/Feb 2007 26(1):249-257.


    The complexity and fragmentation of the current insurance system 
adds cost without value. Net costs of private insurance administration, 
including underwriting, marketing, claims payment, and profit margins 
have grown faster than total health spending for the past decade--more 
than doubling from 2000 to 2008 (Exhibit 20).\27\ The United States 
leads the world in the proportion of national health expenditures spent 
on insurance administration, and the Nation could save $102 billion 
annually if it did as well as the best countries.\28\
---------------------------------------------------------------------------
    \27\ The Commonwealth Fund Commission on a High Performance Health 
System, The Path to a High Performance U.S. Health System: A 2020 
Vision and the Policies to Pave the Way (New York: The Commonwealth 
Fund) February 2009.
    \28\ The Commonwealth Fund Commission on a High Performance Health 
System, Why Not the Best? Results from the National Scorecard on U.S. 
Health System Performance, 2008 (New York: The Commonwealth Fund) July 
2008.


    Moreover, these costs do not include the internal costs to 
providers of multiple reporting forms, formularies, prices or payment 
methods for the same care, and benefit designs. Insurance complexity 
requires additional staff and consumes physician time that could 
otherwise be devoted to patient care. In Commonwealth Fund 
international and national surveys, U.S. patients stand out for reports 
of time spent on insurance-related paper work or disputes.\29\
---------------------------------------------------------------------------
    \29\ C. Schoen, R. Osborn, M.M. Doty, et al., ``Toward Higher-
Performance Health Systems: Adults' Health Care Experiences in Seven 
Countries, 2007,'' Health Affairs Web Exclusive (October 31, 
2007):w717-w734; S.K.H. How, A. Shih, J. Lau, and C. Schoen, Public 
Views on U.S. Health System Organization: A Call for New Directions 
(New York: The Commonwealth Fund) August 2008.
---------------------------------------------------------------------------
    Multiple variations in benefits, underwriting, and marketing costs 
all drive up costs of insurance administration. These costs are 
particularly high as a share of premiums in the small group and 
individual market, consuming 22 to as much as 40 percent of 
premiums.\30\
---------------------------------------------------------------------------
    \30\ The Lewin Group technical report, The Path to a High 
Performance U.S. Health System: Technical Documentation, February 2009. 
See page 14.
---------------------------------------------------------------------------
    Complex variations in benefits also undermine meaningful choice and 
open the door to potential market segmentation based on health risks. 
Even within the current Medicare Advantage program, the wide variation 
in benefit designs makes it difficult to make an informed choice on 
anything but premium rates and whether your current doctor is in the 
network (Exhibit 21). Plans vary on multiple dimensions and the extent 
of the variation is often not evident until one enrolls or experiences 
a serious illness.\31\
---------------------------------------------------------------------------
    \31\ E. O'Brien and J. Hoadley, Medicare Advantage: Options for 
Standardizing Benefits and Information to Improve Consumer Choice (New 
York: The Commonwealth Fund) April 2008.


    As evidence of the potential to reduce overhead costs with reforms, 
private insurers in other countries with multi-payer systems, including 
the Netherlands and Switzerland, for example, are able to provide 
coverage with only 5 percent of premiums allocated to plan overhead and 
the rest for benefits.\32\ In these countries, relatively little is 
spent on marketing, benefits are more standardized and comparable, and 
underwriting health risks (i.e., premium variations based on health) is 
prohibited. Similarly, the standard option offered to Federal employees 
through the Federal Employee Health Benefits Program (FEHBP) operates 
for about 5 percent of claims.\33\
---------------------------------------------------------------------------
    \32\ R.E. Leu, F.F.H. Rutten, W. Brouwer, et al., The Swiss and 
Dutch Health Insurance Systems: Universal Coverage and Regulated 
Competitive Insurance Markets, The Commonwealth Fund, January 2009.
    \33\ Jon Gabel e-mail and memo to Commonwealth Fund, January 30, 
2009.
---------------------------------------------------------------------------
    Among States, Massachusetts efforts to achieve coverage for all 
have succeeded in insuring all but 2 percent of the population.\34\ 
Rates for underinsured have also declined.\35\
---------------------------------------------------------------------------
    \34\ Jon Kingsdale, Executive Director, Commonwealth Health 
Insurance Connector Authority, presentation at AcademyHealth National 
Health Policy Conference, ``Massachusetts Health Care Reform Results So 
Far and Looking Ahead,'' February 2, 2009.
    \35\ S.K. Long, The Impact of Health Reform on Underinsurance in 
Massachusetts: Do the Insured Have Adequate Protection? (Washington, 
DC: The Urban Institute) October 2008.
---------------------------------------------------------------------------
    Massachusetts has also shown that consolidating risk, changing 
market competitive rules, and organizing an insurance connector with an 
easy web-based choice of plans, with review of premiums for 
reasonableness, can improve benefits and lower premiums. Benefits have 
improved and premiums costs have come down following reforms. For 
example, a typical uninsured 37-year-old male faced a monthly premium 
of $335 pre-reform, compared with $184 post-reform, with a $2,000 
deductible instead of a $5,000 deductible pre-reform. To provide 
choices but simplify decision-making, Massachusetts has offered three 
tiers of benefits--labeled gold, silver, and bronze--with actuarially 
equivalent policies within each tier. The Web site fully discloses the 
plan features and variations as well as premiums.
                      insurance design principles
    Insurance market reforms--including minimum requirements on 
insurers to cover everyone, the sick and healthy alike, at the same 
premium--could ensure the availability of coverage across the United 
States. Organizing a national insurance 
exchange that builds on the experience of Massachusetts and other 
countries could enhance choice and continuity, focus competition on 
better outcomes, and provide a mechanism to broadly pool risk. All 
these elements provide a foundation for broader health system reforms.
    There are several key principles to insurance and benefit design if 
reforms seek to expand coverage and aim to improve access, provide 
financial protection, and focus insurance market competition on better 
outcomes (Exhibit 22).


     Establish a minimum benefit level. The goals of access and 
financial protection should guide this minimum. A minimum is necessary 
to avoid driving coverage even lower and will be necessary for any 
reform requiring everyone to have insurance. It sets the standard for 
minimum ``creditable'' coverage.
     Minimum design. To assure access and provide protection a 
minimum should:

          Be broad in scope, including essential acute care.
          Prohibit disease-specific or service-specific limits: 
        otherwise, patients can ``run out'' of critical care (such as 
        effective medication or cancer treatment) and opportunities for 
        risk segmentation remain.
          If deductibles are included, exempt preventive care 
        and essential care for chronic conditions. Primary and 
        preventive care should either be covered in full or with 
        minimal copayment to encourage and support providing the right 
        care and to align incentives with efforts to hold clinicians 
        accountable for care outcomes.
          Set lifetime limits high or eliminate altogether and 
        standardize to facilitate comparisons.
          Establish annual out-of-pocket maximums, including 
        deductibles and copayments or coinsurance.

     Low-income protection. Reduce cost-sharing and limit total 
out-of-pocket exposure for low-income individuals and families. At or 
near poverty, families are already spending most or all of their income 
on basic essentials such as food and housing. Therefore, they are 
particularly sensitive to costs, including costs for preventive and 
chronic care.\36\ Expansion of the Medicaid/SCHIP program to adults and 
higher incomes, with sliding scale premiums and modest cost-sharing (as 
in Massachusetts), is one potential approach. Given advances in 
electronic claims, it would also be possible to limit total out-of-
pocket exposure as a share of income.
---------------------------------------------------------------------------
    \36\ M.E. Chernew, T.B. Gibson, K. Yu-Isenberg, et al., ``Effects 
of Increased Patient Cost Sharing on Socioeconomic Disparities in 
Health Care,'' Journal of General Internal Medicine, Aug. 2008 
(8):1131-1136.
---------------------------------------------------------------------------
     Limit the range of variation in benefit designs. More 
standardized benefits, including actuarial bands within limit ranges 
(e.g., same scope of benefits and total out-of-pocket protection but 
variations in deductible or cost-sharing) help facilitate choice and 
encourage risk pooling. Review should limit designs without clear 
rationale based on effectiveness and appropriateness of care.
     Premiums for the standard plan should be affordable, with 
income-related premium assistance for premium costs in excess of a 
given threshold of income. Such provisions could include sliding-scale 
premiums or tax credits that vary with income.
     Public comparisons of choices. Standardization plus web-
based posting should make it easy to compare information on benefits, 
expected out-of-pocket costs, physician and other provider networks, 
and premiums.
     Insurance market reforms to ensure access, avoid premium 
variations based on health risks, and focus competition on outcomes. In 
the context of coverage for all, ground rules should require that 
insurers cover everyone (guaranteed issue and renewal) and charge the 
same premium regardless of health status of enrollee (community rating 
or age bands). If there is an insurance exchange, these provisions 
should apply to plans sold through the connector and those sold outside 
the connector. Such provisions would lower underwriting and marketing 
costs.
     Risk adjustment of premiums. Premiums should be risk-
adjusted to reduce incentives to avoid risk and to provide incentives 
to promote positive outcomes, including better outcomes for those with 
complex or chronic conditions.
     Competition based on value added. The goal of the various 
insurance market reforms, including an exchange, should be a market 
where plans and care systems that achieve better health outcomes with 
more prudent use of resources do well and those that do not lose money 
and market share. Insurers should compete on the basis of the added 
value they bring by fostering quality and efficiency in the delivery of 
health care, and efficiency in administrative costs.
     Structure insurance choices and make it easy to enroll and 
stay insured through a national insurance exchange or ``connector.''

    Insurance reforms that extend coverage to all, set a minimum 
benefit floor, limit the range of variation, and eliminate underwriting 
would reduce complexity, ensure access, improve continuity, and lower 
administrative costs. Such reforms will require a significant increase 
in the role of the public sector to provide a framework and oversight 
for market competition and to provide financing to make coverage 
affordable relative to incomes.
           improving access, quality, and slowing cost growth
    Although insurance reforms are essential, health reforms will need 
to combine insurance with payment and system reforms to achieve the 
triple goals of improving access for all, achieving better quality 
(health outcomes), and slowing the growth of health spending. Indeed, 
unless reforms also seek to improve the value of care and the 
performance of the care system, efforts to expand coverage will be 
difficult to sustain. At the same time, efforts to provide affordable 
insurance to all and reform the insurance market could provide a 
stronger foundation for payment and system reforms.
    In its 2007 call for more comprehensive reform, the Commonwealth 
Fund Commission on a High Performance Health System identified five 
core strategies for improving on all three dimensions of system 
performance and fostering care system innovations.\37\ These include:
---------------------------------------------------------------------------
    \37\ The Commonwealth Fund Commission on a High Performance Health 
System, A High Performance Health System for the United States: An 
Ambitious Agenda for the Next President (New York: The Commonwealth 
Fund) November 2007.

     Ensuring affordable coverage for all.
     Aligning incentives with value and effective cost control.
     Fostering accountable, accessible, patient-centered and 
coordinated care.
     Aiming high to improve quality, health outcomes: investing 
in information systems and efforts to promote health and disease 
prevention.
     Accountable leadership and collaboration to set and 
achieve national goals.

    To examine what could be possible with an integrated set of 
insurance, payment, and system reforms, the Commission recently issued 
a report entitled, The Path to a High Performance U.S. Health System: A 
2020 Vision and the Policies to Pave the Way. The Path report provides 
a set of recommendations in each strategic area and assesses the 
potential impact from 2010 to 2020 using policies that illustrate 
recommended actions.
    Central to the Commission strategic recommendations is the creation 
of a national insurance exchange that offers a choice of private plans 
and a new public plan, with associated insurance market reforms and 
provisions to make coverage affordable.\38\ Insurance recommendations 
include:
---------------------------------------------------------------------------
    \38\ The Commonwealth Fund Commission on a High Performance Health 
System, The Path to a High Performance U.S. Health System: A 2020 
Vision and the Policies to Pave the Way (New York: The Commonwealth 
Fund) February 2009.

     Establish a health insurance exchange that offers an 
enhanced choice of private plans and a new public plan. This new public 
plan would offer comprehensive benefits with incentives for disease 
prevention and payment methods that reward results. It would build on 
Medicare's claims administrative structure and national provider 
networks. The exchange and new public plan would be open to all, 
including large employers.
     Require individuals to have coverage and employers to 
offer coverage or contribute to a trust fund for insurance, sharing 
responsibility to pay for insurance for all.
     Provide income-related premium assistance to make coverage 
affordable.
     Expand eligibility for and improve payment under Medicaid 
and the Children's Health Insurance Program to improve affordability 
and access. Eliminate Medicare's 2-year waiting period for the 
disabled.
     Set a minimum benefit standard to ensure access and 
adequate protection from the financial burden of obtaining needed 
health care.
     Reform health insurance markets to improve insurance 
efficiency, access, and affordability by prohibiting premium variation 
based on health and guaranteeing offer and renewal of coverage to all, 
regardless of health status.

    Building on this foundation, an integrated set of polices would 
change the way the Nation pays for care and would invest in system 
reforms and health initiatives. Payment reforms include: enhanced value 
for primary care and new payment methods to support better care 
coordination and management of chronic disease (often called ``patient-
centered medical home''); moving away from fee-for-service to more 
``bundled'' payment for care; and correcting price signals to align 
payment levels with more efficient care. Together the set of payment 
reforms aim to reward efficiency (high quality and prudent use of 
resources) and penalize waste and ineffective care by stimulating and 
supporting a more effective and efficient delivery system. System 
reforms include investing in and expanding effective use of health 
information technology and networks (HIT with information exchanges), 
providing better information on comparativeness effectiveness and using 
this information to guide benefit and pricing policies, and all-
population data with benchmarks of top performance.
    The analysis of the potential impact indicates that it would be 
possible to extend affordable insurance to everyone, improve quality, 
and substantially slow the rate of growth of national spending by a 
cumulative $3 trillion by 2020 assuming reforms begin in 2010. Although 
spending would slow compared with projected trends, it would still go 
up each year (Exhibits 23 and 24).




    Many of the Commission recommendations would be politically 
difficult to achieve. They depend on building the political will and 
consensus that the Nation can no longer afford to continue on the 
current path. Changes will require new leadership roles and 
collaboration across public and private sectors. Effective payment 
reforms will require time to develop and implement and flexibility to 
innovate as the Nation learns. Information systems require investment 
and time to yield maximum returns through adoption and use.
    With the current severe recession, there is broad public support 
for fundamental reform. The United State's continued failure to protect 
its population when sick is undermining national health and economic 
security. Wide public concern and stress on businesses and public 
sectors make it increasingly clear that we cannot afford to maintain 
the status quo. Each year we wait, the problems grow worse. There is an 
urgent need for leadership and policy action to force consensus to move 
in a positive direction.
    Thank you for the opportunity to testify on these critical issues.

    Senator Bingaman. Thank you very much.
    Ms. Shearer, please go right ahead.

   STATEMENT OF GAIL SHEARER, MS, DIRECTOR OF HEALTH POLICY 
           ANALYSIS, CONSUMERS UNION, WASHINGTON, DC

    Ms. Shearer. Thank you, Mr. Chairman, members of the 
committee. Thank you very much for the invitation to testify on 
this important issue of the underinsured. The key break downs 
of the health coverage marketplace that have fueled the growth 
in the underinsured include the increase in high deductible 
coverage, annual caps in coverage, lifetime benefit limits, 
limited benefits, preexisting condition exclusions, higher co-
pays, out of network charges, bare bones policies and a flawed 
individual health insurance market.
    During 2008, Consumers Union sent a bus around the country 
to find out what was happening to real people and their 
healthcare. More than 4,000 people told us their healthcare 
stories. In my written statement I have presented profiles of 
several of these people that we encountered. Each tells in its 
own way that we are all at risk of being underinsured.
    Kim, in Minneapolis came to the end of her 18 months of 
Cobra coverage and then found that her individual policy had a 
glaring loop hole. A condition that she not file any claims for 
counseling for 2 years. She had been in grief counseling 
following her husband's suicide.
    Charles, in Georgia discovered that the doctor's office on 
one floor of the insurance company's network was covered, but 
on the second floor where biopsies are done, was not part of 
the network. Finding an in network surgeon for his prostate 
cancer proves so challenging that he said, ``It's not the 
cancer that's going to kill me, it's the insurance company.''
    Bea from North Carolina was laid off from her county social 
worker job and could only afford catastrophic coverage which 
did not cover her preexisting condition including her 
arthritis. She told us, ``I quickly realized that the American 
dream of owning your own business is only for the young and the 
healthy.''
    Solving the problems faced by the underinsured will require 
fundamental reforms of our health care system. It's relatively 
easy to review the situation of the individual's plights and 
conclude that deductibles should be lower, benefits should be 
more comprehensive, networks should provide appropriate 
services and caps and annual or lifetime benefits should be 
prohibited, for example. But the underlying problem is that 
health care costs are high as a percentage of GDP and continue 
to grow at a rate faster than the rate of other goods and 
services.
    This differential growth rate translates to higher 
premiums, higher co-payments and higher burdens on individuals 
and families. As long as the growth in health care costs 
continues unabated, we will struggle as a nation to address the 
very difficult challenge of coming up with how to best pay for 
health care and relieve the burden on the underinsured.
    Consumers Union believes that the problems faced by the 
underinsured can best be addressed by health reforms that 
provide for broad-risk pooling with comprehensive quality 
coverage for all. A health care system that allows pre-existing 
condition exclusions, caps and benefits and underwriting can 
not address the underlying problems. A key building block that 
will make this kind of affordable coverage is increased 
comparative effectiveness research. Congress took an important 
step by including funding for expanded comparative 
effectiveness research in the Stimulus bill.
    Consumers Union has developed a program, Consumer Reports 
Best Buy Drugs, that demonstrates why this type of research is 
so important. Our reports show that individuals can often save 
between $1,000 and $2,000 a year simply by switching from a 
high priced drug to a best buy drug that is equally safe and 
effective. The reality is that in this country and in this 
economy, just about all of us are at risk of being 
underinsured.
    The cause might be a pink slip, a major accident, a birth 
defect, a serious illness such as cancer, pregnancy or being 
eligible only for a limited, loop hole laden, individual 
policy. The real issue is the growth of health care costs at a 
rate much higher than GDP growth and the responses of payers 
who increase deductibles and decrease coverage. The problem of 
the underinsured must be addressed in the context of overall 
system reform that helps moves to a system that rewards 
prevention, bases decision on evidence and is committed to 
getting better value for our health care dollar whether the 
dollar comes from taxpayers, consumers or employers.
    Mr. Chairman and members of the committee, the growing 
problem of the uninsured and underinsured cries out for your 
prompt attention. Thank you very much for considering our 
views.
    [The prepared statement of Ms. Shearer follows:]
                 Prepared Statement of Gail Shearer, MS
                           executive summary
    The reality is that in this country--and in this economy--just 
about all of us are at risk of being underinsured. The cause might be a 
pink slip, a major accident, a birth defect, serious illness such as 
cancer, pregnancy, or being eligible only for a limited, loophole-laden 
individual policy.
    While the definition of the ``underinsured'' varies, quantitative 
definitions used by the government tend to focus on the percent of 
adults between 19 and 64 whose out-of-pocket health care expenses 
(excluding premiums) are 10 percent or more of family income. The ranks 
of the underinsured have grown. The Commonwealth Fund estimates that 42 
percent of U.S. adults were uninsured or underinsured in 2007. You can 
be sure that with the recent loss of millions of jobs, and 
unaffordability of COBRA premiums, these numbers will rise dramatically 
in 2008 and 2009.
    Research by the Consumer Reports National Research Center used a 
series of questions to determine the percent who were underinsured 
based on answers to questions such as whether they considered their 
deductible too high, and whether they felt adequately covered for costs 
of surgery, doctors visits, and catastrophic medical conditions. We 
found that 41 percent of the adult population sampled lacked adequate 
health coverage. Nine percent of the underinsured (by our survey) took 
extraordinary measures to pay medical bills, including dipping into 
IRAs, 401(k)s or pension funds, selling cars, trucks or boats, or 
taking on home equity or second mortgage loans.
    Underinsurance is a problem for two key reasons: Inadequate 
coverage results in the financial burden of uncovered health care. In 
our survey, for example, 30 percent of the underinsured had out-of-
pocket costs of $3,000 or more for the previous 12 months. 
Underinsurance can lead to medical debt and even bankruptcy. The second 
problem posed by underinsurance is delayed or denied health care and 
poorer health outcomes, caused by the financial barrier to care.
    The key breakdowns of the health coverage marketplace that have 
fueled the growth in the underinsured included the increase in high 
deductible coverage, annual caps in coverage, lifetime benefit limits, 
limited benefits, pre-existing condition exclusions, higher co-pays, 
out-of-network charges, barebones policies, and a flawed individual 
health insurance market.
    Fundamental reforms of our health care system are needed to solve 
the problem of the underinsured. A necessary building block will be 
expanded research of comparative effectiveness so that we increase the 
knowledge base for making treatment and coverage decisions. It will be 
necessary to cut the growth of health care costs and get better value 
for our health care dollar in order to be able to afford the coverage 
improvements and expansions necessary to eliminate the risk of being 
underinsured. Moving from the ranks of the uninsured to the insured 
does not guarantee protection against the financial hardship that 
illness can bring, as demonstrated by the plight of the underinsured. 
We look forward to working with you to address this problem that 
threatens families with financial crises just when they are battling 
health care challenges.
                                 ______
                                 
    Mr. Chairman, members of the committee, thank you for the 
invitation to testify on the issue of the underinsured. This growing 
problem creates financial hardship and results in barriers to getting 
needed health care. Being underinsured in America means both pocketbook 
and healthcare hardship. Fortunately, there is increased awareness that 
we can't assume that a simple measure of the uninsured neatly sums up 
the health care status of our Nation. The growing population of 
underinsured demonstrates clearly that moving from the ranks of the 
uninsured to the insured alone does not guarantee protection against 
the financial hardship that illness can bring. We commend you for 
holding this hearing to help keep attention focused on this crucial 
element of the health care problem.
    Consumers Union\1\ is the independent, non-profit publisher of 
Consumer Reports, with circulation of about 7 million (Consumer Reports 
plus ConsumerReports.org subscribers). We regularly poll our readership 
and the public about key consumer issues, and the high cost of health 
care consistently ranks among their top concerns. My statement includes 
information about a survey that we conducted about the problem of the 
underinsured.
---------------------------------------------------------------------------
    \1\ Consumers Union, the nonprofit publisher of Consumer Reports, 
is an expert, independent organization whose mission is to work for a 
fair, just, and safe marketplace for all consumers and to empower 
consumers to protect themselves. To achieve this mission, we test, 
inform, and protect. To maintain our independence and impartiality, 
Consumers Union accepts no outside advertising, no free test samples, 
and has no agenda other than the interests of consumers. Consumers 
Union supports itself through the sale of our information products and 
services, individual contributions, and a few noncommercial grants.
---------------------------------------------------------------------------
    After reviewing the latest numbers that show a recent growth in the 
ranks of the underinsured, my testimony will show how being 
inadequately insured can place tremendous health and financial burdens 
on families. I will provide an overview of the basic causes of becoming 
underinsured, present some profiles of the faces of the underinsured, 
and will provide some comments about finding a solution to this 
problem.
                     the underinsured: the numbers
    Estimates of the underinsured vary based on the underlying data 
source, the methodology, and the definition. Early estimates of the 
underinsured used focused on risk of incurring out-of-pocket costs (not 
including premiums) exceeding 10 percent of income.\2\ Government 
estimates are based on the percent of adults between 19 and 64 whose 
out-of-pocket expenses are 10 percent or more of family income, 
sometimes adjusting to a lower percent for low-income individuals.\3\ A 
recent Commonwealth Fund estimate shows a 60 percent growth in 
underinsured between 2003 and 2007, with an estimated 25.2 million 
individuals underinsured in 2007. The Commonwealth Fund estimates that 
42 percent of U.S. adults were uninsured or underinsured in 2007.\4\
---------------------------------------------------------------------------
    \2\ Pamela Farley Short and Jessica S. Banthin. 1995. New Estimates 
of the Underinsured Younger than 65 Years. JAMA. 274: 1302-1306.
    \3\ Jessica Banthin. AHRQ, Out-of-Pocket Burdens for Health Care, 
Insured, Uninsured and Underinsured. September 23, 2008.
    \4\ Cathy Schoen, et al., How Many are Underinsured? Trends Among 
U.S. Adults, 2003 And 2007, Health Tracking, Health Affairs--Web 
Exclusive, June 10, 2008. See also: Jessica S. Banthin and Didem 
Bernard, Changes in Financial Burdens for Health Care--National 
Estimates for the Population Younger than 65 Years, 1996 to 2003, JAMA, 
December 13, 2006.
---------------------------------------------------------------------------
  consumer reports national research center survey research report \5\
    The Consumer Reports National Research Center conducted a 
nationally representative survey of 2,905 respondents between the ages 
of 18 and 64 in May 2007. The findings were reported in the September 
2007 issue of Consumer Reports.\6\ We found that 16 percent of the 
adult population under 65 was uninsured. We also found that 29 percent 
of those surveyed who had health insurance at the time of our survey 
were underinsured. Combined with the uninsured, the CR survey found 
that 41 percent of the population sampled lacked adequate health 
coverage.
---------------------------------------------------------------------------
    \5\ Health Care Experiences of the American Public: May 2007 
Survey, Consumer Reports National Research Center Survey Research 
Report.
    \6\ Are You Really Covered? Why 4 in 10 Americans can't depend on 
their health insurance, Consumer Reports, September 2007.
---------------------------------------------------------------------------
    Nine percent of underinsured in our survey took extraordinary 
measures to pay medical bills--including dipping into IRAs, 401(k)s, or 
pension funds, selling cars, trucks or boats, selling off stocks and 
bonds, taking on home equity or second mortgage loans, selling homes, 
or declaring bankruptcy. Three percent reported taking on home equity 
or second mortgage loans, selling homes, or declaring bankruptcy. While 
65 percent of the adequately-insured felt well prepared for unexpected 
future medical expenses, only 37 percent of the underinsured expressed 
such confidence.
    The underinsured were defined by Consumer Reports based on 
responses to individual survey items. Respondents were categorized as 
underinsured if they were insured and complained in our survey about 
two or more of the following aspects of their plans:

     It does not adequately cover prescription drug costs;
     It does not adequately cover the costs of doctors' visits;
     It does not adequately cover the costs of medical tests;
     It does not adequately cover the costs of surgery or other 
medical procedures;
     It does not provide enough coverage for catastrophic 
medical conditions;
     The deductible is too high.

    Table 1 shows the percent of underinsured reporting various types 
of dissatisfaction. Table 2 shows the relative financial impact on the 
underinsured compared with the insured.

   Table 1.--Dissatisfaction with Insurance: Consumer Reports National
                         Research Center Survey
------------------------------------------------------------------------
   Percent of respondents who are underinsured expressing         In
   dissatisfaction with these aspects of their insurance:       Percent
------------------------------------------------------------------------
Deductible is too high......................................         70
Does not adequately cover the costs of medical tests........         67
Does not adequately cover prescription drug costs...........         63
Does not adequately cover the costs of surgery or other              58
 medical procedures.........................................
Does not adequately cover the costs of doctors' visits......         53
Does not provide enough coverage for catastrophic medical            51
 conditions.................................................
------------------------------------------------------------------------


    Table 2.--Financial Impact of Being Underinsured Consumer Reports
                    National  Research Center Survey
------------------------------------------------------------------------
                                                Under-
                                               insured      Adequately
                                                 [In       insured  [In
                                               percent]      percent]
------------------------------------------------------------------------
Compared with adequately insured, the
 underinsured in our survey were:
  Twice as likely to spend $3,000 out-of-            30              16
   pocket for medical expenses in the past
   12 months...............................
  Four times as likely to have dug deep              33               9
   into their savings to pay for medical
   expenses................................
  Twice as likely to have charged at least           29              11
   some of their medical bills to credit
   cards...................................
  Three times as likely as adequately-               27               8
   insured to have outstanding unpaid bills
   owed to doctors or hospitals............
------------------------------------------------------------------------

                    why is underinsurance a problem?
    There are two serious health system problems that result from the 
growing numbers of the underinsured--the financial burden resulting 
from uncovered health costs and the health care burden caused by 
delayed or denied care.
    Financial burden of uncovered health care. Health care is 
expensive. When needed health care must be paid out-of-pocket, the 
burden on those who are sick can add tremendously to the burden of 
fighting illness. The burden falls hardest on those with the least 
resources to weather the extra burden of illness--those with low and 
moderate income. Our survey found the underinsured were much more 
likely to face out-of-pocket costs of $3,000 for the previous 12 months 
(30 percent vs. 16 percent of the adequately insured).
    Medical debt has increased recently, even before the financial 
crisis of 2008. Forty-nine million adults (28 percent of the adult 
population) reported carrying medical debt in 2007, an increase from 21 
percent in 2005.\7\ Not surprisingly, underinsured adults, who have 
less comprehensive health care coverage, are more likely than the 
insured to face medical bill and medical debt problems. Some of the key 
factors were inadequate drug and dental coverage, high premiums as 
percent of income, out-of-network charges, and benefit gaps.\8\
---------------------------------------------------------------------------
    \7\ Sara Collins, et al., Losing Ground: How the Loss of Adequate 
Health Insurance is Burdening Working Families, The Commonwealth Fund, 
August 2008, p. 10.
    \8\ Michelle M. Doty, et al., Seeing Red: The Growing Burden of 
Medical Bills and Debt Faced by U.S. Families, Issue Brief, the 
Commonwealth fund, August 2008.
---------------------------------------------------------------------------
    The Commonwealth Fund study \9\ found that the underinsured, 82 
percent of which were insured at the time they were provided medical 
care, face other burdens from high medical bills.
---------------------------------------------------------------------------
    \9\ The Commonwealth Fund Biennial Health Insurance Survey (2007), 
Chart pack, Figure 15.

     29 percent are unable to pay for basic necessities such as 
food, heat or rent;
     46 percent used up all of their savings;
     12 percent took out a mortgage against their home or took 
out a loan;
     33 percent took on credit card debt.

    As a nation, the current financial crisis has been a cogent 
reminder of the downside of carrying too much debt. Medical costs 
contribute substantially to debt. Sixty percent of underinsured or 
uninsured adults reported medical bill problems or debt in the 
Commonwealth Fund Biennial Health Insurance Survey (2007). This study 
showed that 62 percent of those with medical debt had insurance at the 
time of their medical incident.\10\ Clearly, health insurance is not 
providing the financial protection that it is meant to.
---------------------------------------------------------------------------
    \10\ Michelle M. Doty, et al., Seeing Red: The Growing Burden of 
Medical Bills and Debt Faced by U.S. Families, Issue Brief, The 
Commonwealth Fund, August 2008.
---------------------------------------------------------------------------
    Medical expenses of the underinsured are a major contributing 
factor toward bankruptcy. Researchers at Harvard Medical School and 
Harvard Law School conducted interviews with families who filed for 
bankruptcy in 2001. About half said that medical costs contributed to 
the bankruptcy. Three quarters of those whose bankruptcies were related 
to health care expenses had insurance when the illness began.\11\
---------------------------------------------------------------------------
    \11\ David U. Himmelstein, Elizabeth Warren, Deborah Thorne and 
Steffie Woolhandler, Illness and Injury as Contributors to Bankruptcy, 
Health Affairs, February 2, 2005.
---------------------------------------------------------------------------
    Barrier to getting needed health care. Being underinsured 
translates into delayed or foregone medical care, and this can result 
in people getting sicker and even death. Commonwealth Fund research 
found that the underinsured are more likely not to fill a prescription, 
to skip a test or treatment, to not visit the doctor for a medical 
problem and to forego needed specialist care.\12\
---------------------------------------------------------------------------
    \12\ Cathy Schoen, et al., Insured but not Protected: How Many 
Adults are Underinsured?, Health Affairs Web Exclusive, June 14, 2005, 
p. 295.
---------------------------------------------------------------------------
    High deductibles and co-pays can result in delayed care or foregone 
care. The recent Kaiser Family Foundation/American Cancer Society 
report tells the story of a prostate cancer survivor whose health 
insurance has a $3,750 deductible. He cuts back on screening to every 
other year, instead of every year, because of the burden of the $250 
test.\13\
---------------------------------------------------------------------------
    \13\ Kaiser/Cancer, p. 8.
---------------------------------------------------------------------------
                 different routes to being underinsured
    High out-of-pocket health care costs can lead to financial burden 
and to consumers being underinsured in a number of ways. Some of the 
most common causes of being underinsured are high deductibles, caps on 
annual or lifetime benefits, limited benefits, pre-existing condition 
exclusions, co-pays, network restrictions, barebones policies, and 
limited individual health insurance policies.
    Increase in high deductible coverage. One route to being 
underinsured is high deductible health insurance. Many consumers who 
lack employer-based coverage can not afford comprehensive coverage and 
resort to a high deductible policy in the individual market. Tax policy 
that favors health savings accounts has fueled the growth of high 
deductible coverage. Many employers are offering high deductible 
coverage. If a family earning $50,000 faces a $5,000 deductible, even a 
minor illness can cause them to fall into the ranks of the 
underinsured.
    Average deductibles are on the rise. In the individual market, 67 
percent of coverage has deductibles of $1,000 or above.\14\ The Kaiser 
Family Foundation/Health Research & Education Trust annual Employer 
Health Benefits report showed an increase in high deductible health 
plans offered by employers from 7 percent in 2006 to 13 percent in 
2008.\15\
---------------------------------------------------------------------------
    \14\ Kaiser/Cancer, p. 9.
    \15\ P. 5, Employer Health Benefits, 2008 Summary of Findings, The 
Kaiser Family Foundation and Health Research & Education Trust.
---------------------------------------------------------------------------
    Annual caps in coverage. Many policies have annual caps in 
coverage. A serious illness--such as a brain injury or cancer--can lead 
to reaching the cap in coverage. High costs of cancer treatment, for 
example, can quickly lead to using up a $100,000 benefit. The Kaiser/
ACS report tells the story of a breast cancer patient with employer-
sponsored coverage with a $100,000 annual limit. Having to face a 
medical debt of $30,000 while battling cancer created major stress.\16\
---------------------------------------------------------------------------
    \16\ Kaiser p. 11.
---------------------------------------------------------------------------
    Lifetime caps in benefits. Many policies also have lifetime caps in 
benefits. Again, with a serious illness, these caps can be reached.
    Limited benefits. Policies limit benefits in other ways, such as 
excluding emergency room coverage and excluding prescription drugs. 
Individual insurance plans are more likely to have limited benefits, in 
part to keep premiums low and in part because of the concern about 
adverse selection in this market. Even employer plans often limit 
benefits. For example, 55 percent of covered workers in small firms (3 
to 199 workers) have limited mental health benefits, e.g., limits of 20 
or fewer outpatient mental health visits per year.\17\
---------------------------------------------------------------------------
    \17\ Employer Health Benefits 2008, Kaiser Family Foundation and 
Health Research and Educational Trust, p. 141.
---------------------------------------------------------------------------
    Pre-existing condition exclusions. Many people have gaps in 
coverage that result in pre-existing condition exclusions when they 
join a new employer and new health plan. Individual health insurance 
policies often have such exclusions. For someone with a pre-existing 
condition such as cancer or pregnancy, the resulting out-of-pocket 
costs can be very large.
    Copays. A recent report by the Kaiser Family Foundation and the 
American Cancer Society told the story of cancer patients whose 
deductibles, combined with co-pays for doctor visits, outpatient visits 
and prescription drugs led to high medical bills, in some cases 
exceeding $100,000 despite having health insurance coverage.\18\ The 
Medicare Part D doughnut hole is an example of a ``copay'' that is 
designed into the benefit. New research shows that the doughnut hole 
results in Medicare beneficiaries not getting the drugs that they need 
in order to treat chronic conditions.\19\
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    \18\ Karyn Schwartz and Gary Claxton, Kaiser Family Foundation and 
Kristi Martin and Christy Schmidt, American Cancer Society, Spending to 
Survive: Cancer Patients Confront Holes in the Health Insurance System, 
February 5. 2009. 1.
    \19\ Sebastian Schneeweiss et al., The Effect of Medicare Part D 
Coverage On Drug Use and Cost Sharing Among Seniors Without Prior Drug 
Benefits, Health Affairs--Web Exclusive, February 1, 2009.
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    Out-of-network charges. When serious or chronic illness strikes, or 
when emergencies occur, consumers may find that they need to seek care 
from an out-of-network provider. In some cases, they may discover after 
their own careful planning that while their surgeon is in network, 
other doctors (e.g., radiologists or anesthesiologists) are out-of-
network. This can result in large uncovered costs. This can be a 
problem also if a job change leads to a different network, if 
physicians switch out of a network, or if an insurer drops a provider.
    Bare-bones policies. All payers of health care are struggling with 
the high cost and rate of increase of health care costs. Unfortunately, 
States are allowing ``bare-bones'' policies which technically move 
people from the ranks of the uninsured--but leave them being 
underinsured. For example, the ``Cover Florida'' plan (which became law 
in May 2008) allows policies that do not cover hospital or emergency 
room care. While the premium may be low, the absence of this basic 
coverage exposes any purchasers to the risk of facing high out-of-
pocket costs.\20\ Other exclusions in bare-bones policies can be mental 
health, maternity services, cancer care, substance abuse treatment, and 
prescription drugs.\21\ Bare-bones policies with limited benefits 
impose special risks on low-wage consumers who are most likely to have 
out-of-pocket costs that exceed 10 percent of income.\22\
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    \20\ Judith Solomon, New Georgia and Florida Health Plans Unlikely 
to Reduce Ranks of Uninsured, Center on Budget and Policy Priorities, 
July 1, 2008.
    \21\ Bare-Bones Health Plans: Is Something Better than Nothing? 
Reform Matters, National Women's Law Center.
    \22\ Sherry Glied, et al., Bare-Bones Health Plans: ``Are They 
Worth the Money,'' Issue Brief, The Commonwealth Fund, May 2002.
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    Individual health insurance market. While even employer-sponsored 
health insurance plans often have limits that result in underinsurance, 
the individual insurance market, a residual market that covers just 9 
percent of the population, has far more problems that can result in 
being underinsured.\23\ Unlike employer policies, in most States 
companies that sell individual coverage can pick and choose who they 
cover. Through underwriting, in many cases insurers can deny coverage. 
They can attach riders, for example covering all body systems except 
the system where there might be a pre-existing condition. Benefits can 
be skimpy, excluding for example pregnancy or prescription drugs.
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    \23\ Income, Poverty and Health Insurance Coverage in the United 
States, U.S. Census Bureau, 2007, p. 61.
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                       faces of the underinsured
    During 2008, Consumers Union sent a bus around the country to find 
out what is happening to real people. More than 4,000 people told us 
their stories.\24\ Below are some examples of our stories about real 
people who are underinsured.
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    \24\ More stories are available at prescriptionforchange.org.
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Pre-Existing Condition Exclusion in Individual Policy
    Kim--Minneapolis, MN. Kim's husband was having a difficult time 
sleeping so he saw his doctor who sent him home with a 3-week sample 
pack of anti-depressants. Her husband had no previous history of 
depression, but 5 weeks later he took his own life. After her husband's 
death, Kim saw a therapist for grief counseling. Kim ended up leaving 
her job in advertising to devote her time to drug safety advocacy and 
do freelance work. She paid for 18 months of COBRA coverage and then 
shopped around for an individual health plan. Since she had no serious 
health issues in her past, she expected her coverage would be 
affordable. But the insurer she had received coverage through 
previously refused to issue her an individual policy because they said 
that her participation in grief counseling was an indication of 
possible mental illness. Kim was able to get coverage through a second 
insurer but only on the condition that she would not file any claims 
for counseling for 2 years.\25\
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    \25\ http://link.brightcove.com/services/link/bcpid1544602725/
bclid1551048399/bctid1797029 
791.
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Limited Benefits That Exclude Emergency Room Visit
    Phuonglon--Denver, CO. While Phuonglon was traveling out-of-state, 
she had a small seizure and was brought to a hospital emergency room 
for treatment. When she returned home, she reviewed her health 
insurance policy and it appeared that she was covered for the ER visit. 
But then she started to receive bills for care that was not covered by 
her policy. At times, it was really difficult for her because she had 
not budgeted for these expenses. The experience opened her eyes to how 
easily people can go bankrupt by unforeseen medical expenses.\26\
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    \26\ http://link.brightcove.com/services/link/bcpid1544602725/
bclid1551048397/bctid1780555 
026.
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High-Deductible Health Insurance That Creates Financial Barrier to Care
    Gina--St. Joseph, MO. Gina and her husband own their own delivery 
company and have purchased an individual health insurance policy for 
their family. Gina recently had a miscarriage and decided not to seek 
medical treatment because they have a high $3,500 deductible and she 
couldn't afford to see the doctor. When Gina gave birth to her son a 
few years ago, the insurance company refused to pay for her C-section 
because they maintained it was elective (even though her son was born 
breeched). She had to fight with the insurance company to get them to 
pay for these medical costs. In the meantime, the insurance company 
sent their bill to collections. The insurance company eventually paid 6 
months after Gina had paid her full deductible.\27\
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    \27\ http://link.brightcove.com/services/link/bcpid1460683554/
bctid1701199083.
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Out-of-Network Provider for Emergency Transportation
    John--Pelham, AL. This 23-year-old young father had an accident on 
a four wheel vehicle in a rural area. When the ambulance arrived, the 
EMT decided he needed to be taken to the hospital by helicopter. John 
spent 3 days in the hospital recovering from his injuries and left with 
a $9,000 bill because his insurance company said the ambulance and 
helicopter were not preferred providers.\28\
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    \28\ http://link.brightcove.com/services/link/bcpid1460683554/
bctid1676207968.
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Cancer Patient Faced Delayed Care Because of ``Out-of-Network'' Issues
    Charles--Alma, GA. Charles (``Buddy'') was diagnosed with prostate 
cancer but his insurance company denied payment for the services from 
the doctor who diagnosed him. While the doctor's office on the first 
floor is part of his insurance company's network, the second floor 
where biopsies are done is not part of the network. When Charles needed 
surgery he had a very difficult time finding doctors that belonged to 
his insurer's network who could perform the surgery in hospitals that 
were also part of the network. It was only after his State legislator 
intervened on his behalf that Charles was able to resolve his issues 
with his insurance company. ``It's not the cancer that is going to kill 
me, it's the insurance company.'' \29\
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    \29\ http://link.brightcove.com/services/link/bcpid1460683554/
bctid1674044182.
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Limited Benefits Don't Cover Needs of Disabled and Result in Medical 
        Debt
    Sandra--Portland, ME. Sandra is disabled with chronic fatigue 
syndrome and needs a scooter to get around. At first, her insurance 
company decided to only provide partial payment for her scooter and 
then later said it would only pay for a manual wheelchair. Sandra had 
to provide further documentation from her doctor that she couldn't use 
a wheelchair. The appeals process with her insurance company took more 
than 1 year. Sandra continues to incur major out-of-pocket medical 
expenses, including $25,000 last year.\30\
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    \30\ http://link.brightcove.com/services/link/bcpid1460683554/
bctid1662507287.
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Self-Employed, Can Only Afford Individual Coverage With Limited 
        Benefits
    Bea--Charlotte, NC. After she was laid off from her county social 
worker job, Bea opened her own practice but has struggled to afford 
adequate health insurance. She can only afford catastrophic coverage 
which does not cover her pre-existing conditions, including her 
arthritis. I quickly realized that the American dream of owning your 
business is only for the young and healthy.'' \31\
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    \31\ http://link.brightcove.com/services/link/bcpid1460683554/
bctid1648122600.
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Catastrophic Insurance Policy did not Cover $25,000 of Care for Cancer 
        Patient Who Incurred Medical Debt
    Molly--Nashville, TN. After being diagnosed with uterine cancer 
last year, Molly had to undergo three surgeries and 6 months of 
chemotherapy and was unable to work for about 8 months. Her insurance 
policy covered catastrophic medical expenses, but she still had about 
$25,000 in out-of-pocket medical expenses for the care she received. 
Her friends were able to help her pay many of her bills, but she was 
left with about $12,000 in unpaid medical debt and a damaged credit 
record. The stress of my illness was enough for me to deal with, but 
then seeing all the bills I had to pay was just too much for me to 
handle,'' Molly says.\32\
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    \32\ http://link.brightcove.com/services/link/bcpid1460683554/
bctid1640102888.
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Limited Benefits of Individual Policy: Policy Does not Cover Pregnancy 
        Expenses
    Tina--Pittsburgh, PA. When Tina was pregnant a couple of years ago 
she found out that her individual health insurance policy did not cover 
any of her maternity expenses. She developed reclaims and diabetes 
during her pregnancy and none of the care she required for these 
conditions was covered. Tina faced the prospect of having to pay nearly 
$50,000 in pregnancy-related expenses out-of-pocket. Fortunately, a 
local journalist took up her cause and contacted the insurance company. 
Her insurer agreed to cover her expenses through her son's 1-month 
appointment. Her policy was then cancelled but now her husband has a 
new job that provides coverage for her family.\33\
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    \33\ http://link.brightcove.com/services/link/bcpid1460683554/
bctid1607328839.
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Limited Benefits Result in Delayed Care
    Tom--Hutchinson, MN. Tom and his wife own their own pottery studio 
and have paid for their own health insurance over the years. About 5 
years ago, Tom developed a debilitating hip condition. The pain got so 
bad that his doctor recommended that he undergo hip replacement 
surgery. Under his insurance policy, Tom would have had to pay $10,000 
for the surgery, which he could not afford. He ended up putting off his 
surgery for 3 years until he qualified for Medicare. Two days after he 
turned 65, Tom had his surgery and his costs under Medicare were just 
one-third of what he would have paid under his individual insurance 
plan. Delaying the procedure had its own cost: his muscles atrophied 
considerably and it took him longer to recover from his surgery.\34\
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    \34\ http://link.brightcove.com/services/link/bcpid1544602725/
bclid1540999549/bctid1549643 
949.
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Out-of-Network Doctor Care in Emergency and Inadequate Network for 
        Hospital Emergency Room Care
    Andrea--Murphy, TX. Andrea's son was having difficulty breathing 
shortly after he was born and was rushed to the hospital's Neo-Natal 
Intensive Care Unit (NICU) for treatment. Two days later he was doing 
fine and was discharged to go home. Andrea was then informed by her 
insurance company that the Doctor who treated her son in the NICU was 
not part of the insurer's network. Less than half of the $1,145 NICU 
bill was covered by her plan even though he needed emergency care. When 
she had to bring her son back a second time to the ER, she was charged 
$600 for his care. Andrea discovered that there are no hospital 
emergency rooms in Texas that will take her insurance. Her family 
spends $7,000 annually on health insurance.\35\
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    \35\ http://link.brightcove.com/services/link/bcpid1544602725/
bclid1540999549/bctid1561157 
743.
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                          toward the solutions
    Solving the problems faced by the underinsured will require 
fundamental reforms of our health care system. It is relatively easy to 
review the situation of the individuals' plights that are profiled 
above and conclude that deductibles should be lower, benefits should be 
more comprehensive, networks should provide appropriate access, and 
caps in annual or lifetime benefits should be prohibited, for example. 
But the underlying problem is that health care costs are high as a 
percent of GDP and continue to grow at a rate faster than the rate of 
other goods and services. This differential growth rate translates to 
higher premiums, higher co-payments, and higher burdens on individuals 
and families. As long as this growth in health care costs continues 
unabated, we will struggle as a nation to address the very difficult 
challenge of coming up with how to best pay for health care.
    Consumers Union believes that the problems faced by the 
underinsured can best be addressed by health reforms that provide for 
broad risk pooling, with comprehensive, quality coverage for all. A 
health care system that allows for pre-existing condition exclusions, 
caps in benefits, and underwriting can not address the underlying 
problems. Another element of reform must be payment reform that 
increases the chance that appropriate treatment is provided--not too 
much treatment, not too little treatment.
    A key building block that will make this kind of coverage 
affordable is increased comparative effectiveness research. Congress 
took an important step by including funding for expanded comparative 
effectiveness research in the stimulus bill.
    Consumers Union developed a program--Consumer Reports Best Buy 
Drugs--that demonstrates why this type of research is so important. We 
have translated the unbiased systematic reviews--comparative 
effectiveness studies--for 21 categories of drugs. The source of our 
studies are reviews prepared by the Drug Effectiveness Review Project, 
which is based at Oregon Health and Science University. Our reports 
show that individuals can often save between $1,000 and $2,000 a year 
simply by switching from a high-priced drug to a best buy drug that is 
equally safe and effective. A simulation study of potential savings of 
switching from high priced drugs to best buy drugs in four categories 
of drugs used for heart conditions resulted in potential annual 
nationwide savings of $2.7 billion, 8 percent of drug expenditures for 
those four categories.\36\
---------------------------------------------------------------------------
    \36\ Julie Donohue, Michael A. Fischer, Haiden A. Huskamp, and Joel 
S. Weissman, Potential Savings from an Evidence-Based Consumer-Oriented 
Public Education Campaign on Prescription Drugs, Health Services 
Research, November 2008.
---------------------------------------------------------------------------
    Our project has demonstrated that health care outcome is not 
compromised when value is taken into account in making drug choices. We 
commend Congress for including this important provision in the stimulus 
bill and urge you to work toward reforms in the future that create a 
system where coverage decisions can be based on the results of such 
unbiased research.\37\
---------------------------------------------------------------------------
    \37\ We note that we strongly support assuring the research address 
the needs of individuals of various races, ethnicity, age and sex. In 
addition, there should be an exceptions process that is timely and 
appropriate.
---------------------------------------------------------------------------
    Health insurance coverage should assure that consumers do not face 
financial barriers to getting needed health care. Coverage should be 
comprehensive so that needed health care does not result in financial 
burdens such as debt and hardship.
    The reality is that in this country--and in this economy--just 
about all of us are at risk of becoming underinsured. The cause might 
be a pink slip, a major accident, a birth defect, serious illness such 
as cancer, pregnancy, or being eligible only for a limited, loophole-
laden individual policy. The issue for your consideration is not 
whether the count of the underinsured is 15 million or 25 million. The 
real issue is the growth of health care costs, at a rate much higher 
than GDP, and the responses of payers to increase deductibles and 
decrease coverage. The problem of the underinsured must be addressed in 
the context of overall system reform that helps move to a system that 
rewards prevention, bases decisions on evidence, and is committed to 
getting better value for our health care dollar, whether that dollar 
comes from taxpayers, consumers, or employers.
    Mr. Chairman, members of the committee, the growing problem of the 
uninsured and underinsured cries out for your prompt attention. We look 
forward to working with you to shape solutions that will assure that 
the United States rises to the challenge of transforming our health 
care system so that we are no longer at risk of facing financial 
hardship or financial barriers to care just when we need care the most. 
Thank you for considering our views.

    Senator Bingaman. Thank you very much.
    Ms. Rowland, go right ahead.

 STATEMENT OF DIANE ROWLAND, D.SC., EXECUTIVE VICE PRESIDENT, 
 THE HENRY J. DAISER FAMILY FOUNDATION AND EXECUTIVE DIRECTOR, 
     THE KAISER COMMISSION ON MEDICAID AND THE UNINSURED, 
                         WASHINGTON, DC

    Ms. Rowland. Thank you, Mr. Chairman and members of the 
committee. My statement today will focus on why health 
insurance in the scope of coverage matters for family's health, 
well-being and financial security. We know from the experience 
of the uninsured that health insurance helps to improve access 
to basic, primary and preventive care and lowers the likelihood 
of postponing or foregoing needed care and medications due to 
costs.
    It also helps to promote more stable health care 
arrangements that can provide for ongoing medical care. Having 
insurance is clearly better than being uninsured. But the scope 
of health insurance coverage varies widely across plans.
    Families face increasing health insurance premiums plus 
higher deductibles and more cost sharing when they seek care 
and increasing financial burden for families especially in 
these tough economic times. How well health insurance protects 
families from large medical bills is one measure of the 
adequacy of health insurance. In surveys we have done, 3 in 10 
adults reported problems paying their medical bills. And they 
had health insurance to help them.
    These families reported that they had to make difficult 
choices including limiting paying for other necessities such as 
food, heat or housing, using savings or borrowing money and 
considering filing for bankruptcy. Such cost considerations 
lead to skipped medical tests and failure to follow through on 
needed treatment. Insured families facing health spending that 
exceeds 10 percent of after-tax income can be considered as 
underinsured and that the coverage they have is insufficient to 
protect them from the financial toll of health spending.
    In interviews we've held with diverse working families 
across the United States in the spring of 2008, we found 
families with health insurance were often struggling to afford 
the combination of premiums, co-pays, deductibles and cost for 
services not covered by their plan with these costs rising far 
faster than their paychecks. One of the clearest examples of 
the holes in health coverage is the experience of families 
where cancer has taken a toll. In a report we just issued with 
the American Cancer Society, we profile some of the cancer 
patients who have fallen through the cracks in our private 
health insurance system and have resulted in substantial 
medical debts and detriment to their health and well-being.
    Most families with cancer have private health insurance. 
But many face high health care costs that alter their care. 
Five percent of the uninsured said that they had delayed or 
decided not to get care due to costs as cancer victims putting 
their life and survival at risk due to their costs not being 
covered by insurance.
    These experiences document the challenges families face 
today even those with private health insurance coverage when 
seeking medical care. High levels of cost sharing and caps on 
covered benefits can compromise the level of protection health 
insurance provides and lead to both reduced access to needed 
care and serious financial burdens and medical debt. As 
consideration of health reform moves forward it will be 
important to assess both the scope of coverage provided and the 
level of financial assistance offered against a substantial 
medical cost, especially for those with chronic and serious 
illness and those with limited income.
    As you move forward I would like to share with you now the 
voice of one of the interviews we conducted in Wichita, KS, an 
individual struggling with medical bills who was telling us at 
his kitchen table about health care costs and the impact on 
him. So with that I'll end my statement by turning to the video 
from Ron Gaston. Thank you.
    [Video presentation.]
    Mr. Gaston. Those add up and then when you have other blood 
tests.
    Female speaker on video. Ron Gaston had his life mapped out 
and then he got sick.
    Mr. Gaston. I was going to work 5 more years. Then I was 
going to retire and let Medicare and all of that stuff take 
care of it. Maybe even pick up a little supplemental insurance 
to cover what it doesn't care. A lot of people do. But, man, 
this is going to wipe us out.
    Female speaker on video. Like most working Americans, Ron 
gets coverage through his employer, in this case a local paper 
supplier in Wichita. But he's like many Americans in another 
way too.
    Mr. Gaston. You only pay a $15 co-pay. And those add up. 
And you have another blood test and stuff, a total of $125.
    Female voice on video. The annual deductible for Ron and 
his ailing wife has skyrocketed to almost $4,800 a year. 
Premiums have doubled to $1,200 a year. All the while his 
income, $30,000 annually has remained fairly static.
    The Gastons couldn't squeeze anything more out of their 
family budget. And that's why Ron delayed seeing the doctor.
    Mr. Gaston. I didn't have any problems. I mean, I just told 
them all, my wife and my daughter said, ``Hey, you need to go 
get a physical.'' I said, ``No, I don't. I feel just fine.''
    And then, gosh, a year and a half ago I got up one morning 
and my stomach hurt so bad. I was like screaming in pain. I 
couldn't walk, couldn't sit, couldn't lay down.
    Female voice on video. A mass was discovered on his kidney. 
But even then Ron waited another 6 months to get treatment.
    Mr. Gaston. He said, ``You have cancer.'' I said, ``Wow.'' 
I said, ``What is this going to cost me?''
    Female voice on video. Finally surgery revealed it was not 
cancer. Still Ron ended up with $15,000 in out-of-pocket 
medical expenses, debt that he is now paying off in $10 or $15 
increments to various providers. Years ago when his wife was 
sick, Ron dipped into his retirement savings to pay off medical 
debt. But he is too close to retirement now to do that again.
    Mr. Gaston. I wake up at night. How am I going to pay this? 
What am I going to do?--Lifting heavy boxes. What will I do? 
What am I going to do for a second job anyhow?
    Female voice on video. A postscript. Since our interview 
Ron was laid off from his job of 27 years. He hopes he will be 
able to find a new job with health benefits.
    Ron and his wife won't qualify for Medicaid and they are 
several years away from qualifying for Medicare. The life Ron 
had mapped out now seems a distant hope.
    Ms. Rowland. I think Ron's story reflects some of the 
challenges you face in crafting health care reform. I think the 
people like Ron are waiting for this Congress to help bring 
them some of the protection they need. Thank you.
    [The prepared statement of Ms. Rowland follows:]
               Prepared Statement of Diane Rowland, D.Sc.
                                Summary
     Health insurance helps to improve access to basic primary 
and preventive care and lowers the likelihood of postponing or 
foregoing needed care and medications due to costs by promoting more 
stable health care arrangements.
     While having insurance is clearly better than being 
uninsured, the scope of health insurance coverage varies widely across 
plans. Families face increasing health insurance premiums plus higher 
deductibles and more cost-sharing when they seek care resulting in a 
growing financial burden for families.
     How well health insurance is working to protect families 
from large medical bills is one measure of the adequacy of health 
insurance. Among the insured non-elderly population, 3 in 10 adults in 
October 2008 reported problems paying medical bills (compared, however, 
to 60 percent of the uninsured). Families are often forced to make 
difficult choices, including limiting paying for other necessities such 
as food, heat, or housing; using savings or borrowing money; and 
considering filing for bankruptcy; cost considerations lead to skipped 
medical tests and failure to follow through on needed treatment.
     Interviews held with diverse working families across the 
United States in the spring of 2008 showed families with health 
insurance often struggled to afford the combination of premiums, 
copays, deductibles, and costs for services not covered by their plan, 
with these costs rising faster than their paychecks.
     Insured families facing health spending that exceeds 10 
percent of after-tax income can be considered as ``underinsured'' in 
that the coverage they have is insufficient to protect them from the 
financial toll of health spending. By 2004, researchers estimated that 
45.4 million non-elderly people met this definition of underinsured 
compared to 39.5 million people in similar circumstances in 2001.
     One of the clearest examples of the holes in health care 
coverage is the experience of families where cancer has taken a toll. 
Most have private health insurance, but many face high health care 
costs that alter their care--5 percent of the insured (and 27 percent 
of the uninsured) said they had delayed or decided not to get care due 
to costs, putting their life and survival at risk due to costs not 
covered by insurance.
     These experiences document the challenges families face 
today--even those with private health insurance coverage--when seeking 
medical care. High levels of cost-sharing and caps on covered benefits 
can compromise the level of protection health insurance provides and 
lead to both reduced access to needed care and serious financial 
burdens and medical debt. As consideration of health reform moves 
forward, it will be important to assess both the scope of coverage 
provided and the level of financial assistance offered against the 
substantial medical costs especially for those with chronic and serious 
illness.
                                 ______
                                 
    Mr. Chairman and members of the committee, thank you for the 
opportunity to be with you today to discuss the status of health 
insurance coverage in America and the gaps and limits to coverage that 
leave millions of Americans poorly protected when confronting illness. 
I am Diane Rowland, Executive Vice President of the Kaiser Family 
Foundation, and Executive Director of the Foundation's Kaiser 
Commission on Medicaid and the Uninsured. I am also an adjunct 
professor of Health Policy and Management at the Bloomberg School of 
Public Health at The Johns Hopkins University.
    My statement today will focus on why health insurance and the scope 
of coverage matters for a family's health, well-being, and financial 
security. The evidence is clear and strong showing that being without 
health insurance affects the health care people receive and leaves the 
uninsured with diminished access to health services and poorer health 
than their insured counterparts. The consequences of inadequate 
insurance for the many ``underinsured'' Americans are less well-
documented, but both affordability and adequacy of coverage are major 
challenges to be addressed in reforming our health care system.
                        health insurance matters
    Health insurance is a key link to receiving health care when 
needed. Having coverage helps to improve access to basic primary and 
preventive care and lowers the likelihood of postponing or foregoing 
needed care and medications due to costs. It helps to promote more 
stable health care arrangements leading to early detection and 
preventive care. The uninsured use fewer preventive and screening 
services, are sicker when diagnosed, receive fewer therapeutic 
services, have higher mortality and disability rates, and lower annual 
earnings because of poorer health than those with health insurance 
(Figures 1 and 2).\1\ The uninsured are less likely to have a usual 
source of care and be connected to the health care system for ongoing 
preventive and primary care. They are also at greater risk of being 
hospitalized for preventable conditions and less likely to receive 
critical screening services that could lead to early detection and 
better treatment options for cancer (Figures 3 and 4).\2\ \3\ On all 
measures, those with health insurance have better access to care than 
the uninsured.








    While having insurance is clearly better than being uninsured, the 
scope of health insurance coverage varies widely across plans and can 
result in costs and limits that leave some of the insured ill-equipped 
to afford the care they or a family member needs. Rising health care 
costs for families have continued to outpace increases in salaries and 
wages over the last decade, greatly increasing the financial burden for 
health care for families. In the past decade premiums for employer-
sponsored group coverage have more than doubled, with a cumulative 
growth rate of 119 percent, compared to only a 34 percent growth in 
worker's earnings (Figure 5).\4\


    Today, families face not only increasing health insurance premiums, 
but also pay higher deductibles and more cost-sharing when they seek 
care. In 2006, 10 percent of workers with employer-sponsored health 
insurance were enrolled in a plan with a general deductible of $1,000 
or more for single coverage; 2 years later in 2008, 18 percent of such 
workers and over a third of covered workers in small firms (defined as 
under 200 workers) had high deductibles (Figure 6).\5\ Both the premium 
workers pay for coverage and their out-of-pocket costs are increasingly 
a financial burden for families. From 2003 to 2007, the share of non-
elderly people in families with medical bill problems increased from 14 
to 18 percent for insured families (Figure 7).\6\ Out-of-pocket costs 
have been climbing as cost-sharing, deductibles, and limits on covered 
benefits grow.




                     problems paying medical bills
    How well health insurance is working to protect families from large 
medical bills is one measure of the adequacy of health insurance. 
Millions of Americans--both insured and uninsured--worry about their 
ability to obtain and pay for health care. The uninsured are more 
likely to be worried about their ability to afford the health care 
services and medications they need than those with insurance. Yet, 
among the insured non-elderly population, one in four adults say they 
are very worried about their ability to afford needed care and over a 
third of the insured are very worried about having to pay more for 
health care or health insurance (Figure 8).\7\


    Their concerns too often cause them to cut back on care due to 
cost--with many of the insured putting off or postponing needed health 
care (34 percent), skipping a recommended medical visit or treatment 
(30 percent), not filling prescriptions (27 percent) or skipping doses 
and cutting pills (21 percent) due to cost (Figure 9). Failure to get 
needed care can lead to adverse health outcomes and the need for more 
intensive and often costly care.\8\


    In our October 2008 survey, almost one in three adults (32 percent) 
reported that their family had problems paying medical bills in the 
past year and nearly one in five (19 percent) reported that these bills 
had a major impact on their family. Even among the insured non-elderly 
population, 3 in 10 adults reported problems paying medical bills with 
almost one in five of those with problems (17 percent) reporting that 
these bills are having a major impact on their families. As expected, 
the uninsured non-elderly population has had a particularly hard time 
in paying medical bills with three out of five (60 percent) reporting 
that they have had problems paying medical bills in the past year and 
over two out of five with problems (43 percent) reporting that these 
medical bills have had a major impact on their family (Figure 10). Most 
notably, those over 65 with Medicare coverage are less likely to report 
problems with medical bills.\9\


    Medical bills can severely impact a family's ability to pay for 
household necessities. Individuals in families with problems paying 
medical bills are often forced to make difficult sacrifices, including 
limiting paying for other necessities such as food, heat, or housing; 
using savings or borrowing money; and even considering filing for 
bankruptcy. Over the last 5 years, among non-elderly insured adults, 21 
percent reported they had been contacted by a collection agency, 15 
percent said they had used all or most of their savings, and 3 percent 
reported they had declared bankruptcy because of medical bills (Figure 
11).\10\ Again, the uninsured faced even greater challenges.


         looking at how health care costs impact family budgets
    In order to understand more about the circumstances and the 
financial and health care challenges facing low- and middle-income 
working families, the Kaiser Family Foundation interviewed the heads of 
household in 27 diverse working families across the United States in 
the spring of 2008 to learn more about their ability to pay for health 
care. Our study found that health care costs are indeed a strain on 
family budgets, even for families with insurance coverage. In numerous 
cases, families had monthly health care bills totaling hundreds of 
dollars--a significant share of their earnings.
    A case from our family interviews highlights how medical bills can 
mount and leave a family struggling with medical debt. Ron, 59, and his 
wife from Wichita, KS have had significant health problems and struggle 
to pay their bills on a monthly income of $1,815--or about $30,000 a 
year. She suffers from congestive heart failure and diabetes and he was 
diagnosed with diverticulitis. Subsequently, a sonogram and CAT scans 
revealed a mass on his kidney, raising concern that he had cancer and 
resulting in surgery. Although Ron has worked for the same company for 
26 years and at the time of our interview had health insurance through 
his job, health care costs had taken a toll on his family finances. A 
$4,750 deductible; $90 a month in copays for his wife's six 
prescription medications for diabetes, heart disease and glaucoma; and 
unexpected and costly medical needs for himself and his wife have meant 
very high out-of-pocket costs and substantial medical debt for previous 
hospital and doctor care. Facing aggressive collection, Ron borrowed 
money from his 401(k) plan to pay thousands of dollars owed for a 
hospitalization 6 years ago when his wife got pneumonia and currently 
is paying $25 a month to reduce the $1,800 medical debt. Ron's 
experience demonstrates the financial consequences of limits on what 
insurance covers and the impact of health bills on the overall 
financial well-being of a family. Unfortunately for Ron and his wife, 
life has gotten even more precarious: in December of 2008, Ron was laid 
off from his job of 27 years.\11\
    Families with health insurance, like Ron, in our study often 
struggled to afford the combination of premiums, copays, deductibles, 
and costs for services not covered by their plan, with these costs 
rising faster than their paychecks. Frequently, private insurance did 
not cover dental and vision care, and dental care, in particular, had 
saddled families with large expenses. Some insured families, despite 
having coverage, avoided using services because they could not afford 
the out-of-pocket costs. Costs often mounted up quickly, especially 
when a member of a family had ongoing needs for chronic care or 
prescription drugs. Even in generally healthy families, one-time health 
crises like a broken arm or hospitalization resulted in large, 
sometimes staggering, bills. Families without insurance were still 
worse off, having to pay all their medical bills out-of-pocket.
    Our interviews found both insured and uninsured families had 
substantial unpaid bills for medical care--some owed tens of thousands 
of dollars. Most families with medical debt were trying to pay it off 
in small amounts like $5 or $25 or $50, month by month or when they 
could; they were unsure how they would manage to pay it all back. The 
couple above had begun to use retirement savings to pay down their 
medical debts; another family had considered filing for bankruptcy. 
Beyond the burden of the medical debt itself, the debt also prevented 
those who were relatively new to the workforce from getting established 
financially, and compromised families' credit and ability to borrow and 
save, jeopardizing their hopes and plans for the future--for example, 
to purchase a home, or retire. Iris, who is only 23, has severe back 
pain from a car accident, asthma, and severe allergies, but relies on 
over-the-counter medications and an old asthma pump. She has $7,500 of 
medical debt she cannot afford and is already concerned that the debt 
from her medical conditions at a young age will hurt her credit, which 
may prevent her from buying a house or a car in the future.
    Families especially turn to cost-cutting measures when health care 
costs and medical debt have already strained their family resources. 
Families with private insurance and medical debt were three times as 
likely to skip tests as those with private insurance and no medical 
debt and in fact behave more comparably to the uninsured in how they 
access the health care system (Figure 12). Most notably, over a quarter 
of both privately insured individuals with medical debt (28 percent) 
and uninsured individuals (29 percent) postponed care due to cost 
compared to only 6 percent of the privately insured without medical 
debt.\12\ The inadequate coverage and financial burdens for health care 
are leaving families to make choices based on their pocketbook rather 
than their health care needs.


                    financial burden for health care
    The share of family after-tax income going to pay for health care 
services is a measure of the adequacy of health insurance protection. 
Analysis by researchers at the U.S. Department of Health and Human 
Services documents the increase in out-of-pocket burdens and health 
spending relative to income for families from 2001 to 2004 (Figures 13 
and 14). Health care costs for a family's share of premiums, cost-
sharing, and out-of-pocket spending that exceed 10 percent of after-tax 
income are considered a high financial burden. Families facing health 
spending at this level can be considered as ``underinsured'' in that 
the coverage they have is insufficient to protect them from the 
financial toll of health spending. It appears that the number of 
families falling into this group is growing. By 2004, the researchers 
estimated that 45.4 million non-elderly people lived in families with 
health care costs greater than 10 percent of their after-tax income 
compared to 39.5 million people in similar circumstances in 2001.\13\




    The nature of one's health insurance is a critical component of 
determining whether a family faces high expenditures for health care. 
Public insurance through Medicaid for low-income families offers the 
broadest protection with low cost-sharing and comprehensive benefits. 
Employer-based coverage varies widely, but offers coverage that 
protects the majority from high costs. However, in 2004, nearly one in 
five (17 percent) families with coverage through their employer faced 
substantial out-of-pocket costs exceeding 10 percent of income.
    The least protection and greatest burden was among those purchasing 
non-group private insurance with over half of these families (53 
percent) encountering health spending in excess of 10 percent of their 
after-tax income. Those in the non-group market pay the full share of 
the premium and generally have benefits that are less generous with 
higher deductibles and more cost-sharing than in coverage available 
through employer-based group policies. On average, their out-of-pocket 
costs for premiums are more than twice as high as that paid by persons 
with job-based group coverage, and their out-of-pocket spending for 
health services is almost 50 percent greater.
    Most notably those with the fewest financial resources as well as 
the greatest health needs face the greatest health care burdens. In 
2004 over half (54 percent) of the non-elderly in families with incomes 
below the poverty level and more than a third (37 percent) of the near-
poor faced spending that exceeded 10 percent of after-tax income 
compared to 1 in 10 from families with incomes over 400 percent of 
poverty (roughly $88,000 for a family of four today) (Figure 14). One 
in three non-elderly people in fair or poor health or with a disability 
are dealing with medical costs above 10 percent of their incomes. 
Persons with chronic conditions are at an even greater risk--almost 40 
percent of non-elderly diabetics and over half (56 percent) of families 
affected by stroke fall into the high costs burden group (Figure 
15).\14\


    Again, in our interviews of families, we found that out-of-pocket 
costs can be steep even for families with private coverage. Families 
that had private coverage through their jobs or had purchased it on 
their own, in several cases, faced copays, deductibles, and out-of-
pocket costs for care not covered by the insurer that posed a severe 
financial strain. While copays for prescription drugs and doctor visits 
were often nominal on a unit basis, families who had ongoing or 
multiple needs were confronted with large cumulative costs. Deductibles 
reaching as high as $6,000 exposed some families to medical costs their 
budgets could not absorb, resulting in large medical debts. When 
private insurers limited coverage, as for mental health care or 
prescription drugs, or excluded particular services, such as dental 
care, families--although insured--were uninsured for this care, and 
like the uninsured, avoided seeking care due to cost.
                     cancer: a high cost diagnosis
    One of the fears that many American families have is that the 
illness of a family member and the desire to provide the fullest and 
best treatment will lead to financial ruin. When someone we hold dear 
is ill, being able to provide treatment and hopefully a cure is 
paramount, but unfortunately today even those with health insurance may 
face devastating medical bills that both compromise treatment and sap 
financial resources. One of the clearest examples of the holes in 
health care coverage is the experience of families where cancer has 
taken a toll.
    The majority of cancer patients under age 65 have private health 
insurance. Yet, despite having private health insurance some face high 
health care costs that can put both their treatment and physical and 
financial well-being at risk. In our 2006 Kaiser/Harvard/USA Today 
survey of households affected by cancer in 2006, 13 percent of people 
who said the person with cancer was insured (and 45 percent of those 
who were uninsured at some point during cancer treatment) reported that 
the cost of cancer care was a major burden on their family (Figure 16). 
Among those with insurance, nearly a quarter reported the plan paid 
less than expected for a medical bill for their family member and 1 in 
10 reached the limit the plan would pay for cancer treatment (Figure 
17).




    As a result, nearly a quarter of those with insurance reported that 
as a result of the financial cost of dealing with cancer they had used 
up all or most of their savings and 1 in 10 turned to relatives for 
help. Although those without insurance faced significantly more 
challenges, 7 percent of people who said the person with cancer was 
insured reported being unable to pay for basic necessities and 3 
percent said they needed to declare bankruptcy (Figure 18).


    Cost considerations not only affected financial stability for the 
family but in some cases compromised treatment for the cancer--5 
percent of the insured and 27 percent of the uninsured said they had 
delayed or decided not to get care due to costs (Figure 19). These are 
people who stopped or postponed treatment for a deadly disease, putting 
their life and survival at risk due to costs not covered by 
insurance.\15\


    Our recent report conducted jointly with the American Cancer 
Society profiles the situations faced by 20 cancer patients who had 
called in to the American Cancer Society Health Insurance Assistance 
Service. Their stories show that even with private insurance a 
diagnosis of cancer can lead to large medical debts, filing for 
personal bankruptcy, and going without potentially lifesaving 
treatments and point out the shortcomings of their private health 
insurance coverage. Even when cancer patients have relatively 
comprehensive coverage through their private health insurance coverage, 
the sizeable costs from co-payments, deductibles, and co-insurance can 
easily mount up.\16\
    One of the profiled patients, Keith Blessington, has been in and 
out of the hospital since he was diagnosed with stomach cancer. When 
his COBRA ran out his only option was to join a high-risk pool that 
includes a monthly premium of $1,100, a $1,000 deductible, and 20 
percent cost-sharing. Keith has already gone through his 401K, has not 
paid his mortgage for a few months, and is borrowing money from a 
credit card to pay for care for his ailing mother and his various 
medical bills. As Keith mentions in his own words,

          ``[W]hen you have medical problems, a lot of people think 
        it's just their doctor and the hospital. But that is not the 
        case. There are so many outside groups that you get bills from 
        . . . you could have five different doctors bills for one 
        treatment that you had and you don't even know who the four 
        others are. But, they touch base and they submit a bill and you 
        don't know for sure if they will accept your insurance until 
        they actually submit.''

Keith is now $60,000 in debt and that figure climbs an additional 
$6,000 every month.
    In addition to the cost-sharing and deductibles, many patients find 
maximum caps on their benefits or that their policy does not pay for 
treatments recommended by their doctor. Among our profiled patients, 
some faced a cap of $250 for coverage of radiation and $10,000 for 
outpatient costs--amounts easily exceeded in the course of treatment 
for many cancers. For example, Debra Gauvin, 52, diagnosed with stage 
II breast cancer had employer-sponsored insurance that covered 80 
percent of her lumpectomy. However, she quickly met the $20,000 annual 
maximum on her insurance plan, which left her responsible for her 
treatment costs. She currently owes $18,000 for surgery and 
chemotherapy. Although she was able to receive a 61 percent discount 
for the radiation she still needs, the remaining costs of the radiation 
treatment were too significant of a financial burden for Debra so she 
decided to postpone her radiation until 2009, when her insurance would 
help cover the costs.\17\ Such cost considerations can both compromise 
treatment objectives and health outcomes.
                     implications for health reform
    These experiences document the challenges families face today--even 
those with private health insurance coverage--when seeking medical 
care. High levels of cost-sharing and caps on covered benefits can 
compromise the level of protection health insurance provides and lead 
to both reduced access to needed care and serious financial burdens and 
medical debt. As our family budget study shows for low- and moderate-
income people, especially those with chronic health problems, even 
modest levels of cost-sharing can mount up, impeding access to care and 
resulting in financial burdens. Likewise, as the cancer patient 
profiles demonstrate, those with serious illnesses can have their care 
and outcomes jeopardized by limits and gaps in coverage even when they 
have health insurance.
    In the struggle to bring affordable health insurance coverage to 
all Americans, budget constraints and the high cost of health insurance 
will undoubtedly put pressure on policymakers to limit the scope of 
coverage and impose substantial cost-sharing to hold down Federal 
costs. Cost concerns, however, need to be balanced against the 
expectation that health reform will bring improved coverage and lower 
health spending for families. As consideration of health reform moves 
forward, it will be important to assess both the scope of coverage 
provided and the level of financial assistance offered against 
substantial medical costs especially for those with chronic and serious 
illness.
    Thank you for your consideration.
                               References
    1. Kaiser Commission on Medicaid and the Uninsured, ``The 
Uninsured: A Primer,'' October 2008.
    2. Kozak LJ, Hall MJ, and MF Owings. 2001. ``Trends in Avoidable 
Hospitalizations, 1980-1998,'' Health Affairs, 20(2):225-232.
    3. Ward E, Halpern M, Schrag N, Cokkinides V, DeSantis C, Bandi P, 
Siegel R, Stewart A and A Jemal. 2008. ``Association of Insurance with 
Cancer Care Utilization and Outcomes.'' A Cancer Journal for 
Clinicians, 58:9-31.
    4. Employer Health Benefits 2008 Annual Survey, Kaiser Family 
Foundation and Health Research & Educational Trust (HRET), September 
2008.
    5. Ibid.
    6. Cunningham PJ. ``Trade-Offs Getting Tougher: Problems Paying 
Medical Bills Increase for U.S. Families, 2003-2007,'' Center for 
Studying Health System Change, #21, Sept. 2008.
    7. Kaiser Health Tracking Poll: Election 2008, ``October 
Tracking,'' (conducted October 8-13, 2008).
    8. Ibid.
    9. Ibid.
    10. Kaiser Health Tracking Poll: Election 2008, ``Economic Problems 
Facing Families'' (conducted April 3-13, 2008).
    11. Paradise J, Schwartz T, Perry M, and J Cummings, ``Snapshots 
from the Kitchen Table: Family Budgets and Health Care'' Kaiser 
Commission on Medicaid and the Uninsured and Lake Research Partners, 
February 2009.
    12. Hoffman C, Rowland D and E Hamel, ``Medical Debt and Access to 
Health Care,'' Kaiser Family Foundation, September 2005.
    13. Banthin J, Cunningham P, and DM Bernard, 2008. ``Financial 
burden of health care, 2001-2004,'' Health Affairs, 27(1):188-195.
    14. Banthin J and DM Bernard. 2007, ``Changes in Financial Burdens 
for Health Care.'' Journal of the American Medical Association, 
296(22): 2712-2719.
    15. USA Today/Kaiser Family Foundation/Harvard School of Public 
Health National Survey of Households Affected by Cancer (conducted Aug 
1-Sept 14, 2006).
    16. Schwartz K, Claxton G, Martin K, and C Schmidt, ``Spending to 
Survive: Cancer Patients Confront Holes in the Health Insurance 
System,'' Kaiser Family Foundation and American Cancer Society, 
February 2009.
    17. Ibid.

    Senator Bingaman. Thank you very much.
    Ms. Turner, why don't you go right ahead?

          STATEMENT OF GRACE-MARIE TURNER, PRESIDENT, 
                GALEN INSTITUTE, ALEXANDRIA, VA

    Ms. Turner. Thank you, Senator. I am grateful to Senator 
Kennedy and to Ranking Member Enzi for inviting me to testify. 
And thank you to Senator Bingaman for chairing this hearing 
today. As a native of the land of enchantment it's a special 
privilege to be here today.
    I want to thank the committee and your dedicated staff for 
the incredibly hard work you are doing to bring the issue of 
health reform to the forefront of the national debate. I 
founded the Galen Institute in 1995 because I believe that this 
issue is so important. And we focus exclusively on health 
reform.
    As today's witnesses and many other experts have shown, the 
growing number of Americans, even those with insurance, are 
facing health costs that put serious financial pressure on 
them, especially during the Nation's economic crisis. But 
solving this problem must be integrated with other 
considerations, especially the cost of health insurance and the 
likelihood of causing other distortions inside and outside the 
health sector. If the government were to require all Americans 
to have comprehensive health insurance that protects them 
against all but routine medical expenditures, the requirement 
would lead to higher cost for health insurance.
    The full cost of employment-based health insurance is often 
hidden from workers. But the consequences are not. Economists 
have demonstrated that an increase in health insurance premiums 
results in lower wages and lost jobs for workers and increases 
the ranks of the uninsured.
    Large and small companies as well as families must balance 
spending on health insurance with other needs. A number of 
employers have found that creative benefit designs that engage 
employees as partners in managing health cost allow them to 
continue providing health insurance and to continue to contain 
costs for both the company and employees. Maintaining this 
flexibility in benefit design is crucial to keeping health 
insurance affordable and therefore to keeping as many people as 
possible insured.
    In my testimony I describe the positive results of several 
companies in increasing access to health insurance for their 
workers and containing costs. Deloitte Center for Health 
Solutions found, for example, that the cost of consumer 
directed health plans increased by only 2.6 percent in 2006, 
about a third the rate of increase in the cost of traditional 
insurance plans.
    Some innovative benefit designs give people and companies a 
way to couple spending accounts with affordable health 
insurance. The account is used to pay for routine health 
expenditures such as doctor's visits. The high deductible 
insurance covers larger medical costs, especially 
hospitalizations, surgeries and cancer care.
    Many also cover preventive care. And several surveys have 
shown that the use of preventive care actually increases with 
the use of these consumer-directed plans. Health savings 
accounts in particular also have stop loss provisions that 
protect policy holders against major medical costs.
    They are statutory requirements that allow only $5,000 in 
out-of-pocket expenditures for individuals and $10,000 for 
families. While that may seem like a lot, much of that can be 
funded through savings in the policy accounts as well as 
protecting them against $100,000, $200,000, even larger medical 
bills. A growing number of people are choosing to buy this type 
of policy to protect them against large medical expenditures.
    President Obama has said many times during the campaign if 
you've got health care already then you can keep it, if you're 
satisfied with it. A government-mandated benefits package with 
lower deductibles would rob tens of millions of Americans of 
this choice.
    Expanding access to health plans like Medicare and Medicaid 
is not a solution since they also often fail to meet the test 
of providing comprehensive coverage and access to care. 
Medicare has limits on hospital care and many other gaps in 
coverage that force seniors to seek additional insurance 
through retiree health plans, through Medigap plans or by 
selecting Medicare advantage plans that provide them access to 
more comprehensive coverage than traditional Medicare pays. 
Medicaid pays physicians so little that recipients often have 
to go to hospital emergency rooms because they can't find a 
private physician just to seek routine care.
    Making sure that everyone has health insurance to protect 
against large medical bills is a wise and worthwhile policy 
goal. Then we can focus on how to provide access to routine and 
preventive care, especially focusing on those with the greatest 
needs and the most limited resources. Otherwise we could find 
that the ranks of the uninsured have grown through an effort to 
make health insurance more generous for a dwindling few.
    Thank you very much. I look forward to your questions.
    [The prepared statement of Ms. Turner follows:]
                Prepared Statement of Grace-Marie Turner
                           Executive Summary
    There is little debate about the need to make sure that all 
Americans have the security of insurance that protects them from 
medical bills they can't afford and that provides them access to the 
care they need. But no part of the health sector, and no one goal, can 
be considered in isolation from the impact it will have on other goals 
and aspects of health care and coverage. That is particularly true when 
considering the issue of the underinsured and of requiring more 
generous, more comprehensive coverage. Solving this problem must be 
integrated with other considerations, especially the risks of driving 
up costs and causing other adverse consequences.
    If the government were to require all Americans to have 
comprehensive insurance that protects them against all but routine 
medical expenses, the requirement would lead to higher costs for health 
insurance. The full cost of employment-based health insurance is often 
hidden from workers, but the consequences are not. Economists have 
demonstrated that an increase in health insurance premiums results in 
lower wages and lost jobs for workers and increases the ranks of the 
uninsured.
    Expanding access to public plans such as Medicare and Medicaid is 
not a solution. These programs have defined benefit packages, but they 
also often fail to meet the test of providing comprehensive coverage 
and access to care.
    Large and small companies as well as families must balance spending 
on health insurance with other needs. A number of employers have found 
that creative benefit designs that engage employees as partners in 
managing costs allow them to continue providing coverage and to contain 
costs for both the company and employees, often while also providing 
access to preventive care and wellness programs. Maintaining this 
flexibility in benefit design is crucial to keeping health insurance 
affordable.
    President Obama said many times during the campaign, ``If you've 
got health care already, and probably the majority of you do, then you 
can keep your plan if you are satisfied with it.'' A government-
mandated benefits package would rob tens of millions of Americans of 
this choice.
    There is no question that health costs create financial hardship 
for millions of Americans. Making sure that everyone has health 
insurance to protect against large medical bills would seem to be a 
wise and worthwhile policy goal. Then we can focus on how to provide 
access to routine and preventive care, especially focusing on helping 
those with the greatest needs and most limited resources. Otherwise, we 
could find that the ranks of the uninsured have grown through an effort 
to make health insurance more generous for a dwindling few.
                                 ______
                                 
          Addressing Underinsurance in National Health Reform
    I am most grateful to Chairman Kennedy and Ranking Member Enzi for 
inviting me to testify this morning before your committee on 
``Addressing Underinsurance in National Health Reform.'' And thank you, 
Mr. Bingaman, for chairing this hearing today. As a native of the Land 
of Enchantment, it is a special privilege to speak here today.
    I also want to thank the committee and your dedicated staff for the 
incredibly hard work you are doing to bring the issue of health reform 
to the forefront of the national debate. I founded the Galen Institute 
in 1995 as a research organization devoted to the study of health 
reform because I believe that making progress on this issue is so 
crucial to our Nation's future. We focus at the Galen Institute on 
policy initiatives to expand coverage to the uninsured and provide 
incentives to achieve more affordable care and coverage.
    I would like to focus on several issues involving the underinsured 
as they pertain to the larger goal of providing health insurance to 
all.
    There is little or no debate about the need, in a country as 
wealthy and compassionate as ours, to make sure that all Americans have 
the security of coverage that protects them from medical bills they 
can't afford and that provides them access to the care they need. But 
no part of the health sector, and no one goal, can be considered in 
isolation from the impact it will have on other goals and other aspects 
of health care and coverage. That is particularly true when considering 
the issue of the underinsured.
    As Catherine Schoen and many other experts have shown, a growing 
number of Americans, even those with insurance, are facing health costs 
that put serious financial pressure on them, especially at a time when 
the financial security of tens if not hundreds of millions of Americans 
are threatened by the Nation's economic crisis.
    But solving this problem must be integrated with other 
considerations, especially the cost of health insurance and the 
likelihood of causing other distortions inside and outside the health 
sector.
    In my testimony, I will make two key points: (1) Flexibility in 
benefits is crucial in keeping health insurance affordable. (2) If the 
government were to require all Americans to have comprehensive 
insurance that protects them against all but routine medical costs, the 
requirement would lead to higher costs for insurance, resulting in 
lower wages and lost jobs for workers and in increasing the number of 
uninsured.
                        flexibility in insurance
    Ms. Schoen defines in her writings in Health Affairs\1\ and 
elsewhere that those who are insured are considered underinsured ``if 
they experienced at least one of three indicators of financial exposure 
relative to income: (1) out-of-pocket medical expenses for care 
amounted to 10 percent of income or more; (2) among low-income adults 
(below 200 percent of the Federal poverty level), medical expenses 
amounted to at least 5 percent of income; or (3) deductibles equaled or 
exceeded 5 percent of income.''
    This third provision would mean that if a family with an income of 
$60,000 a year had purchased a health insurance policy with a $3,000 
deductible, they would be considered underinsured, even if they chose 
that option--as they very well might do in order to save on insurance 
premiums and make sure they are protected against major medical 
expenses.
    A growing number of people are struggling to pay for health care 
and health insurance. Millions of them are choosing to buy a more 
affordable, higher-deductible policy, yet under this definition, they 
would be considered underinsured.
    This gets to the fundamental definition of health insurance: Should 
it provide financial protection against major medical bills or protect 
against most expenditures on health care?
    The policy debate in Washington and State capitals around the 
country often is confused by what we mean by ``insurance.'' In other 
sectors of the economy, insurance means protection against costs that 
people could not afford to pay without considerable financial 
difficulty, if at all. That is why we buy automobile insurance to 
protect us against collision, injury, and loss of our vehicle, or 
homeowner's insurance to protect against the risk of fire, theft, or 
other serious and expensive damage.
    But with health insurance, we start with the premise that it should 
protect us against exposure to all but minimal costs, with copayments 
for doctors' visits of $15 or $20 and $5 or $10 for prescription drugs. 
The rest of the costs of the office visits or medicine are run through 
insurance, driving up the cost of the coverage. In the trade-off, 
accessing care for more serious illnesses may be more difficult and 
people may be exposed to expensive copayments for larger medical bills.
    Returning to the true meaning of insurance would help reduce this 
problem. Making sure that everyone has health insurance to protect 
against large medical bills would seem to me to be a wise and 
worthwhile policy goal. Then we can focus on how to provide access to 
routine and preventive care, especially focusing on helping those with 
the greatest needs and most limited resources.
    The two stories of Wal-Mart and General Motors tell the much larger 
picture of the opportunities and challenges facing health policymakers 
today.
    Wal-Mart reported last week that all but 5.5 percent of its 
employees now have health insurance, compared with a nationwide 
uninsured rate of 18 percent. The Washington Post reported in a 
February 13, 2009, article \2\ that an important tool that Wal-Mart has 
used to reduce its uninsured numbers is flexibility in its benefit 
offerings. ``Employees said they wanted more choices, especially low-
cost emergency coverage options. Wal-Mart responded with a menu of 
deductibles, co-payments and maximum out-of-pocket costs. It teamed up 
with the Internet site WebMD to simplify enrollment, created electronic 
health records and expanded its $4 generic drug plan from the 350 
medications available to customers to more than 2,000 for employees,'' 
the Post reported. ``Many workers have chosen low-premium, high-
deductible plans that analysts say provide less coverage for preventive 
and primary care. The company tries to mitigate that with an upfront 
credit of between $100 and $500 that can be used on any medical 
expense.'' And for major surgeries and other major medical treatments, 
Wal-Mart negotiates with providers to get the best prices on high-
quality care. For example, the company has teamed up with the Mayo 
Clinic to provide care for employees needing transplant surgery.
    There are hundreds of stories like this from around the country as 
employers seek to find the best care at the most affordable prices so 
they can continue to provide their employees with health insurance.\3\ 
Flexibility in health benefit offerings helps employers achieve those 
goals.
    One tool is Health Savings Accounts (HSAs) that permit individuals 
to combine health insurance with a tax-free health spending and savings 
account. The account is used to pay for routine health expenses, such 
as doctors' visits, for services not covered by insurance, and to 
create a cushion to pay premiums in lean economic times. The high-
deductible insurance policy covers larger medical expenses, especially 
hospitalization and surgeries. Federal law also allows the insurance 
contract to cover preventive care, such as cancer screenings, 
mammograms, and prostate tests. Several surveys have shown the use of 
preventive care actually increases with these plans.\4\ And HSAs do 
have a built-in stop-loss that protects policyholders against major 
medical costs.
    Target offers its employees a range of health insurance choices. 
One HSA option costs them as little as $20 a month, and Target 
contributes $400 a year to health spending accounts for individuals and 
$800 for families.\5\ John Mulligan, Target's vice president for pay 
and benefits, says, ``These plans engage our team members in a 
decisionmaking process that gives them greater ownership and control of 
their health care dollars.'' The company offers its 360,000 employees 
Decision Guides to help them compare prices and quality and to estimate 
their costs, plus access to wellness programs, a nurse hotline, and 
other support tools.\6\
    Whole Foods' CEO John Mackey toured the country talking to 
employees about health benefits options. Afterward, employees voted to 
switch to new account-based health plans with higher-deductible 
insurance coverage, Health Reimbursement Arrangements (HRA). Whole 
Foods puts up to $1,800 a year into a spending account for each 
employee, with Mackey pointing out that this is not charity but part of 
the employee's compensation package. If they don't spend the money on 
medical care, it rolls over and the company adds more the next year. 
Some workers have as much as $8,000 in their accounts. Whole Foods 
saves money and still covers 100 percent of its employees' health 
insurance premiums.\7\
    Companies that have introduced health plans with new incentives for 
consumers to be engaged as partners in managing health costs generally 
have seen lower-than-average health cost increases. Annual premium 
increases for employment-based coverage averaged about 6 percent for 
the last 3 years, down from double digits earlier in the decade.\8\
    The most impressive results have come from consumer-directed plans 
such as HSAs and HRAs. Deloitte's Center for Health Solutions found 
that the cost of consumer-directed health plans (CDHPs) increased by 
only 2.6 percent in 2006 among the 152 major companies it surveyed. 
This is about a third the rate of increase for traditional plans.\9\



    The fact that these employers are able to manage costs through 
flexibility in structuring health benefits gives them more control over 
costs and makes it more likely they will be able to continue offering 
coverage.
    Contrast that with General Motors and the other major automobile 
manufacturers. High health costs associated with extremely generous 
health benefit packages are major factors in the companies' severe 
financial distress.
    Nonetheless, there are discussions in the health policy debate 
about a proposal from President Obama and others that all plans 
participating in his proposed Health Exchange would have to provide 
insurance equivalent to the generous and comprehensive BlueCross 
BlueShield Standard Option Plan.
    Rather than a mandate that could cause more employers to drop 
coverage, continued flexibility in benefits will allow individuals and 
employers more choices in shaping their health benefit packages to fit 
their needs and their budgets and is likely to lead to more people 
having insurance than if government were to direct all plans to meet a 
high benefits threshold.
                       challenges in public plans
    Employers and private insurers are not the only ones struggling 
with the trade-offs between costs and benefits. Public plans such as 
Medicare and Medicaid have defined benefit packages, but they also 
often fail to meet the test of providing access to comprehensive 
coverage. Expanding access to public programs is not a solution.
    Medicare, for example, was the last major health plan in the 
country to offer a prescription drug benefit, long after private plans 
recognized that this was an essential part of quality medical coverage. 
Medicare also has limits on hospital care and other gaps in coverage 
that force seniors to seek additional insurance through retiree health 
plans, private Medigap plans, or by selecting Medicare Advantage plans 
that offer more benefits and more comprehensive coverage than 
traditional Medicare. Many Medicare patients also are having a 
difficult time finding a physician as payment rates fail to keep pace 
with providers' costs.
    Medicaid also looks like a generous benefits package on paper, but 
when I served on the Medicaid Commission (2005-2006), we heard dozens 
of testimonies about the problems recipients have in actually accessing 
care. In many States, Medicaid pays physicians so little that they 
cannot afford to see Medicaid patients, forcing patients to go to 
hospital emergency rooms to seek even routine care. And seniors who are 
dually-eligible for Medicare and Medicaid often face the greatest 
difficulties as they are switched from one program to another depending 
upon where their care is being delivered. This often results in loss of 
medical records, duplicative tests, over- or under-treatment with 
prescription drugs, and a serious lack of coordination among the many 
medical professionals providing them care. My colleague Robert Helms of 
the American Enterprise Institute and I offered a recommendation, which 
was adopted by the Commission, calling for more State flexibility in 
coordinating care for dual eligibles.\10\
    Therefore, I believe the evidence supports the need for greater 
flexibility in benefit structures for both public and private health 
plans, not in rigid benefit structures, to provide greater access to 
coverage.
                           cost is the issue
    In decades of opinion surveys about health care, the cost of care 
and coverage is inevitably at the top of the list of concerns. If 
health coverage is to be more generous, someone must pay.
    Professor Mark Pauly of the University of Pennsylvania's Wharton 
School has done extensive research on employment-based health 
insurance,\11\ and he concludes that workers ultimately pay for their 
insurance through lost wages and sometimes through lost jobs.
    The Kaiser Family Foundation reported in its latest employer 
benefits survey \12\ that the average cost of an individual policy 
offered through the workplace is $4,704, with the worker contributing 
$721 and the firm, $3,983. The average job-based family policy costs 
$12,680, and the worker's contribution is significantly higher, at 
$3,354 (a large reason that many employees decline the family 
coverage), with the employer paying $9,325.
    Tax law provisions shield health insurance from income and payroll 
taxes. While health insurance is part of the compensation package of 
workers, this provision means that the full cost of employment-based 
health insurance is most often hidden from workers. However, rising 
health costs are a major factor in depressing worker take-home pay.
    If Washington were to direct all employers and consumers to obtain 
comprehensive health coverage, workers ultimately would pay in lower 
wages and even lost jobs.
    Economist Katherine Baicker and others have demonstrated that an 
increase in health insurance premiums also increases the ranks of the 
uninsured and the unemployed.\13\ ``Understanding the relationship 
between health insurance costs and labor markets is of growing policy 
importance,'' write the authors. ``Together [our] estimates demonstrate 
that the labor market effects of rising health insurance are far from 
neutral.''
    They suggest that the cost of employer mandates is likely to be 
passed on to workers in the form of lower wages. They also suggest that 
if some groups of workers are exempt from an employer mandate, such as 
part-time workers or employees in small firms, then employers may 
increase their reliance on these workers, undermining the goal of the 
mandate.\14\
    The authors conclude that ``rising health insurance premiums will 
place an increasing burden on workers and increase the ranks of both 
the uninsured and the unemployed.''
    It is important to recognize that requiring health insurance 
packages to be more generous than they are today will have other 
consequences. In order to provide the opportunity for balance between 
pay and insurance, it is essential that employers and health insurers 
continue to have flexibility in trying to keep costs down through 
benefit design. Otherwise, we could find that the ranks of the 
uninsured have grown through an effort to make health insurance more 
generous for a dwindling number of insured workers.
    And at the micro level, individuals and families must balance their 
need for access to needed medical care and protection against large 
medical bills with other demands on their resources, including food, 
housing, transportation, training and education.
    Having a health insurance policy with a $1,000 or $2,000 deductible 
may seem high until a family is faced with $50,000 to $100,000 or more 
in medical bills that they cannot pay.
    President Obama said during the second presidential debate, Oct. 7, 
2008,\15\ and many times during the campaign, ``If you've got health 
care already, and probably the majority of you do, then you can keep 
your plan if you are satisfied with it.''
    A government-mandated benefits package would rob tens of millions 
of Americans of this choice.
                               conclusion
    There are many, many problems to be addressed in health reform in 
the United States. The need for protection against major medical 
expenses is high among them. But the goals of health reform cannot be 
considered apart from their cost. I am concerned about focusing on the 
issue of underinsurance in isolation from the costs, resource 
limitations, and complexities of our health sector. A requirement from 
Washington that all policies must be generous and comprehensive could 
lead to other distortions, including loss of jobs, wages, and 
insurance. In addition, there are serious medical workforce issues 
which also must be considered. If people are to be able to obtain care, 
we must address these shortages, especially the need for more primary 
care physicians. Finally, the Federal and State governments need to 
find more creative ways to reduce their health expenditures so these 
growing costs do not crowd out other needed functions of government.
    Thank you for the opportunity to testify before you today. I look 
forward to your questions.
                                Endnotes
    1. Cathy Schoen, Sara R. Collins, Jennifer L. Kriss, and Michelle 
M. Doty, ``How Many Are Underinsured? Trends Among U.S. Adults, 2003 
And 2007,'' Health Affairs, June 10, 2008, at http://
content.healthaffairs.org/cgi/reprint/hlthaff.27 
.4.w298v1.
    2. Ceci Connolly, ``At Wal-Mart, a Health-Care Turnaround,'' The 
Washington Post, February 13, 2009, at http://www.washingtonpost.com/
wp-dyn/content/article/2009/02/12/AR2009021204096_pf.html.
    3. Grace-Marie Turner, ``The Value of Innovation in Health Care,'' 
Galen Institute, January 13, 2009, at http://www.galen.org/component,8/
action,show_content/id,13/category_id,2/blog_id,1145/type,33/.
    4. ``Chronically Ill Continue Receiving Needed Care When Enrolled 
in a Consumer-Driven Health Plan,'' UnitedHealth Group, April 23, 2007, 
at http://www.unitedhealthgroup.com/news/rel2007/
Quality_of_Care_Summary_0407 
.pdf.
    5. ``Target Offers Employees Health Savings, Reimbursement 
Accounts, Plans to Eliminate Traditional Health Plans, USA,'' Medical 
News Today, May 18, 2006, at http://www.medicalnewstoday.com/articles/
43453.php.
    6. ``Thought Leaders: John Mulligan, Vice President, Pay & 
Benefits, Target Corporation,'' hub Magazine, Summer 2008, at http://
www.hubmagazine.net/printer.php?ID=180.
    7. ``Whole Foods Market Benefits,'' Whole Foods Market, at http://
www.wholefoodsmarket.com/careers/benefits_us.php.
    8. Total U.S. health benefit cost rose by 6.1 percent in 2007. 
``Mercer National Survey of Employer-Sponsored Health Plans,'' Mercer 
LLC, November 19, 2007, at http://www.mercer.com/
summary.jhtml?idContent=1287790.
    9. ``Reducing Corporate Health Care Costs: 2006 Survey,'' Human 
Capital Practice of Deloitte Consulting LLP and the Deloitte Center for 
Health Solutions, 2006, 
at http://www.deloitte.com/dtt/cda/doc/content/
us_chs_red_cor_hea_costs_ 
0106.pdf.
    10. Grace-Marie Turner and Robert B. Helms, ``Medicaid Advantage: A 
Medical Home for Dual-Eligible Beneficiaries,'' March 30, 2007, at 
http://www.galen.org/fileuploads/MedicaidAdvantage.pdf.
    11. Mark V. Pauly, Health Benefits at Work: An Economic and 
Political Analysis of Employment-Based Health Insurance, University of 
Michigan Press, 1999.
    12. Gary Claxton, Jon R. Gabel, Bianca DiJulio, Jeremy Pickreign, 
Heidi Whitmore, Benjamin Finder, Marian Jarlenski, Samantha Hawkins, 
``Health Benefits in 2008.'' Health Affairs, September 24, 2008 at 
http://content.healthaffairs.org/cgi/reprint/hlthaff.27.6.w492v1? 
ijkey=yYSZwPeyQ0oyU&keytype=ref &siteid=healthaff.
    13. Katherine Baicker and Amitabh Chandra, ``The Effect of 
Malpractice Liability on the Delivery of Health Care,'' NBER Working 
Paper Series, Working Paper 10709, August 2004, at http://
www.dartmouth.edu/?kbaicker/BaickerChandra 
MedMal.pdf.
    14. Katherine Baicker and Amitabh Chandra. ``The Labor Market 
Effects Of Rising Health Insurance Premiums,'' Journal of Labor 
Economics, 2006, v24(3,Jul), 609-634, at http://www.nber.org/papers/
w11160.
    15. Barack Obama in the second presidential debate, October 7, 
2008, at http://www.cnn.com/2008/POLITICS/10/07/
presidential.debate.transcript/.

    Senator Bingaman. Thank you all for your good testimony. 
Let me start with a couple of questions.
    Ms. Schoen, in your view it's important to establish a 
minimum benefit level, as I understand it in your insurance 
design principles. I just heard Ms. Turner say that would be a 
big mistake to have a government-mandated benefit level. You 
also made reference to Massachusetts. Could you describe what 
they've done in Massachusetts on this issue of establishing a 
minimum benefit level and how it's worked?
    Ms. Schoen. Yes, thank you for the question. I think the 
emphasis on minimum is important. Ms. Turner talked about HSAs 
setting a standard of $5,000 out-of-pocket as the maximum. 
We're talking about putting a minimum and to--that would be 
credible insurance.
    In fact, if you think of requiring people to have insurance 
or if you think if using a tax credit to buy insurance you need 
to define what would qualify. What Massachusetts did is took 
the decision on what exactly those benefits should be and said 
this is a very difficult issue. We want multiple stakeholders 
to be part of that decision.
    There were general principles on access and financial 
protection. Then a group after the legislature acted came 
together and looked at various benefit designs on thinking 
about what the minimum would be. You could be more generous, 
but you couldn't go below.
    They came up with several standards. Benefits should be 
very broad in scope. You shouldn't have an insurance package 
which simply doesn't cover something that you need.
    There should be financial protection. There should be a 
point at which the plan starts picking up out-of-pocket costs 
above a certain level. There was a discussion on how high that 
threshold should be and worrying about lifetime limits.
    When you talk to actuaries right now it's very difficult to 
compare plans. One says 500,000. Another says a million. It 
costs pennies to put some of these lifetime maximums in them. 
Evening it out makes it possible to compare.
    So what Massachusetts did was put a floor under it in their 
connector which makes it very easy to compare. They have a 
bronze, silver and gold set of benefit designs. But they're not 
rigid. There's quite a bit of variation within actuarial 
equivalents. So they said we want principles of access and 
protection.
    The other thing that was important was they looked at 
essential care. Preventive care is out from underneath the 
deductible to encourage primary care. Some of the designs we've 
seen private companies use that say if we have essential 
medications like insulin, you don't want to discourage use of 
it, so that went into the consideration.
    That was the effort. It did in fact rule out some of the 
insurance that was being sold on the market. There were 
policies with artificial limits, didn't cover days of hospital, 
didn't cover doctors, didn't cover drugs. Those are no longer 
considered credible insurance. There is a floor when you're 
buying insurance that's protective.
    Senator Bingaman. So, if I understand correctly, the system 
that was adopted in Massachusetts under Governor Romney, 
provided that everybody has to get coverage. And it provided 
that everyone, every insurance company that sold coverage in 
Massachusetts had to meet that minimum benefit level that was 
established by this board.
    Ms. Schoen. I actually live in western Massachusetts. The 
requirement is on me to show I have an insurance policy that 
meets the standard. All the carriers send us very simple 
letters to say, we were insured. And we were insured on a 
package that meets the standard.
    We could do this through the tax code, the Federal tax code 
for exemptions could say this meets the standards.
    Senator Bingaman. Let me ask Ms. Turner. What is wrong with 
that kind of approach as you see it?
    Ms. Turner. Actually, the Federal Employee Health Benefit 
Plan has very comprehensive coverage. But it is even less 
specific in what coverage. It has to make sure the doctor 
visits are covered, that hospitalization is covered, emergency 
room care is covered.
    But within that parameter there is even more flexibility 
and benefit design. And competition among the market, in the 
marketplace, can actually lead to the companies being forced to 
provide more comprehensive coverage because people aren't going 
to want to buy a policy that doesn't cover cancer care.
    Senator Bingaman. Well let me just ask, though, is it in 
the public's interest to encourage competition between insurers 
as to whether or not they're going to cover a particular 
ailment that people come up with? If there's a general 
consensus, as I guess there is in Massachusetts, that a 
particular ailment is common enough that it ought to be 
covered.
    Why would we want to allow or encourage insurance companies 
to compete on the basis on whether they cover it or not? Why is 
that a good thing for the public?
    Ms. Turner. There are 1,900 mandates of what policies must 
cover in the States now. And there's evidence that that is 
driving up the cost of health insurance by as much as 30, and 
in some States even 50 percent.
    Senator Bingaman. Is this in Massachusetts?
    Ms. Turner. Cost is a huge issue with the Massachusetts 
plan. Specific mandates and the problem that I believe members 
would have in specifying what needs to be covered and what 
isn't. Everybody needs something. And if you wind up deciding 
what's going to be covered and what's not then what is going to 
be left out.
    It's very difficult to leave anything out because in a 
political world, you know, you really don't want to leave 
anyone out. So, the question is what's covered? It's much 
better to do this, I believe, on an actuarial basis and to make 
sure people are covered and that there are dollar thresholds 
rather than benefit design thresholds because there's really no 
end to the number of benefits that can and should be covered by 
policies.
    Senator Bingaman. I've used my time.
    Senator Enzi.
    Senator Enzi. Thank you, Mr. Chairman. I appreciate the 
tremendous testimony and charts, that are now a part of the 
record, from you. It was very helpful.
    One of the things I always think about with health 
insurance is that when I buy my car insurance I know that I'm 
not paying for the oil changes or the tire replacement. When I 
buy my health insurance I am buying the change of oil and maybe 
the tire replacement. And I know that drives up the cost 
because there's a profit that's built into that part of it.
    Minimum benefit level seems to leave enough flexibility to 
do just about anything that we want to do until we start 
putting in the details of what that minimum benefit level is. 
I've done some looking in the preventive care, that we all 
emphasize, is covered by a lot of insurance, but only used by 
25 percent of the people that have it. What are we going to do 
to drive up the usage if they're paying for it, when they're 
not using it?
    In the area of competition, I've been watching that a 
little bit. I do see some benefits to competition in the health 
insurance market. I know you don't have to look any further 
than the Medicare Part D.
    Seniors are getting the drugs they need. The program has 85 
percent satisfaction rate. And it costs 37 percent less than 
originally expected.
    One of the reasons for that is we have a lot more companies 
vying for it than we ever anticipated. Pre-Part D in Wyoming 
there were two firms providing prescription drug coverage. Now 
there are 48. And yes that does make it difficult for our 
seniors to make the comparisons.
    We did some programs that make that a little bit easier. 
But that's what happens with choice. But we have found that one 
of the reasons for the 85 percent satisfaction rate is because 
they can choose something that they actually like.
    I'll ask Ms. Turner, based on Part D experience, what kind 
of market reforms can be made to increase that competition? How 
do we get it increased?
    Ms. Turner. I do think that Part D is a really wonderful 
example of how market competition can not only drive broad 
choice, but also get costs down. That the Part D benefit is 
coming in at 40 percent under expected expenditures at this 
point. Seniors have done it. You know, they've been offered a 
range of plans and seniors have picked the plans that provide 
the best care and the best coverage for the drugs and the 
services that they need at the best price.
    So the companies have been forced to provide not only 
comprehensive coverage, but also affordable coverage or they're 
going to be left out of the market. I think that model is 
something that not only could work in other public programs, 
but it's a model that could, I think, be utilized in other 
parts of the economy as well, health sector. Thank you.
    Senator Enzi. Thank you. I do think that the current tax 
treatment of health insurance is unfair. The Federal Government 
subsidizes the health insurance premiums for those who get 
health insurance through their job. The highest tax subsidies 
go to the people with the highest incomes and the most generous 
plans.
    Replacing the current tax exemption with a tax deduction, a 
tax credit or a combination of the two would make insurance 
more affordable for the uninsured and those who are shopping on 
the individual market. I know that with my time, I don't have 
time for all of you to answer that question right now. Thank 
you, Mr. Chairman.
    Senator Bingaman. Thank you very much. Let me call on 
Senator Casey at this point.

                             Senator Casey

    Senator Casey. Thank you very much. I want to thank each of 
you for your testimony today. You've highlighted a problem that 
I think persists across the country.
    I know, like a lot of States, in Pennsylvania we have a lot 
of the challenges that you've outlined today, a growing number 
of uninsured and underinsured. I'm told that if the national 
number is more than one in four of the uninsured or 
underinsured of incomes greater than 200 percent of poverty, 
that in our State that number is actually 36 percent. So we 
have in many ways a larger challenge.
    I wanted to highlight a letter that our office received 
from a constituent and see if there's a reaction you have in 
terms of how we can meet this challenge. A woman from Berks 
County, PA from the eastern side of our State, Trisha Urban 
wrote to us. And I'm summarizing what she wrote.
    Her 30-year-old husband died of a heart attack the day 
after she delivered her first child. Her husband had a child 
heart defect and missed his doctor's visit because their health 
insurance had been dropped and their medical bills were over 
$100,000. As you can tell from the brief information, his death 
may have been preventable.
    She wrote to us offering to testify. She wanted us to share 
her story with Members of Congress. Medical bills currently may 
soon take the family's home.
    What do we say to an American with that story, an American 
family in light of the challenge we face overall? Any of you 
want to take a stab at that? I know it's a tough question. It's 
overly broad. But I wanted to get your reaction.
    Ms. Rowland.
    Ms. Rowland. I think all the stories that we have from our 
cancer study, of profiles of cancer individuals as well as our 
kitchen table snapshots that we released today really reveal 
that Americans are struggling with these health care bills. I 
think the thing that we have to focus on is that when people 
have cost concerns they delay care even when it's really 
important to get it. To have up-front and comprehensive care 
that provides for preventive services and gets the cancer 
victim in when they're there at stage one instead of stage 
three, that allows the family that you're talking about to know 
that they should be in a medical home and a good treatment 
setting to get ongoing monitoring for this heart condition 
would be an important part of any health care reform.
    As you look at the principles for health care reform, I 
think it's both the benefits that are being offered, the level 
of financial protection and gearing so that families at the 
lower end of the income spectrum don't have too great a burden. 
So it really is doing cost-adjusted cost sharing. If you're 
going to put cost sharing in, remember $5,000 for a family 
earning $30,000 is very different than $5,000 for a family 
earning $150,000.
    Senator Casey. Ms. Shearer.
    Ms. Shearer. It's hard to add to that answer. But I think 
that the most important thing is that Members of Congress and 
members of the Administration redouble their efforts and their 
commitment to solving this problem. You know, as the Chairman 
mentioned this came up at the summit yesterday. It's going to 
be discussed at another summit next week.
    I think that the message that we're all hearing is that 
people were hurting before. But as of October people are 
hurting, you know, the level of hurt has just expanded 
exponentially. And I think that this really cries out for this 
Congress, this Administration to just redouble their efforts 
and pass some legislation to relieve this suffering.
    Ms. Turner. Can I also say, in my written testimony talk 
about Wal-Mart. The Washington Post had an article last Friday 
on some of Wal-Mart's benefit design, really trying to get more 
of its employees covered. And they actually have a benefits 
package that would have been enormously helpful to the urban 
family.
    They, for less than $50 a month, have a package that covers 
preventive care. The company puts $500 into an account to make 
sure that people don't miss on routine doctor visits. But then 
it covers everything over a certain threshold. So they would 
absolutely not have been exposed to $100,000 or anything even 
remotely close to that.
    What I think we need is a package that provides access to 
routine care, but that doesn't skimp on the larger end of the 
extraordinarily important medical services that really can be a 
difference between life and death for someone.
    Senator Casey. I know we're almost out of time, but Ms. 
Schoen, anything that you wanted to add?
    Ms. Schoen. I think just to underscore what's been said.
    Senator Casey. Fifteen seconds.
    Ms. Schoen. I think it's vitally urgent. And we're often 
penny wise and pound foolish. Medicaid is now paying for cancer 
deaths.
    We wait until the tumor is at stage four, then you spend 
down. We are not saving money by the way we've designed our 
benefits. We are in fact, incurring adverse outcomes.
    We're hurting people's health. So I think this is part of a 
larger issue. We need to get control of the way that we pay as 
well as our insurance system.
    Senator Casey. I know we're out of time. But I guess the 
other scenario is people that actually have coverage may not go 
for treatment. They may not engage in any kind of preventive 
strategy. So that's a whole other set of questions.
    I'm out of time. Thank you very much.
    Senator Bingaman. Senator Alexander.

                           Senator Alexander

    Senator Alexander. Thank you, Mr. Chairman. And thank each 
of you for coming. Very interesting testimony.
    I attended the Health Summit yesterday that President Obama 
held which I appreciated. I think all of us there want to work 
with him, and there's a consensus in the room that we need to 
have a solution where every American has access to health 
insurance.
    There seems to be a broad consensus, that while harder to 
implement, that that included a significant involvement by the 
private sector. We'll see how that works as we go, but we have 
that objective.
    But the focus of the meeting was not how do we deal with 
the uninsured, it was how do we control health care costs. That 
was the purpose of the meeting. And the testimony that the 
President wanted to present to us which we've heard before is 
that if we don't do something about controlling the growth of 
health care costs we're going to bankrupt the country.
    Today, 45 percent of our Gross Domestic Product is the 
amount of our debt. On the course we're going according to 
testimony yesterday, it would be two to three hundred times the 
amount of our debt. So everyone also agreed that, we need to 
control the growth of costs.
    So my question is, how do we reconcile making sure that 
every American is insured, which is also our goal on the 
Republican side and also the goal on the Democratic side, with 
controlling health care costs. I was intrigued with Ms. 
Turner's comment about the definition of insurance. And wonder 
if others on the panel agree with it.
    I mean, your suggestion is that the definition of insurance 
might be to provide financial protection for major medical 
bills rather than protect against most expenditures on health 
care. Or as Senator Enzi put it, that insurance might be for 
the catastrophe or the serious medical problem and that there 
might be a different attitude toward the oil changes or the 
tire changes. So my question--and Senator Bingaman asked the 
question well--what would be the public interest in allowing 
competition for that?
    Well, maybe the question might be, that the answer might be 
controlling all costs--which we have to do. Is it not a 
possible solution or maybe this is what you all recommend any 
way that we have a minimum benefit for these major expenses? 
And that we encourage competition for everything else.
    Is that practical? Would that control cost? And does that 
differ significantly than the way Massachusetts did it? Ms. 
Turner, then maybe Ms. Schoen, your comment on that.
    Ms. Turner. Thank you, Senator. I absolutely agree that the 
debate gets confused--thinking about routine costs and major 
medical expenditures and putting them into the same package.
    Whole Foods, another example, decided that it wanted to 
move to one of these account-based plans. It said we can save 
on insurance costs if we move the deductible up to say, $2,000. 
But we're going to put $1,800 into an account to make sure 
people have money to see the doctor to get routine care, to get 
the medicines they need. But anything above $2,000 is going to 
be covered by the insurance policy.
    Whole Foods pays 100 percent of the premium for the 
insurance. So, if you have that kind of a partnership in which 
you're really working with employees to help them monitor their 
own use of the system, but give them the resources to access 
routine care. And they're going to know more what that is than 
somebody at the health and human services. Then they also are 
protected against the larger costs.
    But I would strongly encourage that it be a dollar 
threshold and not a benefits package because we just can't know 
what everyone is going to need.
    Senator Alexander. Now Ms. Schoen, what's wrong with that?
    Ms. Schoen. I think for starters we need to look at where 
our spending is. We absolutely need caps, out-of-pocket 
protection. But if 50 percent of the healthiest people in the 
United States stopped going all together, just didn't use a 
single service, it counts for only 3 percent of the spending 
dollars.
    Almost all of our national spending is among sicker 
patients, chronically ill and acute care. So, we want to 
address that long-term cost curve--it's not at this front end, 
it's at the high end. The same cost we're trying to protect 
people against.
    We are going to have to do payment reform. We have a set of 
incentives that reward doing more with our volume rather than 
our outcomes and more prudent use of resources. A hospital that 
does extremely well taking care of someone and prevents a re-
admission stands to lose money compared to--and does handoffs 
to primary care, stands to lose money over time because of 
volume of services in the hospital goes down.
    I think we need to couple insurance reform with protecting 
patients and families. Thinking of those front-end costs around 
preventive care with positive incentives, a lot of the company 
examples are actually saying, how can we encourage and provide 
incentives to get preventive care, particularly for diabetics 
and chronically ill to engage them. And then say what is 
happening in the insurance system that we are not paying 
differently.
    The private sector has a lot of flexibility. But when you 
look closely they have no leverage. They are a very small share 
of the sicker population in any of their cities. We don't have 
coherent payment policies. Everyone is paying differently. We 
have layers and layers of cost, administrative cost, at 
insurance companies and hospitals.
    I absolutely agree that costs are essential. And I think 
insurance, if designed well, will provide you a platform to 
start thinking much more creatively about the way we pay for 
care.
    Senator Alexander. Thank you, Mr. Chairman.
    Senator Bingaman. Thank you.
    Senator Hagan.

                             Senator Hagan

    Senator Hagan. Thank you, Mr. Chairman. I think this is a 
very good meeting that you've put together. And I thank the 
panelists.
    Just listening to the questions and the discussions, I 
think what you were just talking about, Ms. Schoen?
    Ms. Schoen. It's actually pronounced Shane. Pronounced 
Shane, if you think of the cowboy movie.
    Senator Hagan. Shane.
    Ms. Schoen. But beyond that, it doesn't look like that.
    Senator Hagan. It just seems like we're reiterating the 
need for the health information technology system so that we 
can, No. 1, have records available. And then be able to analyze 
the data from individual chronic diseases to individual 
institutions and across the country to see. Obviously we want 
the best outcome. But we also have got to have a better control 
on cost of health care in this country.
    I was going to ask a question having to do with the risk 
segmentation. We're talking about a survey that showed that a 
number of adults in the United States are either uninsured or 
underinsured, either 41 or 42 percent which seems like an 
extremely high number. But I was just wondering about the 
breakdown of that, whether it is because there are not 
affordable options for health insurance for individuals or if 
it had to do with the young and healthy adults who feel like 
there's just no need at that point in their life to actually be 
covered.
    Ms. Schoen, could you address that and anybody else?
    Ms. Schoen. In the study that we did the underinsured were 
predominately low and modest incomes. So what you're seeing is 
an affordability. It's a mixture of young, middle-aged and 
older trying to figure out how to get a premium within an 
affordable range and then often having the packages available 
to them.
    This would include people working for the small business 
market which often have very high deductibles, extraordinarily 
high and they've been going up or the individual insurance 
market. I want to stress Diane Rowland's testimony and Gail's 
also have it in, that it's not just the deductibles. But people 
are running into what I call insurance surprises.
    There was a cap on total amount of radiation covered. No 
follow up care for cancer fully covered. It's something you 
wouldn't even know about until you get in that situation. 
That's where you get the risk segmentation.
    There are prescription policies that don't exist at all 
that restrict insulin use. It's a subtle signal on who we want 
and who we don't. There are a lot of opportunities for risk 
segmentation that are quite subtle.
    It's both this benefit limitation not covering it all or 
literally running out. My drugs are covered up until x dollars. 
And then I'm on my own.
    It's this whole mix that people find themselves in the 
underinsured world.
    Ms. Rowland. We've talked a little bit about mandated 
benefits. Well one of the mandated benefits in many States is 
mental health care. So that there are a lot of services that 
you would want to have as part of a package that are not just 
routine, but that can be very important for certain groups.
    I think the real test of the adequacy of a health insurance 
plan is how well it covers someone with ongoing chronic 
illness. That's one of the places where if we can provide 
better early care and better coordinated care, we may actually 
save on the hospitalization side and be able to afford some of 
the other preventive services we need.
    Ms. Shearer. If I could just add to that one other problem 
that people have. Everybody doesn't have access to a wonderful 
employer based policy. Now State regulation varies.
    But most people are in States where they will apply for an 
individual policy. If they have any pre-existing health 
conditions, if they've had a gap in coverage, they're probably 
going to end up either without a policy or with a policy filled 
with gaps that the gaps are designed around their needs. So 
it's a major part of the problem.
    Ms. Turner. I do think, that again argues that the 
thresholds for protection really do need to be dollar-
denominated rather than sort of having a game. OK, we're going 
to cover what regulations say we must and then not cover other 
things.
    I think that making sure people are protected financially 
is really the important consideration. Then doctors and 
patients can be more and have a greater role in making 
decisions about what care they need.
    Senator Hagan. Thank you, Mr. Chairman.
    Senator Bingaman. I believe Senator Hatch was the first one 
at the hearing. So we should probably let him ask his questions 
at this point. Thank you.

                             Senator Hatch

    Senator Hatch. Well thank you, Mr. Chairman. Welcome. We 
appreciate all of you being here and trying to help us with 
these very, very difficult issues and questions.
    Let me go to you first, Ms. Shearer. In your testimony you 
stated,

          ``A necessary building block will be expanded 
        research of comparative effectiveness so that we 
        increase the knowledge base from making treatment and 
        coverage decision. It would be better to cut the growth 
        of health care costs and get better value for our 
        health care dollar in order to be able to afford the 
        coverage improvements and expansions necessary to 
        eliminate the risk of being underinsured.''

    Now I agree with the value and merits of doing comparative 
effectiveness studies, however only in terms of looking at 
clinical effectiveness and not for making treatment and 
coverage decisions based on costs. There's too much variability 
from patient to patient that directly affects the treatment 
outcomes. Therefore such decisions should be left up to the 
physician and patient who are most knowledgeable in their 
situation.
    In fact, using comparative effectiveness to make broad-
based coverage decisions has the potential to add unnecessary 
costs to the system. So my question is, do you agree that we 
should focus our comparative effectiveness efforts to ensure 
patient choice and protect medical innovation?
    Ms. Shearer. Well I think that the main focus is 
appropriately un-clinical research where there's a real need. 
But I'd like to tell you a few little stories about why I think 
that there is potential to save a lot of money through this 
kind of research. We have a program called Consumer Reports 
Best Buy Drugs where we identify alternative drugs that are 
equally effective and safe and less expensive.
    Our researchers have found in looking at four categories of 
drugs for heart use, ace inhibitors, high blood pressure drugs 
and statins that if people switched from drugs that are more 
expensive to drugs that provide better value with no impact on 
health benefit, the potential savings are $2.7 billion a year 
which is about 8 percent of the drug spending. So we think that 
even if the studies don't include cost there is the possibility 
for other groups, such as ours, to look at the data and find 
ways to bring these effectiveness results to the point of being 
able to help the system save money.
    If you look at what happened at the drug effectiveness 
review project based in Oregon, they did not include Vioxx. 
Most of the States did not include Vioxx on their preferred 
drug list because of the comparative effectiveness research. 
That yielded tremendous benefits in terms of health care and 
cost.
    So it's hard to make a blanket statement. I think there's a 
lot of potential for getting better value from this kind of 
research.
    Senator Hatch. Well thank you.
    Ms. Turner, in your testimony you make a point to state the 
flexibility in benefits is crucial to maintaining 
affordability.
    Now last week Wal-Mart reported that almost 95 percent of 
its employees now have health care coverage due to a menu of 
coverage options with a variety of out-of-pocket costs and 
deductibles that meet each individual's unique needs. I don't 
know whether you've been asked this question or not because I 
had to be over on the floor. But what would be the impact on 
health care coverage, wages and jobs in these tough economic 
conditions if this flexibility is not preserved?
    Ms. Turner. That's really the crucial point, Senator Hatch, 
that companies are doing so much. It's under the radar really 
because it's not----
    Senator Hatch. You talk about Fresh Foods. I mean, my gosh, 
people I understand love their approach.
    Ms. Turner. They do. And Wal-Mart for example takes very 
seriously not only helping people with routine costs. But also 
they're negotiating--they're working with the Mayo Clinic if 
somebody needs transplant surgery. So they're using their 
negotiating power to make sure that the large bills are covered 
and that they're getting the best deal and the best care as 
well on the small bills.
    The flexibility of employers and the motivation of 
employers to make sure that their employees are getting the 
preventive and wellness care they need, as well as making sure 
they're getting the best care on the high end is crucial. I 
just think it would be such a shame to lose the incentive of 
employers to really look at health costs across the board and 
still make sure that their employees are healthy.
    Senator Hatch. Well my colleagues on the other side hate 
health savings accounts even though they're working amazingly 
well on some of these companies. I guess it's because they 
think it's a Republican idea. But I don't think Republicans can 
take sole credit for that. I think it works.
    Ms. Turner. That's right.
    Senator Hatch. Do I have time to ask one more question, Mr. 
Chairman?
    Senator Bingaman. Sure, go right ahead.
    Senator Hatch. Well let me ask one of Ms. Schoen. Your 
testimony recommends setting a minimum floor and standard for 
health insurance benefits. Having served in the U.S. Senate now 
in my 33d year, I can safely predict that every decent provider 
group out there will assert that their condition and service 
must be part of the minimum benefit package.
    I mean, I guarantee you, they're going to want everything 
under the sun. And the end result will be a package that will 
be far from ``minimum'' in its form.
    Now this in turn will raise the cost of coverage for 
millions of Americans and result in even greater numbers of 
uninsured and underinsured. Now how do you propose to address 
that challenge? And should we focus on actual value rather than 
defining benefits?
    Ms. Schoen. I think focusing on value is incredibly 
important. The point I made in the testimony and I briefly 
mentioned what Massachusetts had done is thinking when we're 
talking about broad and scope it's not to limit for this 
disease or capping you. If you have cancer you're going to get 
no more than this, certain circumstances making it much more 
transparent.
    To even cap the total amount of expenditures as has been 
suggested you have to say which expenditures would count toward 
that cap. So I think there are ways of looking at the 
interaction with premiums. Massachusetts went through a very 
interesting exercise where people looked at the implication of 
premiums for different decisions. Went broad and scope in terms 
of we're not limiting it to people with only certain diseases 
will get coverage and others will be excluded.
    You won't have a surprise that if you need essential care--
and we're talking about doctors, drugs, and hospitals when I'm 
talking about essentials. Because there were policies being 
sold that had no drug coverage and no physician coverage, 
literally none.
    They had $100 a day toward a hospital. So saying there's 
the floor. Then you can be more generous above it. And it's 
what most companies do.
    When you look at the kind of floor that Massachusetts put 
in it was not below what any large company currently offers. So 
it was a reasonable package. Because you do--actually people do 
understand there's an implication for their premiums. I mean, 
they're thinking in terms of, I want affordable health care. 
And I also have to have affordable insurance.
    Senator Hatch. My time is up. Thank you, Mr. Chairman.
    Senator Bingaman. Senator Burr.
    Senator Burr. Thank you, Mr. Chairman. If we haven't asked 
unanimous consent for our opening statements to be part of the 
record, may I ask that?
    Senator Bingaman. We'll include any statement anyone wants 
to include in the record.
    Senator Burr. Thank you, Mr. Chairman.

                   Prepared Statement of Senator Burr

    Mr. Chairman, thank you for holding this hearing today. I 
want to thank our witnesses for joining us as well.
    Mr. Chairman, this is a timely, if somewhat narrowly 
focused hearing on an important aspect of health care reform. I 
understand that President Obama will be making some remarks to 
that point tonight and I look forward to hearing his thoughts. 
As I said at Senator Daschle's confirmation hearing, our goal 
should be to ensure affordable, high-quality health care 
coverage for all Americans. I believe that by addressing 
affordability, we can cure much of what ails our health care 
system.
    American families are straining against an uncertain 
economic situation that is compounded by a health care system 
that is expensive and doesn't always deliver value where we 
need it. Because health care can be expensive, people tend to 
forgo needed medical treatment, especially so when our health 
insurance falls short of our needs.
    What frustrates Americans about this situation is that we 
spend trillions of dollars on health care in this country, yet 
many feel like their coverage is inadequate if they have it. 
Americans currently spend around $2 trillion on health care 
annually (16 percent of GDP). By 2013, that number is expected 
to double to $4 trillion (21 percent of GDP). This spending 
trend is not projected to reduce the number of uninsured or 
underinsured.
    I believe that before we can embark on the search of a 
solution, we need to understand why health care costs so much 
in this country. I am hopeful that our witnesses can articulate 
this for us today. In my view, we spend a lot of money on 
health care in this country, but we don't always buy value.
    The government though isn't always a good judge of value. 
In our discussion today, we need to be careful about what 
constitutes ``adequate'' coverage. Mandating adequate coverage 
has not been especially effective, when looked at holistically. 
Ideally, benefits mandates may ensure that people have adequate 
coverage, but that can be a moving target. I believe that 
experience with mandates has been a mixed bag and in some cases 
mandates create a costly barrier too high for many low-income 
Americans.
    In the 110th Congress, Senator Coburn and I introduced the 
Universal Health Care Choice and Access Act. This bill 
contained several solutions to our health care problems--
solutions that are mindful about what works in our current 
system. Whatever we do about the cost or availability of health 
care I think we should commit to not up-end what actually does 
work. Americans have the highest standard of care anywhere in 
the world, unfortunately the delivery and financing of that 
care breaks down from time to time. Our system is an engine of 
innovation that produces the advancements that extend life, 
defeat chronic diseases, and make minor health nuisances more 
livable. These are things we shouldn't take for granted. We 
should work to protect this country's crucible of medical 
innovation--but we can only do that by addressing the costly 
burden borne by American health care consumers.
    Senator Burr. Mr. Chairman, I think most of us agree that 
one of the tasks before us is to make sure that we provide the 
resources in some way, shape or form so that every American can 
access coverage. And when I say access coverage, my hope is 
that we'll end up allowing them to construct what best meets 
their income, their health conditions, their age. Clearly this 
is going to be difficult, as we've seen, to try to achieve a 
consensus package.
    Ms. Schoen, let me ask you, how do Americans rank in terms 
of out-of-pocket cost compared to counterparts in Canada and 
Europe?
    Ms. Schoen. If you do the actual dollars? Very high. The 
only country that's up there with us is Switzerland in terms of 
dollars.
    Senator Burr. But from out-of-pocket costs of the 
individual?
    Ms. Schoen. Out-of-pocket costs. If you look at it as a 
percent of our national spending it doesn't look as high.
    Senator Burr. I'm looking at the report that the 
Organization of Economic Cooperation and Development did where 
the out-of-pocket cost of the United States is 13 percent.
    Ms. Schoen. Right.
    Senator Burr. In the UK it is 13 percent.
    Ms. Schoen. That's why I want to just try and make the 
distinction between the percent and the actual dollars. The UK 
currently spends about 8 percent of their national income on 
health care. We're at over 17 percent.
    So when you take our 13 percent and multiply it times our 
$8,000 to $9,000 per person, the dollars are very high. That's 
the dilemma we've been in. Even when we protect people with 
insurance, their actual out-of-pocket costs relative to their 
wages are going up rapidly.
    Senator Burr. The out-of-pocket cost for somebody in the UK 
is in fact, not 13 percent because they're being taxed a large 
amount to contribute to the cost of the government program. Yet 
on top of the government program they've still got 13 percent. 
In the case of Switzerland, 31 percent. In the case of Belgium, 
22 percent. In the case of Poland, 28 percent.
    As a percentage and not taking into account any of the 
other countries that I'm looking at, that we're comparing----
    Ms. Schoen. I agree with you on the percents. I would be 
happy to give you the actual per person because what we're 
seeing is we have a very expensive health care system. We spend 
four times as much on insurance administration costs.
    Senator Burr. A lion's share because we have allowed the 
benefit package to be dictated and with very little choice on 
the part of consumers. Consumers have a voice in many of the 
cases as to how the construction of the project goes.
    I am 53 years old. My wife has told me we're not going to 
have any more children. But I can't buy a government program 
under FEHBP that doesn't have maternity.
    I'm not going to use it. I know it. And I know I pay for 
it. But I can't buy a plan without it. And the reality is that 
that's frustrating for a lot of Americans.
    What's the out-of-pocket cost for Medicare beneficiaries?
    Ms. Schoen. It depends on whether they've bought a 
supplemental policy or they have Medicare only. It can be 
extremely high.
    Senator Burr. The average though is 20 percent, isn't it?
    Ms. Schoen. Again, it absolutely depends. And Diane may 
have more recent figures. When you take the Medicare only, the 
basic package people are very highly exposed. Most seniors have 
bought supplemental policies. So they limited their out-of-
pocket.
    Senator Burr. Let me turn to Ms. Rowland, if I can. From 
the perspective of adequate benefits, do you believe our 
government health coverage--and I'm specifically referring to 
FEHBP--program provides an adequate benefit?
    Ms. Rowland. The FEHBP program clearly covers a full range. 
So I would qualify that as an adequate benefit package.
    Senator Burr. Now under FEHBP we have a lot of different 
plans we can choose from. Some are high deductibles. But you're 
confident in the way that you've stated it, that adequate is 
that there's an entity that looked at it and if a member of 
FEHBP chooses to have the high deductible verses to have the 
thing that covers first dollar that that's adequate. That the 
consumer, me, the Federal employee, have made that choice.
    Ms. Rowland. Yes. And in the end someone who incurs their 
high level of say, cancer treatment, may find that that policy 
leaves them with a substantial financial burden. But the 
benefit began as a standard benefit.
    I would also point out that there's been a lot of 
discussion here about competition and Medicare Part D. But 
Medicare Part D does define what the benefit is so that it's 
not just an undefined benefit.
    Senator Burr. It does define the benefit. But it defines it 
in the loosest terms. A minimum that must be met and for any 
senior then they can choose a plan that has a more exhaustive 
coverage that happens to, in the case of Ms. Schoen--or excuse 
me, Ms. Shearer talked about equivalent drugs.
    If, in fact, a particular plan doesn't carry the drug you 
and your physician have decided is best suited for you, then 
you can choose another plan that might substitute that heart 
medication and might cover that particular drug. But the 
individual at the end of the day chooses from those competitive 
bid plans which one best suits their needs and their income.
    Ms. Rowland. Correct. But the benefit there is providing a 
service benefit, not just a dollar cap on spending for 
prescription drugs, which is my point. That it does have a 
definition of benefits which is similar to what we've talked 
about for general health insurance.
    Senator Burr. I thank the Chair.
    Senator Bingaman. Senator Coburn, you're the last one up. 
The vote has started. So go right ahead.

                             Senator Coburn

    Senator Coburn. Thank you. I'm sorry I missed most of your 
testimony. I did read it last night. It was my bed partner for 
a good portion of the evening.
    Let me just see if any of you disagree with the following. 
Does anybody disagree that preventive care outside of the 
deductible ought to be something that's important?
    OK.
    Does anybody disagree that there's a tremendous advantage 
to the medical home model?
    Does anybody disagree there needs to be payment reform?
    Does anybody disagree that the insurance products that are 
out there today are only less than two-thirds of the money that 
is actually paid for the insurance goes for either preventive 
care or treatment?
    I'm asking the questions because the problem isn't access. 
The problem is cost. There's no transparency in the market.
    You all, through your testimony and every other thing with 
the solutions that we're offering, the No. 1 problem is cost. 
So without transparency, without real markets, one of the 
reasons our costs are out of control is that there is no 
competition. Now we heard a moment ago about caps on all of 
these.
    Medicare has got all sorts of caps. When people run out 
it's on them. So we're not going to have a cap-less system. We 
can't afford Medicare the way we have it today.
    We need payment reform. I would absolutely agree with that. 
But we can't also deny the fact that Medicare has got caps, 
much more so than Medicaid does.
    I'm interested, Ms. Schoen in the numbers in Massachusetts. 
I'm just going to ask if this is accurate or not. It may not 
be. But is it not true that the cost estimate that went up for 
the per year increase last year for the Massachusetts plan was 
10 percent?
    Ms. Schoen. I actually can't speak exactly to the cost 
estimate because the most recent numbers that John Kingsdale 
presented last week indicate rates are coming in quite low this 
year. They've actually had some reductions, particularly for 
the low-income they were very----
    Senator Coburn. I mean last year their cost increase, on 
average, was up 10 percent for their care plan.
    Ms. Schoen. For some of the plans, but not all. And they've 
been coming down. They're modified.
    The other thing they found is when they consolidated their 
individual small group market and brought the healthy lives in, 
they had a dramatic decrease in the premiums with an 
improvement in benefit policies. So bringing risk pools back 
together have been a big benefit.
    Senator Coburn. I'm not against the risk pool concept. But 
it is true that the average family policy in Massachusetts is 
$16,897. And the rest of the country, it's $5,799, so 3\1/2\ 
times greater for a mandated set of benefits.
    I want to talk for a minute with each of you about 
comparative effectiveness because the thing that I worry about 
is comparative effectiveness and there's no question we can do 
it on drugs and all sorts aside. The thing that often times 
isn't considered as a practicing physician is, I try to put 
people on generics. But side effects are a significant 
complication.
    So some nongeneric drugs actually work better, even though 
they're much more because the patient will take the medicine. 
You know, I can give them another drug which costs a whole lot 
less. But if they don't take it I'm not helping them.
    The thing that worries me about comparative effectiveness 
as a physician that's practiced 25 years or so is the art of 
medicine is totally ignored, totally ignored in comparative 
effectiveness. And what we see in England is the art is out. 
But we don't have the art of medicine practice because they've 
used comparative effectiveness based on cost.
    I wonder if you all could address for me or at least 
assuage some of my concerns about using comparative 
effectiveness. And how you could use what I think is about 40 
percent of the practice of medicine is art and 60 percent is 
science. Are my concerns legitimate? I guess that's what I'd 
ask.
    Ms. Turner. We actually invited an expert of the National 
Institute for Clinical Excellence in the UK to come over and 
talk with us about it. There are huge concerns, particularly 
about people who are outside the very center--20, 30, 40 
percent of patients being able to access the medicines they 
needed because it is a gigantic political issue then to get 
those drugs covered. Many people wind up not actually having 
access to the care they need.
    The National Institute for Clinical Excellence research 
shows it actually is driving up cost in the system. We can talk 
about some of the reasons for that later. But it's even when 
they use cost in the equation, it's still not helping to 
contain cost. And it does interfere with the practice of 
medicine, absolutely.
    Senator Coburn. Other comments?
    Ms. Shearer. Let me just talk a little bit about what we 
have found. We have found that by providing information we can 
open conversations between physicians and patients. Right now 
often physicians are not aware that their patient is getting to 
the drug store and not able to pick up their medicine because 
they can't afford it.
    We believe that the power of information is tremendous. We 
also believe that we need to have a process, ultimately, that 
provides for the exceptions. And maybe it's a question of step 
therapy or a protocol where we don't necessarily start with the 
most expensive. This Nation can't afford to keep starting with 
the most expensive treatment.
    Hopefully we can find a way to work toward a model where we 
get better value and we achieve the information and the 
communication and ultimately save money.
    Senator Coburn. Is it your assumption that we start with 
the most expensive initially?
    Ms. Shearer. In many cases we do.
    Senator Coburn. I'm sorry. I have not seen that in any of 
the practice of medicine that I've been exposed to. I think 
probably what you're referring to is that we've had such great 
benefit from sub specialization. And then we use sub 
specialists for primary care.
    Example, you strain your back. You come to me. The first 
thing I do is not order an MRI. I put you on muscle relaxers, 
pain relaxer, bed rest and do a good clinical exam.
    If you go to an orthopedist or a neurosurgeon, the first 
thing they order is an MRI. So, you know, we have to sort some 
of that out. But the benefits of sub specialization have 
markedly given us greater health care. But also significantly 
raise the cost because we don't have the differentiation.
    Could I continue for 1 more minute?
    Senator Bingaman. Sure. I think I may go over and vote. Why 
don't you just conclude the hearing.
    Senator Coburn. Alright. I will. Thank you very much.
    Senator Bingaman. Thank you all. Let me thank all the 
witnesses. Thank you.
    Senator Coburn. My biggest worry, we've all talked about 
health IT and how it can help us. We just spent a ton of money 
on that in the Stimulus package which won't be spent until 
after 2011, any of it. But health IT isn't going to help us any 
time until we have interoperability where the health IT can 
talk to everybody.
    So that the pharmacist can e-mail back that the patient 
didn't pick up the prescription. In other words so we have the 
connection. We have the warning set up so that we can all talk.
    Let me thank each of you. You know every American is 
interested in this, no matter what it is. But I'll tell you one 
thing they're interested in more, is that they want to know 
that they get to choose who is going to care for them. And they 
want to be involved in the decisionmaking.
    That should be the rail that we run up against that we 
should not violate as we move toward this. And with that I will 
adjourn our hearing. Thank you.
    [Additional material follows.]

                          ADDITIONAL MATERIAL

                  Prepared Statement of Senator Brown

    Last week, the U.S. Department of Labor reported that there 
are currently 11.6 million unemployed Americans and that the 
unemployment rate has risen to 7.6 percent. Over the past year, 
the number of unemployed persons has increased by 4.1 million 
and the unemployment rate has risen by 2.7 percentage points. 
In a country that provides health coverage predominantly 
through employment, an economic decline not only causes jobs to 
disappear, it causes health coverage to disappear.
    Much-needed and deserved attention has been devoted to the 
problem of uninsured Americans. In fact, the Institute of 
Medicine (IOM) will be releasing a report today, entitled, 
``America's Uninsured Crisis: Consequences for Health and 
Health Care.'' As Congress, policymakers, and experts continue 
to discuss and consider potential solutions to the crisis of 
uninsurance, it is imperative that we also examine the crisis 
of underinsurance--the ways that inadequate health insurance 
affects American families and contributes to the deterioration 
of our health care system.
    Approximately 46 million Americans are uninsured. An 
additional 25 million Americans are underinsured--living with 
health insurance that does not adequately protect them from 
catastrophic health care expenses. Underinsured individuals are 
generally defined as adults between 19 and 64, whose out-of-
pocket health care expenses, excluding premiums, are 10 percent 
or more of family income. It is estimated that 42 percent of 
U.S. adults were uninsured or underinsured in 2007.
    It is important to note that this definition, while 
extremely useful, is actually incomplete. Other populations, 
including children in underinsured families and seniors who 
lack coverage to supplement Medicare, also face significant 
challenges in our health care system. I believe that Chairman 
Bingaman has rightly chosen to focus on one population at a 
time; however, we would do well to remember that underinsurance 
is common to every age group in all but the wealthiest segment 
of our society.
    It is not a niche issue; it is a national issue.
    Inadequate health coverage leaves Americans exposed to 
significant financial risk. Underinsurance can quickly undercut 
the financial stability of middle class families and turn 
financial stability into financial ruin.
    Consumers Union found that 30 percent of the underinsured 
had out-of-pocket costs of $3,000 or more for a single year and 
a Health Affairs study found that one quarter of underinsured 
people have deductibles of $1,000 or more. Other Americans have 
coverage with lifetime caps on coverage that cut off support to 
individuals with cancer and other catastrophic conditions. A 
Commonwealth Fund survey found that 46 percent of the 
underinsured report being contacted by collection agencies for 
medical bills.
    Those are the financial implications. The health care 
implications are even more alarming. According to a Health 
Affairs study, 53 percent of the underinsured forgo needed 
medical care--they may not fill their prescriptions, they may 
delay care or forgo a screening test. They may avoid health 
care until the lack of it catches up to them, whether that 
means the need for more expensive treatments or a diagnosis 
that at one time was neutral and is now life threatening.
    Underinsurance has not just hurt individuals financially; 
it has harmed them physically--sometimes irreversibly.
    I would like to tell you the story of Denny and Debbie 
Byers from Columbus, OH. Denny worked construction for 34 years 
before he and his wife Debbie, a bank teller, retired and tried 
to purchase health insurance through the private market. While 
Denny was able to secure private health insurance, Debbie was 
unable to find coverage due to pre-existing allergies and 
asthma.
    However, Denny quickly found out that his newly purchased 
health insurance did not cover his usual doctor's visits, nor 
did his insurance cover his two high blood pressure medications 
or his migraine medication. Denny has since chosen to pay out-
of-pocket for generic versions of the blood pressure 
medications, but cannot afford the $30 per pill price-tag 
associated with the migraine drug, for which there is no 
generic.
    Denny has insurance that doesn't cover the care he needs. 
That's not coverage; it's a crock.
    It's not enough to fight for affordable coverage, we must 
fight for real coverage. Coverage that provides financial 
protection for what people need, regardless of their current 
health status, regardless of their past health care needs, 
regardless of their income, regardless of their age.
    Health insurance shouldn't be a vehicle for punishing the 
sick and rewarding the healthy.
    It shouldn't be a hammer that beats health care costs down 
by arbitrarily denying care to those who need it.
    Health insurance shouldn't be used to bring down costs; 
logic and knowledge and research and health system 
accountability and information technology and reasonable 
expectations should be used to bring down health care costs.
    We need a health care system that provides the right care, 
at the right time, at the right level, and we need health 
insurance that covers it.
    We don't need health insurers who cherry pick or health 
insurance that shortchanges its enrollees.
    Underinsurance is a promise half-fulfilled, and when it 
comes to the health of our children, our parents, and 
ourselves--when it comes to the health of Denny and Debbie 
Byers of Columbus, OH--half-way is not good enough.
    Thank you for holding this hearing, Mr. Chairman. I look 
forward to hearing from our witnesses.
    [Whereupon, at 11:27 p.m. the hearing was adjourned.]

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