[Senate Hearing 111-974]
[From the U.S. Government Publishing Office]
S. Hrg. 111-974
HEALTHCARE REFORM ROUNDTABLE (PART I)
=======================================================================
HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
ON
EXAMINING HEALTH CARE
__________
JUNE 11, 2009
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
EDWARD M. KENNEDY, Massachusetts, Chairman
CHRISTOPHER J. DODD, Connecticut MICHAEL B. ENZI, Wyoming,
TOM HARKIN, Iowa JUDD GREGG, New Hampshire
BARBARA A. MIKULSKI, Maryland LAMAR ALEXANDER, Tennessee
JEFF BINGAMAN, New Mexico RICHARD BURR, North Carolina
PATTY MURRAY, Washington JOHNNY ISAKSON, Georgia
JACK REED, Rhode Island JOHN McCAIN, Arizona
BERNARD SANDERS (I), Vermont ORRIN G. HATCH, Utah
SHERROD BROWN, Ohio LISA MURKOWSKI, Alaska
ROBERT P, CASEY, Pennsylvania TOM COBURN, M.D., Oklahoma
KAY R. HAGAN, North Carolina PAT ROBERTS, Kansas
JEFF MERKLEY, Oregon
SHELDON WHITEHOUSE, Rhode Island
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
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STATEMENTS
THURSDAY, JUNE 11, 2009
Page
Dodd, Hon. Christopher J., a U.S. Senator from the State of
Connecticut, opening statement................................. 1
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming,
opening statement.............................................. 4
Prepared statement........................................... 5
Flowers, Margaret, M.D., Maryland Co-Chair, Physicians for a
National Health Program, Chicago, IL........................... 8
Prepared statement........................................... 9
Williams, Ronald A., CEO, Aetna, Inc., Hartford, CT.............. 21
Prepared statement........................................... 23
Johnson, Randel K., Vice President for Labor, Immigration, and
Employee Benefits, U.S. Chamber of Commerce, Washington, DC.... 25
Prepared statement........................................... 26
Dennis, William J., Jr., Senior Research Fellow, National
Federation of Independent Business, Washington, DC............. 29
Prepared statement........................................... 30
Andrus, Mary, Co-Chair of The Health Care Task Force, Consortium
for Citizens with Disabilities, Washington, DC................. 31
Prepared statement........................................... 32
Rosman, Samantha, M.D., Board of Trustees, American Medical
Association, Chicago, IL....................................... 35
Prepared statement........................................... 35
Scheppach, Raymond C., Ph.D., Executive Director, National
Governors' Association, Washington, DC......................... 38
Prepared statement........................................... 39
Shea, Gerald, Assistant to the President, AFL-CIO, Washington, DC 43
Prepared statement........................................... 44
Rivera, Dennis, Chair, SEIU Healthcare, SEIU, Washington, DC..... 48
Baicker, Katherine, Professor of Health Economics, Harvard School
of Public Health, Boston, MA................................... 49
Prepared statement........................................... 50
Gruber, Jonathan, Ph.D., Associate Head, MIT Department of
Economics, Cambridge, MA....................................... 56
Prepared statement........................................... 57
Trautwein, Janet Stokes, Executive Vice President and CEO,
National Association of Health Underwriters, Arlington, VA..... 62
Prepared statement........................................... 63
Praeger, Sandy, Kansas Insurance Commissioner, Topeka, KS........ 69
Gottlieb, Scott, M.D., Resident Fellow, American Enterprise
Institute, Washington, DC...................................... 71
Prepared statement........................................... 72
(iii)
Steve Burd, President and CEO, Safeway, Inc., Pleasanton, CA..... 74
Harkin, Hon. Tom, a U.S. Senator from the State of Iowa.......... 79
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah...... 82
Mikulski, Hon. Barbara A., a U.S. Senator from the State of
Maryland....................................................... 84
McCain, Hon. John, a U.S. Senator from the State of Arizona...... 87
Bingaman, Hon. Jeff, a U.S. Senator from the State of New Mexico. 90
Sanders, Hon. Bernard, a U.S. Senator from the State of Vermont.. 93
Alexander, Hon. Lamar, a U.S. Senator from the State of Tennessee 97
Casey, Hon. Robert P., a U.S. Senator from the State of
Pennsylvania................................................... 100
Merkley, Hon. Jeff, a U.S. Senator from the State of Oregon...... 103
HEALTHCARE REFORM ROUNDTABLE
(PART I)
----------
THURSDAY, JUNE 11, 2009
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 3:09 p.m. in Room
216, Hart Senate Office Building, Hon. Christopher J. Dodd,
presiding.
Present: Senators Dodd, Harkin, Mikulski, Bingaman,
Sanders, Casey, Merkley, Enzi, Isakson, McCain, Alexander, and
Hatch.
Opening Statement of Senator Dodd
Senator Dodd. The committee will come to order.
Let me thank all of you for being here and I apologize for
being a couple minutes late. We just finished a vote for the
Senate, let me thank my colleagues, as well, for those who are
supportive of that last effort. It's a long time coming and no
one, more than I do, wishes that Senator Kennedy was sitting in
this chair and banging down that gavel. He has a great
relationship with every member of this committee and we all
wish him the very, very best, the speediest of recoveries, and
the hopes that he'll be back in this chair with this gavel in
his hand before this process is over.
I want to thank my colleague from Wyoming, thank him for
his support on this last vote we had on the tobacco issue, an
historic moment that we're finally going to be able to regulate
and control tobacco products which may be one of the major
steps we can make in prevention and healthcare and begin to
reduce the number of children who start smoking every day, the
3,000 to 4,000 that begin that habit.
I don't ever recall in my 29 years in this committee having
a panel this large. I thought you were the audience when I
walked in with this many people, but obviously we have a lot of
ground to cover and so I want to be very brief in my opening
comments, turn to my colleague from Wyoming for any opening
comments he wishes to make, and then I'll introduce our
witnesses, and we'll begin the process of hearing from each of
you about this most important issue.
As Mike Enzi has said and I'm sure he may repeat it again,
but it deserves being said by all of us, I don't know of
another issue that any of us either have dealt with or will
deal with that will have an impact on every one of our citizens
in this country.
There are other issues that are huge and cover an awful lot
of people, but this one touches 100 percent of Americans and
every business, every consumer, every provider, as well, and so
it's important we get this right. I'm very conscious of that,
the magnitude of the job in front of us, to work in concert
with the Finance Committee, Senator Max Baucus and Senator
Chuck Grassley. I'm determined to achieve that same sense of
comity and civility in this committee that's been a hallmark of
the success in the past, to sit with each other, to listen to
each other in these coming days as we try to fashion a product
that all Americans can be proud of.
That doesn't mean there won't be differences that we'll
have to confront and deal with, but to the extent we can work
with each other and achieve the common ground and unanimity on
many issues that I believe we can, we can make major steps
forward in the achievement of the healthcare reform that I
think all of us are so anxious to achieve.
Let me begin, as I said a moment ago, that there is no one
who wishes our dear friend Ted Kennedy was sitting at this
gavel more than I do. Many of us have been preparing for this
moment for a long time but none longer than the chairman of
this committee. Four decades, at least, he's been an advocate
of healthcare reform.
Reforming our system so that every American has access to
affordable, high-quality healthcare has been the cause of his
life. He's been a leader on this issue for 40 years and he
continues to be a leader in so many different ways and that
doesn't depend upon location per se.
Today, we address an issue that affects, as I said, 100
percent of our fellow citizens. For far too many Americans, the
costs are too high, the quality of care is inadequate, and too
many of our citizens, one in every six, have no health
insurance at all, and in today's economy, too many of our
families find that the cost of healthcare puts stress on a
family budget, to put it mildly.
We spend more than $2 trillion on healthcare each and every
year in our Nation, more than 18 percent of our Gross Domestic
Product. By the year 2040, we're told by many experts, 34 cents
of every dollar we spend could be on healthcare. That is not
simply unacceptable, I hope, to all of us, it's unsustainable
and therefore the sense of urgency that we share about this
moment.
Premiums and out-of-pocket costs for individuals and
families alike continue to skyrocket. In my home State of
Connecticut, healthcare costs have shot up 42 percent in the
last 8 years and today there are 322,000 people in my State
that lack insurance.
It is wrong that so many families in any State and across
our country go to sleep at night wondering what they will do if
their children get sick or how they'll care for an ailing
parent. It's a worry that we all can share from time to time.
Over the last few months, I have held town hall meetings,
as many of my colleagues have, throughout my State. Ron
Williams, by the way, of Aetna was a panelist at one of them
and I thank him immensely. He's the CEO of a major insurance
company, and he was there, listening to the concerns of people
in Connecticut.
At one event in Connecticut, I met a mother terrified about
what losing her health insurance could mean for her disabled
toddler's future. At another, I spoke with a cancer survivor
who now pays as much for her healthcare as she does for the
mortgage on her home because her husband passed away from
leukemia and she's lost her employer-sponsored health
insurance.
In fact, more than half of the families that go through
bankruptcy in our country say that healthcare costs have
contributed to putting them there. That's not the America we
should be. I share and I believe that all of us share that
goal.
We know that health reform is a difficult issue. If it were
easy, we would have reformed our country's healthcare system
years ago to assure quality affordable health coverage for all
Americans, but we owe it to our citizens to bring about the
change they need so desperately and finally today we have a
president who has made it a priority, and a Congress who's
poised to act.
If there is no other message out of today's hearing, it
should be this: we will act to cut the skyrocketing costs of
healthcare to our healthcare system, and we will at long last
make quality affordable health insurance available to every
man, woman and child in the United States of America.
Our goal is to protect people's choice of doctors, their
choice of hospitals and of insurance plans, reduce the costs
for families, businesses and government, and to assure
affordable high-quality healthcare for every one of our
citizens.
Our goal is also to strengthen what works and to fix what
doesn't. If you like the insurance you have today, you should
be able to keep it. If you don't like what you have today,
we'll give you a better choice, including a public option for
healthcare.
No longer will a pre-existing condition, such as a heart
attack, cancer or even being the victim of domestic violence,
prevent you from obtaining insurance. No longer will costs be a
barrier to coverage.
Our approach will be to offer affordable options for
Americans struggling under the skyrocketing costs of
healthcare.
We have proposed a piece of legislation that we think will
accomplish this great purpose. This is the first committee in
Congress that will act on this important goal and as every
single American will be affected by what we do in the coming
weeks, we want to hear from a great variety of Americans on
their views of how best to meet those goals and so we look
forward to hearing from our witnesses today and witnesses
tomorrow, as well, but even more importantly, we look forward
to enacting real healthcare reform, that we'll be able to say
to our citizens that we've advanced the cause of healthcare for
every single American in our Nation. Delay or inaction is
simply not an option for any of us. Healthcare reform cannot
and must not wait.
With that, again I thank my colleagues, and the staff, for
the tremendous amount of work that's already been done over the
past many months on this issue. This is not the first time that
we've gathered and our determination again is to work together
and achieve, if we can and I believe we can, a strong
bipartisan piece of legislation.
With that, let me turn to Senator Enzi.
Opening Statement of Senator Enzi
Senator Enzi. Thank you. I have a full statement that I'd
like to have put in the record.
But I want to reserve as much time as possible for the
roundtable and I do want to make some comments, besides what I
have down here.
I know all of you have been asked to take a look at the
bill that we're marking up and that kind of disturbs me. You
know, you can't have a bipartisan bill that's written by one
side and that's what it is.
We've been having a walk-through and I thank the Senator
from Connecticut, Senator Dodd, for the tremendous way that
he's working with us, so that we have an opportunity to look at
options from everybody.
I have been working on this for several years. A couple of
years ago Senator Kennedy and I sat down and listed out some
principles and then because higher education was a very high
priority and he dedicated most of his time to that, I collected
ideas from both sides of the aisle to come up with a way that
we could take care of everybody with healthcare. I called it a
10-step plan and I did 10 stops in Wyoming and promoted it and
learned a lot more from that part of the process, as well, and
I'm not the only one that's been working on that.
A lot of other people have put together proposals and all
of those need to be considered. I have worked on a lot of bills
with Senator Kennedy and with Senator Dodd. I have never worked
on one that was as comprehensive as this one. This one will
affect every single American. This will affect every business,
every provider and every consumer.
We've never had a bill with so many moving parts and they
have to be there in order to take care of the goal that we've
set and I think both sides of the aisle have that goal of
taking care of every American. How we get there, there's some
differences on that, and our walk-through is pointing out some
of those differences, some of the alternative ideas, and we've
had some agreement through that process.
In fact, I find it to work a lot better than the normal
mark-up process where you have to put up a certain amendment
and then you can argue about pieces of the amendment or the
whole amendment and vote them up or down.
This is a lot more constructive where staff have a chance
to work on some specific language apart from the concept that
we're doing and that's real important.
If we don't get this right, America will suffer. If we get
it right, it'll be a great thing and we do have an opportunity
to get it right. We shouldn't be subject just to time tables.
We should be subject to getting it right and that may take a
little bit longer, but I think it's important for us to do
that.
I'm anxious to hear your ideas, whether they are in the
bill or not. As you probably noticed, there are three major
sections that are blank and we will find out what's in those
later. Unfortunately, we have to have amendments in probably
Monday, and those are extremely critical and I understand the
reason that Senator Dodd left those out was because there is
some controversy over those and we need to have the time to put
them together. That's what we're all hoping we can have, and
that is some time to put it together.
[The prepared statement of Senator Enzi follows:]
Prepared Statement of Senator Enzi
Mr. Chairman, I firmly believe an ounce of prevention is
worth a pound of cure. Congress has a unique opportunity to
improve our health care system, but this bill misses the mark.
As the Senate's only accountant, and the only Senator to
serve on the HELP, Finance and Budget Committees, which share
jurisdiction over health care reform, I am concerned about the
vast amounts of wasteful spending in the health care reform
bill released by HELP Committee Democrats this week. This bill
will pave sidewalks, build jungle gyms, and open grocery
stores, but it won't bring down health care costs or make
quality coverage more affordable. In a time of record debt and
deficits, how can you justify the wasteful spending in this
bill?
I believe we should instead focus on rooting out the waste,
fraud and abuse that is driving up health care costs. Creating
a whole slew of new wasteful programs will indeed bend the cost
curve, but in the wrong direction.
Instead of providing mandatory spending on a vast array of
public health programs, we should provide the CDC with a
Director's fund, similar to the NIH common fund, which the
Director can use to set priorities. A Director's fund improves
CDC's planning, because the Director would have a consistent
funding source, and clear authority to set priorities.
I agree that we need to be able to target funding towards
specific public health issues, like obesity. But instead of
taking multiple attempts at trying everything we can think of,
we should be both more selective and more flexible in our
approach. Consolidating programs allows more funds to be used
on a bigger picture goal rather than small amounts of funds for
smaller goals. Targeting spending will result in better
outcomes because the experts with boots on the ground decide
how to spend the money, not politicians.
We should allow States to streamline all health promotion
and disease prevention funding to target the top 3 chronic
conditions that cost that State the most. This provides the
States with the flexibility to target their Federal grant
dollars on the most costly chronic conditions. Finally, while
States must be held accountable for spending Federal funds,
they cannot achieve programmatic goals with multiple mandates.
I believe we should be thinking and planning for the long
term, instead of praying for a quick fix and throwing money at
the problem in a knee-jerk reaction. For example, many chronic
health problems are caused by behavior, and are therefore
preventable. But changing behavior, whether it is quitting
tobacco, eating healthier, or exercising more, is one of the
hardest things to achieve. One way to tip the balance toward
change is to incentivize the behaviors we want to see. I think
we should be able to use the health care system to provide
incentives to keep people healthy, both on an individual level,
and on a system-wide level. Unfortunately, I don't see any of
that in the bill we are scheduled to mark up.
Some of the programs proposed in this bill may have value,
but this is the wrong bill and the wrong process. With our
Nation's health and economy at stake, this bill must not turn
into a Christmas wish list for every partisan interest group in
Washington. I urge my colleagues to reconsider this scattershot
approach and work with me to tackle our biggest health problems
in a targeted, prioritized way.
Thank you.
Senator Dodd. And we will do that. Let me just say to
Senator Enzi and our colleagues, the goal is obviously to spend
some time not only with you today listening to your thoughts
and ideas on all of this and then tomorrow with another panel.
This evening we will go back to our walk-through again as we
listen to Senator Mikulski, who's got some thoughts, as well as
Senator Murray, on the workforce issues and quality issues, and
to revisit these other questions that have come up. As Senator
Enzi pointed out, we left a couple of these sections blank very
simply because they are controversial. Rather than trying to
write something that could be seen as almost confrontational, I
tried just to deal with the issues where I think there is at
least some unanimity around purpose.
There are obviously differences in how to achieve those
purposes. We will continue in that vein and my hope is that we
can eliminate a lot of the dissent in certain areas, achieve a
common language, and then in those areas where we can't, we
will have to engage in that kind of a debate. Our purpose is to
try and achieve as much bipartisanship as we possibly can in
this effort.
Let me begin by thanking our witnesses. You are all very
gracious to be here. A lot of you spent a lot of time on these
issues and I want to introduce you all very briefly. My
introductions of you will not do justice to your careers and
your background and the experience you've brought to the
positions you are in.
Dr. Margaret Flowers is a Maryland pediatrician, represents
Physicians for a National Health Program where she has
tirelessly advocated the benefits of a single-payer system, and
we thank you very much, Doctor, for being with us.
I have already mentioned Ron Williams, the CEO of the Aetna
Insurance Company, where he has focused on innovation and
industry to improve access and affordability. I mentioned he's
attended one of my very well-attended town hall meetings--700
people at one, 500-600 at others--as an insurance company
executive to listen to people and respond to their concerns.
Mental health parity was one issue which Aetna took a
leadership role on and again Senator Kennedy was a champion of
that issue, but Aetna played a very constructive role in that,
Ron.
Publicly, I want you to know how much we appreciate the
efforts your company made in that regard.
Randel Johnson is the Vice President of Labor, Immigration,
and Employee Benefits at the U.S. Chamber of Commerce, and is
primarily responsible for employee benefits issues pending
before the Congress and Federal agencies. We thank you, as
well, for being with us.
Mr. William Dennis is a Senior Research Fellow at the
National Federation of Independent Businesses, and he can
provide insight on key healthcare issues that affect small
business and that's been a major subject of our conversations.
So we thank you, as well.
Mary Andrus is the Co-Chair of Health Care Task force with
a Consortium for Citizens with Disabilities as well as Vice
President for Government Relations at Easter Seals and has been
a strong advocate throughout this process for individuals who
face extra challenges.
Dr. Samantha Rosman is a member of the American Medical
Association's Board of Trustees, has been a relentless
physician advocate, even during medical school, for healthcare
access to all, and we thank you, as well, for being with us.
Ray Scheppach--is that how you pronounce that? Ray
Scheppach is the Executive Director of the National Governors'
Association, has expertise in State and Federal budgets as they
relate to healthcare policy, very important issue for us, as
well.
Dennis Rivera. Where is Dennis? Dennis, good to see you.
He's a good friend, is chair of the Healthcare at SEIU, has
worked tirelessly for the United Healthcare Workers in an
effort to fix our Nation's broken system.
Dr. Katherine Baicker--did I pronounce that correctly--is a
Professor of Economics at Harvard University School of Public
Health where her research focuses on the effectiveness of
public and private health insurance.
Dr. Jonathan Gruber is the Professor of Economics at MIT
and has been appointed to the Board of the Massachusetts
Insurance Connector. I have been talking about Massachusetts a
lot over the last 7 or 8 hours as we have asked questions all
the time about how are things working in Massachusetts. We
appreciate your presence here today.
Janet Trautwein, as well, is the CEO and Executive Vice
President of the National Association of Health Underwriters
and has a particular expertise in issues related to the
uninsured, long-term care, and high-risk pools.
Commissioner Sandy Praeger. Commissioner, we thank you for
being with us. Ms. Praeger is the Commissioner of Insurance in
the State of Kansas, has been responsible for regulating all
insurance sold in Kansas which includes overseeing nearly 1,700
insurance companies and 90,000 licensed agents. Is it a
requirement to have white hair to be in Kansas? Kathy Sebelius,
our new----
Ms. Praeger. [Off microphone.]
Senator Dodd. Well, I love to see younger people with white
hair. I have a bias.
Scott Gottlieb is a practicing physician and Resident
Fellow at the American Enterprise Institute, has served as a
senior policy advisor at CMS, and we thank you very much.
And closing out, I missed--oh, I'm sorry. Gerald Shea, AFL-
CIO. Gerald, I apologize. Where are you? There you are. I
apologize. I went right by you. Thank you. I apologize. Thank
you for being with us.
Closing our first panel is Steve Burd--we heard from him at
lunch today, the Democrats did--who is the Chairman, President
and CEO of Safeway, and incidentally, as I mentioned at lunch
with the Democrats today in our Policy Committee lunch, left a
very strong impression about what he's been able to do at
Safeway, and thank you for being here with us, and we're
anxious again to hear you today in this panel. Thank you,
Steve, very much.
I'm going to ask you to keep opening statements brief, if
you would. I know many have supporting documents. Let me say to
all my colleagues, any opening statements, comments, supporting
material will be included in the record and that includes our
witnesses, and so we begin with you, Doctor, and again thank
you for joining us.
STATEMENT OF MARGARET FLOWERS, M.D., MARYLAND CO-CHAIR,
PHYSICIANS FOR A NATIONAL HEALTH PROGRAM, CHICAGO, IL
Dr. Flowers. Thank you, Senator Dodd and to the other
Senators, for inviting me to speak to you today.
I speak on behalf of the majority of people living in
America who desire a national health program. For decades,
healthcare providers have struggled to provide care in an
increasingly-difficult environment and it is taking a toll.
Doctors are leaving practice, refusing to accept health
insurance, and there's a new category of physicians, disruptive
physicians, who are expressing the dysfunction of a healthcare
situation that places obstacles between them and the treatment
of their patients.
The greatest obstacle is the private health insurance
industry. This industry detracts from the health of our Nation
rather than adding value to it.
We have reached a point in American history which allows us
to finish what President Franklin Delano Roosevelt set out to
accomplish almost 75 years ago with the Social Security Act, a
national health system.
The lack of a coordinated and comprehensive nonprofit
national health system sets us apart from other industrialized
nations and we're seeing the results in increased costs and
poor health outcomes.
For decades, reliance on the market and efforts to patch
together a system using a public and private mix has failed to
guarantee quality healthcare to all Americans. This reliance on
the market dates back to the 1960s when there was a strong
belief that America was so different from the other nations
that our unique American market would solve our healthcare
problems. We were wrong then and it's disappointing to see us
continue to cling to this idea. This is not the time for more
tinkering.
The healthcare market has allowed private health insurers
to rake in obscene profits while nearly 50 million Americans
lack health insurance and tens of millions more are
underinsured. We are ranked the worst out of 19 industrialized
nations in terms of preventable deaths which means a 101,000
preventable deaths in this country every year.
Healthcare in our country is already rationed based on
ability to pay. Patients are waiting months to get in to see
their doctors and some of them never even make it through the
door. We provide little employment security, however we tie
health insurance to employment. When people are most
vulnerable, they are least protected.
In what other country do patients hold bake sales in order
to pay for life-saving treatment? What other industrialized
Nation allows millions of people to go into bankruptcy due to
medical debt every year?
In 1809, Thomas Jefferson said, ``The care of human life
and happiness, not their destruction, is the legitimate
responsibility of good government.''
We have a moral imperative to create a health system that
provides healthcare to all people, and I want to emphasize
care, not insurance. The plan being put forth at present may be
considered to be politically expedient but it will not address
the fundamental problems in America today.
We need to have a full, open and honest discussion and I'm
thankful for the opportunity to start that today. However, here
are many experts who could help in the deliberations of this
and I hope that we'll have a hearing on the topic of a national
health program based on single-payer financing.
The price we are paying for the profit-driven healthcare
market is the squandering of our economic, mental and physical
health as a Nation. The market is the wrong model. Healthcare
is not a commodity. It is a human right.
We must ask ourselves as we go through this process of
reviewing health legislation today what are the results that we
want to see. We consider success to be health security which
means that every person will wake up knowing that if they need
healthcare, they can get it, plain and simple, because it is
their right and not their privilege.
Thank you.
[The prepared statement of Dr. Flowers follows:]
Prepared Statement of Margaret Flowers, M.D.
Dear Chairman Kennedy and Senators, thank you for inviting me to
speak to you today from the perspective of a physician and activist. I
am a pediatrician with experience both as the director of a hospitalist
program and chair of pediatrics at a rural hospital and in community-
based private practice. I am currently co-chair of the Maryland chapter
of Physicians for a National Health Program (PNHP). PNHP has over
16,000 members nationwide. I also sit on the steering committee of the
Leadership Conference for Guaranteed Health Care/National Single Payer
Alliance which represents over 20 million people nationwide. I know
that today I am speaking on behalf of the majority of people living in
America who desire a national health program.
For several decades now we have seen the health care situation in
this country deteriorate. Health care providers have struggled to
provide care in this increasingly difficult environment and it has
taken a toll. We are seeing doctors, like myself, leaving practice,
doctors who are refusing to accept health insurance and a new category
of doctors, disruptive physicians. These demoralized physicians who
become angry with their staff or patients are expressing the
dysfunction of a health care situation that places obstacles between
them and the treatment of their patients. The greatest obstacle is the
private health insurance industry. This industry detracts from the
health of our Nation rather than adding value.
We have reached a unique point in American history and we have an
opportunity for real health care reform. The economic downturn, the
millions of Americans who can't get needed care and the election of a
President who understands that health care is a human right place us in
the position to finish what President Franklin Delano Roosevelt hoped
to accomplish almost 75 years ago in the Social Security Act: a
national health system. The lack of a coordinated and comprehensive
national health system sets us apart from the other industrialized
nations and we see the results in markedly increased costs and poor
health outcomes.
Current expectations are high. People are craving change. For
decades, reliance on the market and efforts to patch together a system
using a public and private mix have failed to guarantee quality health
care to every person in America. The reliance on the market dates back
to the 1960s when there was a strong belief that America was so
different from the other nations that our uniquely American market
would solve our health care problems. We were wrong then and it is
disappointing to see us continue to cling to this idea. This is not the
time for more tinkering. We cannot continue this Ponzi scheme of health
insurance bailouts. This is the time to step back and look at the big
picture.
The health care market has produced a situation in which private
health insurers rake in obscene profits while nearly 50 million
Americans lack health insurance, and tens of millions more with
insurance still cannot afford the care they need. We are ranked the
worst of 19 industrialized nations in terms of preventable deaths, over
101,000 each year. We have the highest infant and maternal mortalities.
Health care in our country is already rationed based on ability to pay,
even for those with insurance. Patients without insurance or with bare
bones insurance may have to wait months to see a doctor, and many
patients never even make it through the door. We provide little
employment security compared to other nations, yet we tie health
insurance to employment. As a result, when people have to stop working
due to an illness or when a recession causes them to lose their jobs,
they lose their health insurance as well. In other words, when people
are most vulnerable, they are the least protected. In what other
country do people hold bake sales to pay for lifesaving treatments?
What other country allows millions of people to go into bankruptcy
because of medical debt? Almost two thirds of bankruptcies are related
to illness or medical bills in this country. Shockingly, over three
quarters of those who go bankrupt had health insurance at the start of
their illness.
In 1809, 200 years ago, Thomas Jefferson said, ``The care of human
life and happiness, not their destruction, is the legitimate
responsibility of good government.'' It is time to end the destruction
of human life in this Nation. We have a moral imperative to create a
health system that provides health care to all people. Senator Kennedy,
I know that you and others who are seated here today understand this
and hold this same belief.
The briefing paper put forth by this committee contains reform
ideas that would improve health outcomes if they were part of a
national system. However, the current reforms will not reach the goals
of providing affordable high quality care for all people in America.
These reforms will not be universal and will increase health care
costs. I have outlined the reasons for this in my submitted testimony.
The plan being put forth at present may be considered to be
politically feasible, although I question even that. It will not be
practically feasible in that it will not address the fundamental
problems in America today. In order to create a national health system
that improves health, we need to have a full, open and honest
discussion about it. I am thankful that we will start this discussion
today. However, there is much to be considered and many people who can
provide you with the data that you need in order to have a full
deliberation about a national health program based on single-payer
financing. The LCGHC respectfully requests that your committee and the
Senate Finance Committee hold a joint hearing on the merits of a
national single-payer health system in order to accomplish this. Also,
we request that the Congressional Budget Office score a single-payer
bill, either S. 703 or H.R. 676, against any other reform proposals.
The market has been very successful in providing enormous income to
the few who administer and invest in the health industry. The price we
pay for this is the squandering of our economic, mental and physical
health as a nation. The market has failed to improve health and control
costs because it is the wrong model. Health care is not a commodity, it
is a human right. The United States signed the Universal Declaration of
Human Rights in 1948. The other industrialized nations who have
followed this human rights approach spend less and have better
outcomes.
We must ask ourselves, as we go through this process of reviewing
health legislation today, what are the results that we want to see?
Will we continue down this path that has failed us for decades? Will we
continue to fear the power of the medical-industrial complex? Or will
we grasp this opportunity for real change? Will we create a health
system based upon these few principles: that everybody has access to
the same standard of care, that there are no financial barriers to care
or financial consequences as a result of getting needed care and that
medical decisions are made by patients in consultation with their
medical providers based upon what is best for the patient rather than
what they can afford? Will we provide health security, as embodied in
the American Health Security Act of 2009, so that every person will
wake up in the morning knowing that if they need health care, they can
get it, plain and simple, because it is their right and not a
privilege?
COMMENTS ON THE LEGISLATIVE BRIEFING PAPER
The proposed reform is based on the belief that all we need to do
is strengthen what works and fix what doesn't. While this sounds
simple, it amounts to tinkering with a failed system rather than
stepping back and looking at the root problems and addressing them. It
is akin to continuing to add transmission fluid when what you really
need is an overhaul. It isn't sustainable.
The reason that the reform is becoming so complex is because we
refuse to stop and examine what it would take to create a health
system. Instead, we are trying to apply a case of band aids to hold a
failing health hodgepodge together. We will add bureaucracy, regulate
and throw money at the private insurance industry in the hope that we
can get it to act the way traditional Medicare already acts. There is
no evidence to show that this will be successful and much evidence to
show that it will fail. Are we willing to continue to allow thousands
of Americans to die while we try this experiment? Is that morally right
when we have a proven solution that will not only provide care to each
person and prevent death, but will also save money? The solution is to
create a national health system that is coordinated and comprehensive
and that is based on single-payer financing. It is the only fiscally
responsible solution. The solution is health care, not health insurance
coverage. The solution is everybody in and nobody out. It is that
simple.
President Obama said recently that we should make health insurance
affordable, but exempt those who can't afford it. He also said that
employers should have to share in the cost of health care, but that
small businesses should also be exempt. We know that for 80 percent of
the uninsured, the head of the household is employed, predominantly in
small business. So we must ask what this would really accomplish. These
exemptions mean that many of those who are currently left out will
continue to be left out. This is not a solution.
The President also stated that ``pouring money into a broken system
only perpetuates its inefficiencies.'' Yet, pouring money into a broken
system is exactly what is being proposed. As long as there is a
multipayer system, even one that includes a ``public option,'' there
will be the added costs of determining who is eligible for which plan,
who gets subsidies, who can go where and receive what treatment, who
pays co-pays and deductibles and what happens if you lose your job or
move. There are also the added costs of billing and regulating multiple
insurers. A single health system will greatly simplify administration
and will allow transparency and public accountability. A single health
system will allow everybody to receive care and may not even mean any
increased spending, according to the Congressional Budget Office and
General Accountability Office.
I would like to discuss these revised legislative priorities:
1. Assure a single standard of high quality and affordable health
care to all people in America.
2. Improve quality of health care by removing financial barriers to
care so that patients can seek care early in their illness and receive
needed treatment and simplify the administration/reimbursement of
health care so that patients and providers spend less time on paperwork
and authorization and more time discussing care.
3. Build a public health system that promotes wellness and
prevention.
4. Create a durable structure of long-term supports and services
for all people who need them.
5. Prevent fraud and abuse.
6. Remove financial consequences such as bankruptcy from medical
debt and establish a progressive method of financing health care.
Assure a single standard of high quality and affordable health care
to all people in America.
There are people who have health insurance and like it. However, no
person with health insurance in America has health security. That is
why even well-insured Americans who face job loss will lose their
health insurance and may find themselves uninsurable. And that is why
even those who are satisfied with their insurance are finding their
ability to pay for it unsustainable. So one would ask, why the fact
that they like their insurance means that we should build a system
around it. There are people who like to drive without wearing
seatbelts, but that didn't stop us from passing seatbelt laws because
the evidence shows that it saves lives.
Americans often believe that they are well-insured, until they
actually need to use their insurance and then encounter the
complexities of it and the restrictions. The majority of people have
low healthcare needs. In fact, 80 percent of the population is
relatively healthy and hasn't faced the difficulties of navigating the
health insurance maze.
What Americans want is their choice of health provider and choice
of treatment, not a choice of health insurance plan. Nobody is able to
look at the different health plans and choose one that is ``right'' for
them because health needs can change unpredictably. That is why one
plan that covers all medically necessary care is the ``right'' plan. It
is there when you need it and allows the patient to choose their
medical provider and facility and to choose their treatment without
interference from insurance administrators. A national health plan
allows people to wake up in the morning and know that if they need
health care that day, they can get it simply without having to search
through provider networks and without waiting on the phone to get
preauthorization for care.
The idea of adding a health insurance exchange adds cost (4 percent
to every premium in Massachusetts) and perpetuates the idea that people
can find the ``plan that is right for them.'' And the idea of
regulating insurance companies so that they will actually do what they
are supposed to do, adds cost and administrative complexity. And, based
on recent experience, regulation of health insurance companies is
likely to fail to change their behavior.
The current private health insurance business model in the United
States is designed to create profit by collecting premiums and
restricting and denying care. Changing our for-profit and ``not-for-
profit'' insurers into social insurance agencies, like there are in
Europe, would require a radical amount of regulation and oversight.
This seems like a lot of waste in order to preserve an entity that adds
no value to health care.
Rather than adding expense in the form of regulation and an
exchange, we could save an estimated $350 billion on administrative and
non-healthcare costs by creating a national single-payer system. These
dollars would be applied to the delivery of actual health care.
It was stated in the briefing paper that the public plan being
proposed is necessary because it will provide fiscal discipline and
full accountability. Private health insurance must be removed from the
national health system because it has raised costs and been abusive to
patients and providers for too long without accountability.
Improve quality of health care by removing financial barriers to
care so that patients can seek care early in their illness and receive
needed treatment and simplify the administration/reimbursement of
health care so that patients and providers spend less time on paperwork
and authorization and more time discussing care.
Under a national health system, every person will receive a medical
card that they have for life. The card is accepted at every facility so
that no matter where a person is (at home or traveling), they can get
health care.
There are multiple benefits to creating a national single-payer
health plan:
Every person has guaranteed care from the time that they
are born until they die.
There are no gaps or cracks to fall through so that care
can be continuous.
Patients can have a medical home because they will no
longer be forced to change their doctor simply because they changed
jobs, their employer changed plans or the plan changed its network.
Out-of-pocket spending is reduced so that patients can get
needed care. Currently about 53 percent of Americans delay getting care
or filling prescriptions because of the cost. Multiple studies show
that co-pays and deductibles usually lead Americans to make choices
that are bad for their health.
Health care costs are predictable and transparent for
individuals, businesses, providers and facilities. Medical bankruptcies
will end. Businesses, providers and health facilities will be able to
devote their time and resources to doing what they do best: growing
their businesses and taking care of patients.
Medical decisions are made by the people who have received
medical training rather than faceless insurance administrators who are
looking at a computer screen rather than a patient. The doctor-patient
relationship will be restored and improved as both work together to
promote health.
Patient privacy will be restored because administrators
will not have access to clinical records in order to find pre-existing
conditions that can be used to deny payment for care.
Fewer providers will leave clinical practice and fewer
providers will become disruptive under a system that is simpler to use
and allows them to practice their medical skills.
Public policy will be directed towards policies that
improve health because there will be an incentive to invest in the
health of the population being served by the system. It improves health
outcomes and increases public approval.
Build a public health system that promotes wellness and prevention.
When every person is in the same plan, there is greater incentive
to make it a high quality plan. At present, people who have low incomes
are sometimes able to receive Medicaid, but across the United States,
the quality of care under Medicaid is substandard. There is a saying
that ``a program for the poor is a poor program.'' And this is
unacceptable. We cannot be healthy as a nation if there are disparities
in access to care. Unfortunately, health disparities in the United
States are increasing, especially for those with chronic disease.
Wellness will increase because care can be coordinated more easily
when all providers are in the same network, similar to the way care is
coordinated in the VA system. There is improved communication and less
duplication of tests and treatments.
Under a national system, there will be a large database of health
information that can be used to determine best practices and to
allocate health resources to areas that need them.
Rather than wasting billions of dollars on administration, profits
and marketing, we can use those dollars for public health education and
prevention efforts.
The Federal Prevention and Public Health Council will be a valuable
part of a national health system.
Create a durable structure of long-term supports and services for
all people who need them.
There is certainly a need for people in the United States to
receive supports and services so that they can be productive members of
society and lead high-quality lives. The idea of a debit card that can
be used to pay for these services will be greatly simplified under a
national health system that is transparent and accountable.
The idea to retain a role for private insurance in long-term
supports and services is questionable. One must ask why private
insurance, which adds cost without adding value, is necessary. And one
must also question why there would be a policy of requiring payment
into the system for a number of years before receiving benefits. Our
goal should be to meet the needs of everyone, not to exclude people.
Such exclusions lead to poorer outcomes and less productive and
satisfied lives.
Prevent fraud and abuse.
It is true that for any system, there must be a method to reduce or
prevent fraud and abuse. A national health system will be transparent
and held accountable, which will facilitate this process. The incentive
for fraud and abuse decreases when the business model changes from the
creation of profit to the provision of care.
Under a multipayer system, a new bureaucracy will need to be
created in order to investigate fraud and abuse. This will add more
cost and will be of questionable effectiveness. Despite current
regulation of health insurers, it is difficult to discover and
prosecute their acts of fraud and abuse. We could have a series of
Senate hearings on the fraudulent and abusive practices of for-profit
insurers.
The solution is not more regulation. The solution is to remove
private insurers from involvement in paying for the provision of needed
health care and create a publicly funded and privately delivered health
care system.
Remove financial consequences such as bankruptcy from medical debt
and establish a progressive method of financing health care.
The position paper speaks of shared responsibility, which can be
translated to say that individuals must purchase health insurance. This
is in itself abusive and not the type of shared responsibility that
will improve our health outcomes and make us a better Nation.
To mandate that people purchase an over-priced product (private
health insurance) that will still leave them at risk of medical
bankruptcy if they become ill is cruel. It borders on extortion. In the
States that have previously mandated the purchase of health insurance,
such as Massachusetts, it has left people unable to afford health care
and has required them to keep their income below a certain level in
order to receive subsidies so they can afford insurance. More people
(86 percent of the uninsured and 37 percent of the insured) are
reporting difficulty affording health care in Massachusetts now than
they were before the reform (85 percent uninsured and 29 percent
insured).
In addition, the United States ranks 54th in the world for fairness
in financing of health care. Health care financing is very regressive,
with those of lower income paying a greater proportion of their income
for health care. Given the widening gap between the rich and the poor
in this Nation, this must change.
For years now, we have seen health insurers and employers shift
more of the cost of health care onto the individual in the form of
increased premiums, increased cost-sharing in payment for the premiums
and increased co-pays and deductibles coupled with restrictions and
caps on paying for care. The result is more uninsured people, more
medically bankrupt people, more people skipping needed care, more
people facing difficult choices of getting needed care or providing for
their family's needs and more people suffering and dying.
It is time to stop shifting the burden onto the individual for
health care that should be treated as a human right and part of the
social contract. Providing health care for the population is part of
the social infrastructure that exists in civilized nations.
The optimal form of shared responsibility is to create a single
publicly funded and privately delivered health care system in which
everybody participates based on their ability to pay (with exemptions
for those with the lowest incomes) and everybody receives the health
care that they need when they need it. This is how we will lift our
Nation out of poverty and become productive and healthy once again.
______
Attachment.--Medical Bankruptcy in the United States, 2007:
Results of a National Study
(By David U. Himmelstein, M.D.,* Deborah Thorne, Ph.D., Elizabeth
Warren, J.D., Steffie Woolhandler, M.D., MPH*
ABSTRACT
Background: Our 2001 study in 5 States found that medical problems
contributed to at least 46.2 percent of all bankruptcies. Since then,
health costs and the numbers of un- and underinsured have increased,
and bankruptcy laws have tightened.
* Department of Medicine, Cambridge Hospital/Harvard Medical
School, Cambridge, MA.
---------------------------------------------------------------------------
Methods: We surveyed a random national sample of 2,314 bankruptcy
filers in 2007, abstracted their court records, and interviewed 1,032
of them. We designated bankruptcies as ``medical'' based on debtors'
stated reasons for filing, income loss due to illness, and the
magnitude of their medical debts.
Department of Sociology, Ohio University, Athens.
---------------------------------------------------------------------------
Results: Using a conservative definition, 62.1 percent of all
bankruptcies in 2007 were medical; 92 percent of these medical debtors
had medical debts over $5,000, or 10 percent of pre-tax family income.
The rest met criteria for medical bankruptcy because they had lost
significant income due to illness or mortgaged a home to pay medical
bills. Most medical debtors were well-educated, owned homes, and had
middle-class occupations. Three quarters had health insurance. Using
identical definitions in 2001 and 2007, the share of bankruptcies
attributable to medical problems rose by 49.6 percent. In logistic
regression analysis controlling for demographic factors, the odds that
a bankruptcy had a medical cause was 2.38-fold higher in 2007 than in
2001.
Harvard Law School, Cambridge, MA.
---------------------------------------------------------------------------
Conclusions: Illness and medical bills contribute to a large and
increasing share of U.S. bankruptcies. 2009 Elsevier Inc. All rights
reserved. The American Journal of Medicine (2009) xx, xxx.
Keywords: Bankruptcy; Health care costs; Health economics.
As recently as 1981, only 8 percent of families filing for
bankruptcy did so in the aftermath of a serious medical problem.\1\
By contrast, our 2001 study in 5 States found that illness or
medical bills contributed to about half of bankruptcies.\2\
Since then, the number of un- and underinsured Americans has grown
\3\; health costs have increased; and Congress tightened the bankruptcy
laws.\4\
Here we report the first-ever national random-sample survey of
bankruptcy filers.
METHODS
We used 3 data sources: questionnaires mailed to debtors
immediately after bankruptcy filing; court records; and telephone
interviews with a sub-sample of debtors.
Sample Design
Between January 25 and April 11, 2007, we obtained from Automated
Access to Court Electronic Records, a list of all 118,308 bankruptcy
petitions filed in the United States. We excluded filings in Guam and
Puerto Rico, nonpersonal bankruptcies, and cases missing a name or
address. Within 2 weeks of their filings, we mailed introductory
letters to 5,251 randomly selected debtors; 275 were returned as
undeliverable. We then mailed self-administered questionnaires to the
4,976 debtors with valid addresses; 2,314 (46.5 percent) were completed
and returned; 124 were returned incomplete (2.5 percent) and 83 (1.7
percent) declined to participate; 2,455 (49.3 percent of those with
valid addresses) did not respond.
We compared court records (described below) of respondents with a
random sample of 99 nonrespondents. Nonrespondents resembled
respondents in income, assets, debts, net worth, market value of homes,
and history of prior bankruptcy.
Questionnaire
Introductory letters described the study and offered debtors the
option of obtaining a Spanish-language version of the questionnaire.
The questionnaire and $2 were mailed a few days later. Nonrespondents
received replacement questionnaires, another $2, and were invited to
respond via telephone or on-line. Subsequently, we offered
nonrespondents $50 to complete the questionnaire.
The questionnaire asked about demographics, health insurance and
gaps in coverage, occupation, employment, housing, and efforts to cope
financially before filing. It also asked about specific reasons for
filing for bankruptcy; the range of out-of-pocket medical expense
(none, $1-$999, $1,000-$5,000, or >$5,000); loss of work-
related income; and borrowing to pay medical bills. Finally, it asked
respondents if, for $50, they would be willing to complete a follow-up
interview.
Court Records
We obtained the public bankruptcy court records of respondents and
the sample of nonrespondents from the Federal court's electronic filing
system. Research assistants (mainly law students) abstracted each
record.
The court records included the chapter of filing, income, assets,
and debts outstanding at the time of filing. These records indicate the
creditor to whom money is owed, but not why the debt was incurred.
Telephone Interviews
There were 2,314 debtors who completed questionnaires, 2007 of whom
were willing to be interviewed. By February 2008, research assistants
had completed telephone interviews (in English or Spanish) with 1,032
of them; 69 debtors no longer wished to be interviewed. We were unable
to reach 906.
Interviewers collected additional detail about employment,
finances, housing, borrowing to pay medical bills, and whether medical
bills or income loss due to illness had contributed to their bankruptcy
(questions we used to verify written questionnaire responses from the
entire sample of 2,314 debtors).
The 1,032 telephone interviews identified 639 patients (debtors or
dependents) whose health problems contributed to bankruptcy; details
about medical expenses, health insurance, and diagnoses were obtained.
Two physicians grouped diagnoses into 14 categories.
Telephone survey participants resembled other respondents on most
financial and demographic characteristics. They were slightly older and
better educated.
Clinical Significance
62.1 percent of all bankruptcies have a medical cause.
Most medical debtors were well-educated and middle class;
three quarters had health insurance.
The share of bankruptcies attributable to medical problems
rose by 50 percent between 2001 and 2007.
Data Analysis
We used data from the questionnaires and court records to analyze
demographics, health insurance coverage at the time of filing, and gaps
in coverage.
The questionnaires were the basis for our 2001-2007 time trend
analysis. For this analysis, we replicated the most conservative
definition employed in the 2001 study, which designated as ``medically
bankrupt'' debtors citing illness or medical bills as a specific reason
for bankruptcy; OR reporting uncovered medical bills >$1,000 in the
past 2 years; OR who lost at least 2 weeks of work-related income due
to illness/injury; OR who mortgaged a home to pay medical bills.
Debtors who gave no answers regarding reasons for their bankruptcy were
excluded from analyses.
For all other analyses (i.e., those not reporting time trends) we
adopted a definition of medical bankruptcy that utilizes the more
detailed 2007 data. We altered the 2001 criteria to include debtors who
had been forced to quit work due to illness or injury. We also
reconsidered the question of how large out-of-pocket medical expenses
should be before those debts should be considered contributors to the
family's bankruptcy. Although we needed to use the threshold of $1,000
in out-of-pocket medical bills for consistency in the time trend
analyses, we adopted a more conservative threshold--$5,000 or 10
percent of household income--for all other analyses. Adopting these
more conservative criteria reduced the estimate of the proportion of
bankruptcies due to illness or medical bills by 7 percentage points.
To arrive at nationally representative estimates, we weighted the
data to adjust for the slight underrepresentation of respondents who
filed under Chapter 13 (bankruptcies with repayment plans). In
calculating mean out-of-pocket medical expenses from our telephone
interviews, we trimmed outliers at $100,000.
Chi-squared and 2-tailed t tests were used for univariate analyses.
We used forward stepwise logistic regression analysis on the 2007
cohort to assess predictors of medical bankruptcy and predictors of
home loss or foreclosure among homeowners. Finally, we performed
logistic regression using the combined 2001 and 2007 cohorts to examine
whether the odds of a bankruptcy being medical were higher in 2007 than
in 2001, after controlling for demographics, income, and insurance
status. SAS Version 9.1 (SAS Institute Inc., Cary, NC) was used for all
analyses.
Table 1.--Demographic Characteristics of 2314 Bankruptcy Filers and Comparison of Medical and Nonmedical Filers,
2007*
----------------------------------------------------------------------------------------------------------------
P Value
All Medical Nonmedical medical vs.
bankruptcies bankruptcies bankruptcies nonmedical
bankruptcies
----------------------------------------------------------------------------------------------------------------
Mean age.......................................... 44.4 years 44.9 years 43.3 years .01
Debtor or spouse/partner male..................... 44.5% 44.9% 44.3% NS
Married........................................... 43.9% 46.3% 40.1% .02
Mean family size--debtors + dependents............ 2.71 2.79 2.63 .02
Attended college.................................. 61.9% 60.3% 65.8% .02
Homeowner or lost home within 5 years............. 66.7% 66.4% 67.8% NS
Current homeowner................................. 52.3% 52.0% 53.2% NS
Occupational prestige score >20................... 87.3% 86.1% 89.8% .01
Mean (median) monthly household income at time of $2,676 $2,586 $2,851 .002
bankruptcy filing................................ ($2,299) ($2,225) ($2,478)
Debtor or spouse/partner currently employed....... 79.2% 75.5% 85.0% .001
Debtor or spouse/partner active duty (military or 19.4% 20.1% 18.4% NS
veteran).........................................
Market value of home (mean)....................... $147,776 $141,861 $159,145 .03
Mean net worth (assets--debts).................... ^$41,474 ^$44,622 ^$37,650 NS
----------------------------------------------------------------------------------------------------------------
* Bankruptcies meeting at least one of the following criteria: illness, injury or medical bills listed as
specific reason for filing OR uncovered medical bills >$5000 or >10 percent of annual family income OR, lost
; 2 weeks of work-related income due to illness/injury, OR depleted home equity to pay medical bills.
Human subject committees at Harvard Law School and The Cambridge
Health Alliance approved the project.
RESULTS
The demographic characteristics of our sample are shown in Table 1.
Most debtors were middle aged, middle class (by occupational
prestige),\5\ and had gone to college. Their modest incomes reflect the
financial setbacks common in the peri-bankruptcy period. Two thirds
were homeowners.
Compared with other debtors, medical debtors had slightly lower
incomes, educational attainment, and occupational prestige scores; more
were married and fewer were employed (reflecting more disability).
Medical debtors were older and had larger families. Although similar
proportions were homeowners, medical debtors' homes had 11 percent
lower market value. The average net worth was similar (and negative)
for medical and nonmedical debtors (^$44,622 vs ^$37,650, P >.05).
Medical Causes of Bankruptcy
Illness or medical bills contributed to 62.1 percent of all
bankruptcies in 2007 (Table 2).
Unaffordable medical bills and income shortfalls due to illness
were common; 57.1 percent of the entire sample (92 percent of the
medically bankrupt) had high medical bills, proportions that did not
vary by insurance status; 5.7 percent of homeowners had mortgaged their
homes to pay medical bills; 40.3 percent of the entire sample had lost
income due to illness; 95 percent of the lost-income debtors also had
high medical bills.
Data from the detailed telephone survey yielded confirmatory
results. When asked about problems that contributed very much or
somewhat to their bankruptcy, 41.8 percent of interviewees specifically
identified a health problem, 54.9 percent cited medical or drug costs,
and 37.8 percent blamed income loss due to illness. Overall, 68.8
percent cited at least one of these medical causes. An additional 6.8
percent had recently borrowed money to pay medical bills.
Insurance Status of Debtors and Dependents
Less than one quarter of debtors--whether medical or nonmedical--
were uninsured when they filed for bankruptcy; an additional 7 percent
had uninsured family members (Table 3). Medically bankrupted families,
however, had more often experienced a lapse in coverage during the 2
years before filing (40.0 percent vs 34.1 percent, P = .005).
Table 2.--Medical Causes of Bankruptcy, 2007*
------------------------------------------------------------------------
Percent of
all
bankruptcies
[In percent]
------------------------------------------------------------------------
Debtor said medical bills were reason for bankruptcy...... 29.0
Medical bills >$5,000 or >10 percent of annual family 34.7
income...................................................
Mortgaged home to pay medical bills....................... 5.7
Medical bill problems (any of above 3).................... 57.1
Debtor or spouse lost ; 2 weeks of income due to illness 38.2
or became completely disabled............................
Debtor or spouse lost ; 2 weeks of income to care for ill 6.8
family member............................................
Income loss due to illness (either of above 2)............ 40.3
Debtor said medical problem of self or spouse was reason 32.1
for bankruptcy...........................................
Debtor said medical problem of other family member was 10.8
reason for bankruptcy....................................
Any of above.............................................. 62.1
------------------------------------------------------------------------
* Percentage based on recent homeowners rather than all debtors.
Table 3.--Health Insurance Status of Debtor Households With and Without
Medical Causes of Bankruptcy
------------------------------------------------------------------------
Nonmedical
Medical
Bankruptcy Bankruptcy P Value
[In [In
percent] percent]
------------------------------------------------------------------------
Debtor or a dependent uninsured at 30.8 30.7 .93
time of bankruptcy filing............
Debtor or a dependent had a lapse in 40.0 34.1 .005
coverage during 2 years before
bankruptcy filing....................
------------------------------------------------------------------------
In multivariate analysis, being uninsured at filing did not predict
a medical cause of bankruptcy, while a gap in coverage did (odds ratio
[OR] = 1.35, P = .002). Other predictors included: older age (OR =
1.016/year, P = .0001), married (OR = 1.59, P = .0001), female (OR =
1.34, P = .002), larger household (OR = 1.97/household member, P =
.01), and lower income quartile (OR = 1.30, P = .0001).
Medical debtors' court records identified more debt owed directly
to doctors and hospitals than did nonmedical debtors', a mean of $4,988
vs $256, respectively (P <.0001). Medical debtors with coverage gaps
owed providers a mean of $8,338, vs $2,740 (P <.0001) for medical
debtors with continuous coverage. Nonmedical debtors had few medical
debts, averaging under $300 regardless of insurance status. (Medical
debts financed through credit cards or other borrowing, or owed to
collection agencies are not included because they cannot be identified
through court records.)
Patients Whose Illness Contributed to Bankruptcy
Telephone interviews identified 639 patients whose illness
contributed to bankruptcy: the debtor or spouse in 77.9 percent of
cases; a child in 14.6 percent; and a parent, sibling or other adult in
7.5 percent. At illness onset, 77.9 percent were insured: 60.3 percent
had private insurance as their primary coverage; 10.2 percent had
Medicare; 5.4 percent had Medicaid; and 2 percent had Veterans Affairs/
military coverage. Few of the uninsured lacked coverage because of a
pre-existing condition (2.8 percent) or belief that coverage was
unnecessary (0.3 percent); nearly all cited economic reasons.
By the time of bankruptcy, the proportion of patients with private
coverage had fallen to 54.1 percent, while the percentage with Medicare
and Medicaid had increased to 16.4 percent and 9.9 percent,
respectively. The proportion whose employers contributed to coverage
decreased from 43.2 percent to 36.6 percent.
Out-of-pocket medical costs averaged $17,943 for all medically
bankrupt families: $26,971 for uninsured patients, $17,749 for those
with private insurance at the outset, $14,633 for those with Medicaid,
$12,021 for those with Medicare, and $6,545 for those with Veterans
Affairs/military coverage. For patients who initially had private
coverage but lost it, the family's out-of-pocket expenses averaged
$22,568.
Among common diagnoses, nonstroke neurologic illnesses such as
multiple sclerosis were associated with the highest out-of-pocket
expenditures (mean $34,167), followed by diabetes ($26,971), injuries
($25,096), stroke ($23,380), mental illnesses ($23,178), and heart
disease ($21,955).
Hospital bills were the largest single out-of-pocket expense for
48.0 percent of patients, prescription drugs for 18.6 percent, doctors'
bills for 15.1 percent, and premiums for 4.1 percent. The remainder
cited expenses such as medical equipment and nursing homes. While
hospital costs loomed largest for all diagnostic groups, for about one
third of patients with pulmonary, cardiac, or psychiatric illnesses,
prescription drugs were the largest expense.
Our telephone interviews indicated the severity of job problems
caused by illness. In 37.9 percent of patients' families, someone had
lost or quit a job because of the medical event; 24.4 percent had been
fired, and 37.1 percent subsequently regained employment. In 19.9
percent of families suffering a job loss, the job loser was a
caregiver.
Changes in Medical Bankruptcy, 2001 to 2007
In our 2007 study, 69.1 percent of the debtors met the legacy
definition of medical bankruptcy employed in our 2001 study, a 22.9
percentage point absolute increase (49.6 percent relative increase)
from 2001, when 46.2 percent met this definition (P <.0001).
(Inflation, which might edge families over our $1,000 medical debt
threshold, did not account for this change. An analysis that used all
criteria except the size of medical debts found a 48.7 percent relative
increase. An analysis limited to the 5 States in our 2001 study yielded
virtually identical findings.
In multivariate analysis, a medical cause of bankruptcy was more
likely in 2007 than in 2001 (OR = 2.38, P <.0001) (Table 4).
Table 4.--Multivariate Predictors of Medical Causes of Bankruptcy, 2001
and 2007 Combined
------------------------------------------------------------------------
95 percent
Odds confidence P Value
ratio interval
------------------------------------------------------------------------
Age.............................. 1.02 1.01-1.02 .0001
Married.......................... 1.32 1.13-1.55 .0006
Own home now or in past 5 years.. 1.10 0.93-1.30 NS
All family members insured at 1.23 1.03-1.46 .02
time of filing..................
Gap in health insurance coverage 1.64 1.38-1.94 .0001
for any family member within
past 2 years....................
Income quartile.................. .99 .82-1.07 NS
Attended college 1.02 .87-1.18 NS
Year of bankruptcy filing, 2007 2.38 2.05-2.77 .0001
vs. 2001........................
------------------------------------------------------------------------
DISCUSSION
In 2007, before the current economic downturn, an American family
filed for bankruptcy in the aftermath of illness every 90 seconds;
three quarters of them were insured.
Since 2001, the proportion of all bankruptcies attributable to
medical problems has increased by 50 percent. Nearly two thirds of all
bankruptcies are now linked to illness.
How did medical problems propel so many middle-class, insured
Americans toward bankruptcy? For 92 percent of the medically bankrupt,
high medical bills directly contributed to their bankruptcy. Many
families with continuous coverage found themselves under-insured,
responsible for thousands of dollars in out-of-pocket costs. Others had
private coverage but lost it when they became too sick to work.
Nationally, a quarter of firms cancel coverage immediately when an
employee suffers a disabling illness; another quarter do so within a
year.\6\ Income loss due to illness also was common, but nearly always
coupled with high medical bills.
The present study and our 2001 analysis provide the only data on
large cohorts of bankruptcy filers derived from in-depth surveys. As
with any survey, we depend on respondents' candor. However, we also had
independent checks--from court records filed under penalty of perjury--
on many responses. Because questionnaires and court records were
available for our entire sample, we used them for most calculations.
The lowest plausible estimate of the medical bankruptcy rate from these
sources is 44.4 percent--the proportion who directly said that either
illness or medical bills were a reason for bankruptcy. But many others
gave reasons such as ``aggressive collection efforts'' or ``lost income
due to illness'' and had large medical debts. Indeed, detailed
telephone interview data available for 1,032 debtors revealed an even
higher rate of medical bankruptcy than our 62.1 percent estimate--at
least 68.8 percent of all filers.
Our current methods address concerns expressed about our previous
survey. We assembled a random, national sample and asked far more
detailed questions. In addition, we adopted more stringent criteria for
medical bankruptcy. Adopting an even more stringent threshold for
medical debts (e.g., eliminating those with medical debts below 10
percent of family income) would reduce our estimate by <1 percent.
Teasing causation from cross-sectional data is challenging.
Multiple factors push families into bankruptcy. Yet, our data clearly
establish that illness and medical bills play an important role in a
large and growing proportion of bankruptcies.
Changes in the Law
Between our 2001 and 2007 surveys, Congress enacted the Bankruptcy
Abuse Prevention and Consumer Protection Act (BAPCPA), which instituted
an income screen and procedural barriers that made filing more
difficult and expensive.
The number of filings spiked in mid-2005 in anticipation of the new
law, then plummeted. Since then, filings have increased each quarter.
They are likely to exceed 1 million households in 2008, representing
about 2.7 million people.
BAPCPA's effects appear nonselective. Current filers differ from
past ones mainly in having struggled longer with their debts.\7\ New
restrictions fall equally on medical and nonmedical bankruptcies, with
no preferences for medical debts or sick debtors. It is implausible to
ascribe the growing predominance of medical causes of bankruptcy to
BAPCPA.
Conversely, there is ample evidence that the financial burden of
illness is increasing. The number of under-insured increased from 15.6
million in 2003 to 25.2 million in 2007.\3\ Of low- and middle-income
households with credit card balances, 29 percent use credit card
borrowing to pay off medical expenses over time.\8\ Collection agencies
contacted 37.2 million Americans about medical bills in 2003.\9\
Between 2005 and 2007, the proportion of nonelderly adults reporting
medical debts or problems paying medical bills rose from 34 percent to
41 percent.\10\
Adding to Other Studies
We have reviewed elsewhere the older studies on medical
bankruptcy.\2\ \11\ Most rely exclusively on court records where many
medical debts are invisible, disguised as credit card debt or
mortgages. In our cohort, most medical debtors had charged unaffordable
medical care to credit cards.
Similarly, debts turned over to collection agencies by doctors or
hospitals may be unrecognizable on court records. Moreover, income loss
due to illness cannot be identified. In short, even though such studies
find substantial rates of medical bankruptcy,\12\ \13\ estimates based
solely on court records understate medical bankruptcies.\9\
Population-based studies also are problematic because many debtors
are unwilling to admit to filing. Thus, a study based on the Panel
Survey of Income Dynamics could identify only 74 bankruptcies (0.4
percent of respondents), half the actual filing rate among the national
population from which the sample was drawn.\13\
A few studies employed novel methods to analyze medical bankruptcy.
One found a high bankruptcy filing rate in a cohort of patients with
serious neurologic injuries.\14\ A survey of cancer patients documented
a 3 percent bankruptcy rate; 7 percent had taken a second mortgage to
pay for treatments.\15\ A questionnaire-based study found medical
contributors to 61 percent of Utah bankruptcies; 58 percent of families
seeking help at bankruptcy clinics in upstate New York reported
outstanding medical debts.\16\
Medical impoverishment, although common in poor nations,\17\ \18\
is almost unheard of in wealthy countries other than the United
States.\19\ Most provide a stronger safety net of disability income
support. All have some form of national health insurance.
The U.S. health care financing system is broken, and not only for
the poor and uninsured. Middle-class families frequently collapse under
the strain of a health care system that treats physical wounds, but
often inflicts fiscal ones.
ACKNOWLEDGMENTS
Additional support came from Harvard Law School and the American
Association of Retired Persons. Professors Melissa Jacoby, Robert
Lawless, Angela Littwin, Katherine Porter, John Pottow, and Teresa
Sullivan played key roles in the Consumer Bankruptcy Project.
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(Millwood). 2006;25:W84-W88.
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BillsAndBankruptcy.pdf. Accessed July 16, 2008.
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bankruptcy before and after brain or spinal cord injury: a glimpse at
the iceberg's tip. Med Care. 2007;45:702-711.
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Public Health National Survey of Households Affected by Cancer
(November 2006). Available at http://kff.org/upload/7590.pdf.
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Albany, NY: Empire Justice Center; 2006.
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catastrophic health spending. Health Aff (Millwood). 2007;26:972-983.
18. Raccanello K, Anand J, Dolores EGB. Pawning for financing
health expenditures: do health shocks increase the probability of
losing the pledge? In: Wood D, ed. The Economics of Health and
Wellness: Anthropologic Perspectives. Oxford, UK: Elsevier; 2008.
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several nations. Available at: http://www.pbs.org/wgbh/pages/frontline/
sickaroundtheworld/interviews/. Accessed July 18, 2008.
______
[The Philadelphia Inquirer, December 8, 2008]
Coverage Mandate Will Fail as a Health-Care Reform Plan
(By Rose Ann DeMoro)
It's time for Congress to stop getting carried away with financial
bailouts for big industries, especially when it comes to some of the
most-profitable and least-responsible companies: the health-insurance
giants.
Two major trade lobbies, America's Health Insurance Plans and the
Blue Cross-Blue Shield Association, have announced that they would be
willing to end their disgraceful practice of excluding people from
coverage based on their health or age. In exchange, they want the
Federal Government to force uninsured Americans to buy private
insurance.
That would be exactly the wrong direction for health-care reform.
Proposing mandatory coverage as the solution overlooks the one-fourth
of insured Americans who are rationing their own medical care because
they can't afford to pay the bills. One in eight late-stage cancer
patients turns down recommended care because of the cost, according to
a recent report in USA Today.
And let's not forget the insured patients who are denied needed
treatments that their insurers don't want to pay for.
A mandate for individuals turns the challenge of health-care reform
on its head. It would be a massive bailout for one of the most
merciless industries in America--and one that's already rolling in
cash. The 18 biggest insurers reported $16 billion in profit last year.
Now, in exchange for promising the coverage they should have
provided all along, these insurers are demanding additional billions of
dollars in profit from people who would face fines or other penalties
if they didn't hand over the cash.
The insurance giants' proposal came in concert with one by Senator
Max Baucus (D., MT), the chairman of the influential Senate Finance
Committee, who wants to make an individual mandate part of health-care
reform. There is speculation that Senator Ted Kennedy (D., MA), the
other leading Senate voice on health-care reform, is considering
including an individual mandate in whatever measure emerges from his
Health, Education, Labor, and Pensions Committee.
Mandatory coverage also was a component of Senator Hillary
Clinton's health-care proposal when she sought the Democratic
presidential nomination. Barack Obama wisely opposed the idea during
the primaries.
A coverage mandate is the centerpiece of the Massachusetts health
care law that many see as Kennedy's model. But the mandate is an
unpopular disaster in Massachusetts; in California, public opposition
to it helped kill a similar proposal.
Coupled with Massachusetts' failure to rein in insurance price-
gouging, the State's mandate forces the typical middle-aged adult to
spend more than $6,000 out-of-pocket on premiums and deductibles before
medical expenses are covered.
No wonder the insurers like it. Tony Soprano would, too.
Ultimately, any reform plan that relies on such a mandate to
establish ``universal'' coverage will fail.
Without restraints on skyrocketing insurance premiums and out-of-
pocket costs, many families will face further economic distress, with
little additional health security to show for it. And without tough
regulatory oversight of insurers, patients will continue to endure
inhumane denials of care.
The most effective way to fix our broken health-care system would
look like Medicare, but improved and expanded to cover everyone. A
single-payer, Medicare-for-all bill sponsored by Rep. John Conyers (D.,
MI) had more than 90 co-sponsors in the last Congress--more than any
other reform bill. It is expected to be reintroduced early next year.
Such a program is the only way to control costs through negotiated
fee schedules, global budgets, bulk purchasing, a huge cut in
administrative waste, and other measures. And it's the only way to
wrest control of our health from the insurers.
Senator Dodd. Thank you very much.
Mr. Williams.
STATEMENT OF RONALD A. WILLIAMS, CEO, AETNA, INC.,
HARTFORD, CT
Mr. Williams. Thank you, Vice Chairman Dodd.
This committee is to be commended for its efforts to
address not just the access for the uninsured but also
affordability and quality of care.
Having been a senior executive in both nonprofit health
plans and for-profit health plans and having operated in the
individual, small group and large employer marketplace, I would
like to briefly comment on the issues as they are at the core
of this committee's and other committees' legislative work.
I want to start by talking about the approximately 250
million people who have healthcare coverage today. There is a
highly competitive insurance market with over 1,300 plans and I
know firsthand from our customers that there is a high
satisfaction rate with the coverage.
One hundred and seventy-five million Americans are insured
through the commercial market, divided nearly evenly between
for-profit and not-for-profit plans. More than 95 percent of
the employers polled in a recent Conference Board Business
Council Survey overwhelmingly want to continue to provide their
employees this type of coverage.
It is the employers' long-term commitment to their
employees' health that has driven much of the innovation that
we have today in terms of services. For example, we support
significant insurance reforms that provide uniform access
across the country, but these reforms cannot work without a
companion requirement that requires all Americans to be part of
the insurance system.
Congress must also make certain that there is comprehensive
affordable coverage that's available and subsidize it for those
who cannot afford it. Simply put, we need a comprehensive
package with guaranteed issue of insurance and everyone in the
insurance pool.
Insurance premiums are a direct reflection of underlying
services in healthcare. In 2007, the cost of healthcare
services grew at an annual rate of 6.4 percent. Premiums
therefore increased at 6.1 percent. Making insurance affordable
will require us to bend the healthcare cost curve and we
insurers are committed to continuing our ongoing efforts as
part of the president's overall cost reduction.
Today, most experts agree that 30 percent of care is
unnecessary and yet the majority of Americans believe they
don't get the tests and treatment they need. Fifty-five percent
of Americans say insurers should pay for what a doctor
recommends, even if a treatment has not been proven.
If our collective goal is to achieve affordable coverage
for Americans, it is essential that we reach a consensus on
these issues and make delivery system reform happen.
In terms of the individual and under 10 small group
markets, by reforming the individual market which should also
include small businesses fewer than 10, we can tell our
insurance market solutions to effectively address the needs of
the uninsured, many of whom would see coverage in these markets
without disrupting or possibly unraveling the entire insurance
market.
There is risk in every great endeavor, but if the primary
objective is to fix what is broken and provide comprehensive
coverage for the uninsured, Congress must take care not to
shift those who pay for insurance today into an untested
structure that could cost more than they now pay.
We can cover the uninsured if we guarantee issue insurance,
strongly align it with an individual coverage requirement,
subsidize those that truly need healthcare and provide
affordable coverage options which improve choices and reduce
complexity.
Congress must also deal with the issue of cross
subsidization. In making the decisions, we need to be mindful
of how reforms impact different segments of the population.
While the purpose of every insurance pool is to spread risk,
how much should a 23-year-old with a lower average income pay
to lower the rate of a 60-year-old with higher-than-average
income? These are the policy decisions that must be made.
For groups of businesses between 10 and 50, 85 percent of
whom offer employees health insurance, we need a package of
solutions that make the current market work better. I believe
the intent of the SHOP Act is the right approach as it provides
a package of solutions intended to address the major issues of
these larger small businesses which are rate volatility and
affordability of coverage.
I would call on the committee to leave some details to
regulation, understanding that making our new model work will
require time, experience and course corrections.
Thank you for the chance to comment, and we look forward to
working with you.
[The prepared statement of Mr. Williams follows:]
Prepared Statement of Ronald A. Williams
Good Morning Vice-Chairman Dodd, Senator Enzi and members of the
committee. My name is Ronald A. Williams, and I am the Chairman and CEO
of Aetna, Inc.
I want to thank you for this opportunity to appear before you to
discuss health care reform, something we feel passionate about at
Aetna. I applaud Chairman Kennedy, Ranking Member Senator Enzi, and the
full committee for your leadership in the effort to make health care
work for all Americans.
I also want to thank Vice-Chairman Dodd from Connecticut, my home
State, for his leadership. This spring, I had the opportunity to
participate in two of Senator Dodd's Connecticut town halls on health
care reform and listened as several hundred seniors, students, parents
and everyday citizens shared their experiences with the health care
system and their desire for reform. We may not have all agreed on the
details of reform, but we did and can agree that great nations do not
have 45 million people who are uninsured.
The committee is to be commended for its effort to address not just
the issue of access for the uninsured, but to also focus on
affordability and quality of care. I would like to briefly comment on
these issues as they are at the core of this committee's and other
committees' legislative proposals.
COMPANION SOLUTIONS
I want to start by talking about the approximately 250 million
people who have health care coverage today. There is a competitive
insurance market with over 1,300 plans, which are nearly equally
divided between for-profit and not-for-profit plans. I know first hand
from our customers that there is a very high satisfaction rate with
this coverage:
175 million Americans are insured through the commercial
market with coverage sponsored and subsidized by their employers.
More than 95 percent of employers polled in a recent
survey overwhelmingly want to continue to provide their employees this
type of coverage.
It is the employers' long-term commitment to their
employees' health that has driven much of the innovation we have today
in terms of services that help improve and sustain employee health.
And although we know health care insurance works for many,
it does not work for everyone. Therefore, we must work together to
develop targeted solutions that address access, affordability and
quality for all Americans.
For example, we support significant insurance reforms that
are uniform across the country. But these very reforms cannot work
without a ``companion'' requirement that requires all Americans to be
part of the insurance system.
Congress must also make sure affordable coverage is
available and to subsidize those who cannot afford it.
Simply put, it all must be part of the same package.
COST AND QUALITY
Insurance premiums are a direct reflection of underlying services
in health care such as provider costs. In 2007, the cost of health care
services grew at an annual rate of 6.4 percent. As a result, premiums
also increased 6.1 percent.
Making insurance affordable will require us to bend the health care
cost curve, and we insurers are committed to continuing our on-going
effort as part of the President's overall cost reduction plan. This
also means reforming a provider payment system currently based on
volume and quantity, and moving to a system based on outcomes and
quality.
Today most experts agree that 30 percent of care is unnecessary,
and yet, the majority of Americans believe they don't get the tests and
treatment they need. Fifty-five percent of Americans say insurers
should pay for what a doctor recommends even if a treatment has not
been proven to be more effective than a cheaper one. If our collective
goal is to achieve affordable coverage for all Americans, it is
essential that we address these issues and make delivery system reform
happen.
specific solutions for the individual and under 10 small group markets
By reforming the individual market which should also include small
businesses with fewer than 10 employees, we can tailor insurance market
solutions to effectively address the needs of the uninsured, many of
whom would seek coverage in these markets, without disrupting or
possibly unraveling the entire insurance market. There is risk in every
great endeavor, but if the primary objective is to fix what is broken
and provide comprehensive coverage for the uninsured, Congress must
take care not to shift those who pay for insurance today into an
untested structure that could cost them more than they pay now.
We can cover the uninsured if we:
Guarantee issue of insurance and strongly align it with an
individual coverage requirement;
Subsidize those that truly need help; and
Provide affordable coverage options which improve choice
and reduce complexity.
Congress must also deal with the issue of cross subsidization. In
making policy decisions, we need to be mindful of how reforms may
impact different segments of the population. While the very purpose of
an insurance pool is to spread risk, how much should a 23-year-old with
a lower than average income pay to lower the rate for a 60-year-old
with a higher than average income? It's only when we truly reduce the
cost of care that we will be able to provide affordable coverage and
reduce overall health care spending.
SMALL GROUP 10 TO 50
For small businesses with between 10 and 50 employees, 85 percent
of whom offer their employees health insurance, we need a package of
solutions that makes the current market work better. I believe the
intent of the SHOP act is the right approach as it provides a package
of solutions intended to address the major issues for these small
businesses, which are rate volatility and affordability of coverage. We
would propose some important changes to this bill that we believe would
not jeopardize the desired result.
I would call on the committee to leave some details to regulation
understanding that making our new model work will require time and
experience. This will allow greater flexibility in meeting different
consumer needs and expectations. Examples on this point include benefit
package design, where we need not legislate in a ``one-size-fits-all''
manner. Rate banding is another example; while moving to a national
standard is advisable, we need to allow for flexibility in designing
rate bands that are based on actuarial modeling and reflect our
collective intent to expand access and increase affordability. This may
take some experience with a new system to get right.
Thank you for the chance to comment and we look forward to working
with you to pass reform that addresses affordability, access and
quality.
Senator Dodd. Thanks very much.
Mr. Johnson.
STATEMENT OF RANDEL K. JOHNSON, VICE PRESIDENT FOR LABOR,
IMMIGRATION, AND EMPLOYEE BENEFITS, U.S. CHAMBER OF COMMERCE,
WASHINGTON, DC
Mr. Johnson. Thank you, Senator Dodd.
While there's been much focus in the press and elsewhere on
the so-called public plan option, Senator Dodd, which certainly
the Chamber has concerns with, I'd like to, today, focus on the
new employer mandate which I realize is not spelled out in the
bill but is sketched out in actually the Savings Clause, and I
think this is highly ironic, given that this is, let's be
clear, a sweeping new burden on employers of unprecedented
proportion in the benefits area.
Now, in contrast to the process before us, the Congress
spent almost a decade in consideration of the Family Medical
Leave Act which you were very much involved in, which provided
for 12 weeks of unpaid leave, but that essentially was a
process that stretched out over 7 to 10 years.
Now the Congress is considering imposing a potentially
sweeping new healthcare mandate on employers in less than 4
months and with regard to process, I have to agree with Senator
Enzi.
I have to note that I was on the Hill when Mrs. Clinton's
plan was being considered and she came under much criticism for
drafting the plan behind closed doors, as you will recall, and
then presenting the plan to Congress.
However, there were many hearings on that bill. I was at
many of those, at one committee, and I would have to argue that
it was a model of transparency and full deliberative process
compared to the accelerated process we are now apparently
facing when people are talking about a final piece of
legislation by September or October.
I would also urge that the committee consider these new
healthcare mandates not just in the context of the healthcare
debate but in the context of the many other bills pending in
front of this committee dealing with paid family leave,
expansion of OSHA, uncapped punitive and compensatory damages,
et cetera, and this is on top of a huge regulatory burden that
our employers already have to face.
Now, we don't know what an employer mandate's going to
cost, but there are some studies out there. The RAND
Corporation has come out with one study, and I'm just going to
quote this,
``From our model, we estimate that firms newly
offering coverage will spend $9 billion to $17 billion
on premium contributions and penalty payments, under
the pay or play, will spend $4 to $12 billion.''
That's not chump change to our members.
Now this is already against a backdrop of where employers
are providing coverage to 170 million Americans. They're
already spending $500 billion on healthcare on a voluntary
basis and I guess I would say that employers already are
underwater on this and they have been for a long time. I think
we're doing our part.
Now this is not to say that every employer is providing
health insurance to their employees. Many simply cannot afford
to do so and a new government mandate requiring that employers
provide some level of healthcare benefits, apparently here to
be determined by government boards, subject only to disapproval
by Congress or pay an undetermined civil penalty, is not going
to change this reality.
Moses could change the Nile and make it run red but we
cannot wave a wand and create profits. The payments will come
off the bottom line, as these various studies have testified
to. It will result in lower wages and job losses and in some
cases, and this may sound apocryphal, but in some cases some
businesses may go out of business.
I'm just requesting that we refocus on the employer
mandate. Let's go slowly on this issue and I appreciate your
time, Senator.
[The prepared statement of Mr. Johnson follows:]
Prepared Statement of Randel K. Johnson, on behalf of
the U.S. Chamber of Commerce
Summary
The Chamber stands ready to work with Congress to enact health
reform, this year. However, proposals being floated are not reform--
they would make the system even worse for employers and those who value
free-market competition. The Chamber urges this committee to reconsider
the approach it is taking.
After meeting with stakeholders behind closed doors for nearly a
year, the committee released a proposal that bears almost no
resemblance to the points of consensus reached, which raises
significant concerns to the employer community as a whole.
The committee's draft proposal is focused largely on ideological
efforts that will not solve the real problems Americans are facing in
health care. Rather than focusing on improving quality and lowering
cost, the proposal centers on creating new burdens on America's job
creators, significantly expanding public programs, and a new
government-run insurance company.
The Chamber is gravely concerned by the process and the product
thus far. As badly as reform is needed, we cannot support reform just
for the sake of reform. Ironically, the current process has been less
open and transparent than reform efforts in 1994, which involved more
hearings, more time to consider legislation, and more public vetting of
options than has been contemplated here. We, and the business community
at-large, are still eager to work with Congress to develop a workable
product that can garner broad bipartisan support, preserves the parts
of the system that work, is fiscally responsible, and expands coverage,
increases quality, and lowers costs. However, the products coming out
of this committee over the past 7 days do not meet any of these goals,
and would make the system, and America's overall financial situation,
worse, not better.
The U.S. Chamber of Commerce is the world's largest business
federation, representing more than 3 million businesses and
organizations of every size, sector and region.
More than 96 percent of the Chamber's members are small businesses
with 100 or fewer employees, 71 percent of which have 10 or fewer
employees. Yet, virtually all of the Nation's largest companies are
also active members. We are particularly cognizant of the problems of
smaller businesses, as well as issues facing the business community at-
large.
Besides representing a cross-section of the American business
community in terms of number of employees, the Chamber represents a
wide management spectrum by type of business and location. Each major
classification of American business--manufacturing, retailing,
services, construction, wholesaling, and finance--numbers more than
10,000 members. Also, the Chamber has substantial membership in all 50
States.
The Chamber's international reach is substantial as well. We
believe that global interdependence provides an opportunity, not a
threat. In addition to the U.S. Chamber of Commerce's 101 American
Chambers of Commerce abroad, an increasing number of members are
engaged in the export and import of both goods and services and have
ongoing investment activities. The Chamber favors strengthened
international competitiveness and opposes artificial U.S. and foreign
barriers to international business.
Positions on national issues are developed by a cross-section of
Chamber members serving on committees, subcommittees, and task forces.
Currently, some 1,800 business people participate in this process.
______
The U.S. Chamber of Commerce would like to thank the Chairman and
Ranking Member, and other members of the committee for the opportunity
to participate in today's roundtable and to submit this statement for
the record. The Chamber appreciates your efforts to achieve access to
affordable coverage for all Americans. The U.S. Chamber of Commerce is
the world's largest business federation, representing more than 3
million businesses and organizations of every size, sector, and region.
The employer-based system voluntarily provides health benefits to
over 178 million Americans. Overwhelmingly, employees are satisfied
with these benefits and want their employers to continue providing it
to them. Further, employers are currently spending over $500 billion on
health benefits each year.
According to the U.S. Census Bureau, nearly 46 million Americans
lack health insurance. The Chamber believes that this number is
misleading, and that we must acknowledge the difference between those
that cannot afford to purchase coverage, and those that can afford
coverage, but choose not to do so. This committee seeks to get both of
these groups into the system.
Covering those who cannot afford coverage does necessitate a myriad
of approaches. The Chamber believes it is paramount to begin with a
greater focus on enrolling those who are already eligible for
government-subsidized or free insurance--and steps to use Gateways to
accomplish this goal are a great stride in the right direction. An
estimated 10 million people are currently eligible, but Federal and
State agencies have not done an adequate job of streamlining
procedures, putting boots on the ground, and signing them up. Nearly
another 9 million of the uninsured are non-citizens; a solution for
them will necessitate reopening the question of immigration reform.
About 15 million of the 46 million uninsured have high enough
incomes that they likely could afford insurance, if they chose to
purchase it. Their reasons for going without could range from feeling
young and invincible, lacking appealing insurance options (they are
often uninterested in gold-plated PPO plans), being boxed in by State
insurance mandates that limit their purchasing options, or lacking an
understanding of the necessity of obtaining coverage. There are many
proposals designed to prevent these individuals from opting out of the
system, and to force them to shoulder their ``fair share'' of the
expenses of providing medical care to the Nation. However, policymakers
have a responsibility to address their concerns if these individuals
are to be obligated to purchase coverage.
This committee needs to make a U-turn on these issues--rather than
defining a dangerously high actuarial value to determine the
qualifications of a health insurance plan, Congress should only require
that individuals have comprehensive catastrophic coverage that offers
first dollar coverage of prevention. The creation of a Medical Advisory
Council, a proposal that Tom Daschle dubbed the ``Federal Health
Board'' when he invented it, would be disastrous and possibly
unconstitutional. No new bureaucracy should be given the power to
impose law without proper checks and balances--and requiring a joint
resolution of disapproval is unduly burdensome. Advisory bodies should
advise and make suggestions, not make law.
If Congress creates an individual obligation to purchase coverage,
we must first ensure that individuals will be able to obtain affordable
coverage. This will require significant market reforms, new pooling
options, removing State benefit mandates, and making available a full
range of insurance options that will appeal to the young and healthy.
All potential coverage solutions for the uninsured will be
unsustainable unless Congress enacts meaningful delivery system,
payment, financing, and entitlement reform. Some proposals to cover the
uninsured are alarming and may well make the system worse, not better.
The small group and individual insurance markets are in serious
need of significant reform. Currently regulated at the State level, the
costly and burdensome benefit mandates coupled with an arguable lack of
competition have led to the need for Federal reform of the individual
and small group markets. The Chamber has long supported granting small
businesses the ability to pool risk and to offer uniform benefits
across State lines to address these problems, to no avail. Large
businesses have been successful in offering comprehensive benefits
primarily because Federal law (ERISA) protects them from the patchwork
of inconsistent State laws and regulations, and the vast majority of
individuals enrolled in ERISA plans report a high level of satisfaction
with their plans. Plans to limit self-insurance to only companies with
more than 250 employees are a step in the wrong direction, and further
changes to ERISA and new requirements to apply to ERISA plans will
weaken the part of the system that is working well.
A national insurance Gateway should serve as a marketplace where
individuals and small businesses can go to obtain coverage that meets
the new standards. This Gateway must facilitate meaningful pooling
options for these individuals so that their risks can be shared, their
premiums can be predictable, and their costs lower. Further, having
learned from the arguable lack of competition and problems encountered
at the State level, the Gateway must allow for a high amount of plan
flexibility, greater risk pooling, and a range of options.
The plans sold in the Gateway will have to meet some minimum
benefit standard, and the Chamber feels the best course of action for
designing this standard would be to look at existing high-deductible
health plan products that offer first-dollar coverage of preventative
services. It is absolutely essential that individuals have both access
to and incentive to use preventative services, but also that the
remaining parts of the plan be up to consumers--make the minimum a
catastrophic plan, allow individuals and purchasers to determine how
much richer of a plan they would like to select. This will provide
appropriate safeguards against financial difficulties and ensure access
to appropriate care.
If Congress manages to maneuver these challenges in a way that
successfully encourages individuals who can afford coverage to opt in,
and also successfully enrolls those who are already eligible for free
or subsidized care, there would still be about 10 million uninsured.
This group is comprised of individuals who cannot afford coverage, the
people who are driving the need for coverage reform in the health care
system. Covering them will entail many challenges.
The proposal to give Federal subsidies to individuals making up to
500 percent of the Federal Poverty Level (FPL)--that would be $110,250
for a family of four. Subsidies of this size are extremely fiscally
irresponsible, unsustainable, and only feed into the growing cost
problem. Expanding Medicaid to 150 percent of FPL will increase the
program's fiscal woes. Relief for those who cannot afford insurance
must be targeted, fiscally responsible, and in coordination with other
reforms that lower costs and fix the insurance market.
The Chamber does not believe that a mandate on employers to sponsor
health insurance will make serious headway to cover the uninsured, but
rather could lead to a loss of jobs. Employers who can afford to
sponsor health insurance typically provide generous benefits--and most
large employers do. Employers who cannot currently afford to offer
health insurance benefits will not be able to do so simply because they
are mandated to do so--small employers and businesses that operate on
very small profit margins will still be unable to afford to provide
benefits.
The decision to force employers to sponsor government-approved
health plans is not one that should be taken so lightly. Congress spent
nearly a decade debating policies relating to mandatory family leave--
unpaid leave at that. Under the Federal ERISA framework, very few new
mandates have reached consensus to be forced upon employer-sponsored
plans. Congress generally recognizes the importance of employer
flexibility, autonomy, and ability to make the financial choices and
take the necessary risks to create jobs, boost the economy, and drive
the engine of prosperity.
Employers have been great innovators in health care, and in many
reforms we have led the way and have kept the unsustainable rising
costs of health insurance from reaching the breaking point. A mandate
on employers is sure to reduce flexibility and choice, while raising
costs and providing little benefit. Existing mandates have proven
inadequate in determining the scope of plans, helping to cover the
uninsured, or properly distinguishing the good players from so-called
free-riders. The push for a coverage mandate on employers is an
ideological one, not a pragmatic one, and should not be viewed as a way
to cover the uninsured.
Employers support the notion of ``shared responsibility,'' when
viewed through the lens of realism. Any objective observer would
conclude that employers, who currently cover more than 178 million
Americans and pay over $500 billion per year, are indeed being
responsible. Mandating further ``responsibility'' on their part would
exhibit confusion about the economic realities employers face. An
employer mandate would be a job-killer, because it would force
struggling employers to spend money they don't have.
Another concerning proposal is the creation of a new government-run
health plan, euphemistically referred to as the ``public option,'' or
brazenly referred to as ``consumer-driven.'' Proponents say that this
is necessary to ``keep private insurers honest,'' yet proposed market
reforms should accomplish this goal without the creation of a new
entitlement plan. Proponents claim that a government-run plan can
compete on an equal playing field with private plans, but this would
put the government in the position of being both a team owner and the
referee; inevitably the government would move to give unfair advantages
to the ``public option,'' just as they are considering doing now with
the public financing of student loans.
Even the op-ed page of the Washington Post has cited the ``public
option'' as a backdoor way to bring the Nation to single-payer,
socialized medicine. The President's promise that Americans will be
able to keep the health insurance they have cannot be kept if we move
to such a system--which we inevitably would if, as the Lewin Group
estimates, up to 130 million people are shifted into this public plan.
Employers are especially concerned with the prospect of a new
government-run plan because of the bad experience we have had with
current government-run plans. According to a recent study by Milliman,
employer plans' costs are increased by an estimated 20 to 30 percent
due to cost-shifting from Medicare and Medicaid. ``Public option''
proponents will say that this is denied by MedPAC, or that the new plan
will not engage in this cost-shifting, but these assurances ring
hollow--especially when we consider the incredible unfunded liabilities
currently shrugged off by current government-run plans.
The Chamber is gravely concerned by the process and the product
thus far. As badly as reform is needed, we cannot support reform just
for the sake of reform. Ironically, the current process has been less
open and transparent than reform efforts in 1994, which involved more
hearings, more time to consider legislation, and more public vetting of
options than has been contemplated here. We, and the business community
at-large, are still eager to work with Congress to develop a workable
product that can garner broad bipartisan support, preserves the parts
of the system that work, is fiscally responsible, and expands coverage,
increases quality, and lowers costs. However, the products coming out
of this committee over the past 7 days do not meet any of these goals,
and would make the system, and America's overall financial situation,
worse, not better.
When you get past the ideological arguments, Democrats,
Republicans, and business all want the same reforms--lower costs,
improved quality, and better outcomes. We believe a key to
accomplishing this is reforming the payment system to incent providers
to give the best, most efficient care. The Chamber will strongly
support Congress in enacting these needed reforms.
The Chamber is eager to work with you to enact reform, but urges
your consideration and caution when crafting proposals that could prove
harmful to U.S. companies. If structured properly, a Gateway could be a
boon to small business. Subsidies could realign Federal dollars in a
way that seriously reduces the uninsured. Entitlement programs could be
reformed, revamped, and improved. Even better, the coverage currently
enjoyed by more than 250 million Americans could be secure and
sustainable, have better quality, and be more affordable.
The Chamber looks forward to working with Congress on this and
other initiatives that will help more individuals, small businesses,
the self-employed, and others gain access to the highest quality, most
affordable, and most accessible health care possible. But we will not
support reform for the sake of reform--it must be market-driven,
preserve and boost the economy, and truly protect the parts of the
system that work.
Senator Dodd. Thank you very much. I'm glad you remember
the Family Medical Leave Act. Nice of you to do so. By the way,
the final version of it passed in 2 weeks.
Mr. Johnson. After about two vetoes and many, many years.
Senator Dodd. Thanks for remembering the vetoes.
Mr. Dennis.
STATEMENT OF WILLIAM J. DENNIS, Jr., SENIOR RESEARCH FELLOW,
NATIONAL FEDERATION OF INDEPENDENT BUSINESS, WASHINGTON, DC
Mr. Dennis. Thank you, Senator.
Small business has been primarily concerned about the costs
of health insurance to America's small employers and considers
it a major reason for the increasing coverage problem.
The importance of costs can be seen actually in
Massachusetts. After coverage reforms, health spending jumped
almost 25 percent in 2 years compared to 11 percent nationally.
The reduction uncovered was 3 to 4 percentage points. I guess
there's some dispute as to exactly how much these days, but
anyway what happens in a State like Texas, where we already
have 33 percent lacking coverage rather than Massachusetts
which was like eight or nine before the reforms came in.
Small business and NFBI have consistently opposed the
employer mandate. We have two principle reasons for the
opposition. The first is that employees ultimately bear the
cost of their health insurance through lower employment,
depressed wages and the loss of other economic opportunities.
Congress must ask itself do we want an employer mandate
that effectively requires low-wage employees to indirectly and
opaquely pay for their own health insurance or do we want to
face the problem directly and transparently and provide
subsidies for the low-income to purchase it?
The second reason that NFBI has consistently opposed the
employer mandate is that in the initial costs, the up-front
costs, before they can be transferred to employees, they must
be borne by employers. Small employers particularly have
difficulties with all these up front costs.
Finally, NFBI supports and helped develop the SHOP Act
sponsored by Senators Durbin, Snowe and Lincoln. The
committee's draft captures the essence of SHOP in its market
reform provisions, most prominently guaranteed issue and
renewal, the disallowance of medical underwriting and modified
community rating.
In addition, the gateway connector concept is a positive
step to facilitate small employers increasing their provisions
of employee health insurance. Gateways perform a clearing house
function, part of the small employers' HR function and
insurance information functions. All substantially ease the
small employers' search information and transactions costs
directly addressing the actuarial value of small group plans.
In addition, its section 125 capabilities also bring
efficiencies and equity to affected employees and employers.
Thank you very much, Senator.
[The prepared statement of Mr. Dennis follows:]
Prepared Statement of William J. Dennis, Jr.
Small business has been primarily concerned about the cost of
health insurance to American small employers and considers it a major
reason for the increasing coverage problem. The committee draft appears
not to address the cost problem to the extent necessary, and typically
cannot expect results until well after substantial new demand is placed
on the system. For example, NFIB does not consider the public option a
means to control the increase in prices. Similarly, the concept of
medical loss ratios, while designed to address an important problem for
smaller firms may prove counter-productive, if for no other reason than
administrative personnel assigned to ferret out waste and fraud, can
reduce net costs rather than increase them. Electronic records are fine
as are other committee recommended measures, but there are more
including built in cross-subsidies that foul prices signals, re-
importation of prescription drugs that mean Americans subsidize the
prescriptions of consumers in other developed countries, medical
liability that yields unnecessary tests and procedures, and a host of
others.
Small business and NFIB have consistently opposed the employer
mandate. We have two principal reasons for opposition, though there are
others. The first is that employees ultimately bear the cost of their
health insurance through lower employment, depressed wages, and the
loss of economic opportunities. So, the Congress must ask itself: Do we
want an employer mandate that effectively requires low-wage employees
to indirectly and opaquely pay for their own health insurance? Or, do
we want to face the problem directly and transparently and provide
subsidies for the low-income to purchase it? The second reason NFIB has
consistently opposed the employer mandate is that the initial costs,
costs before they can be transferred to employees, are bourne by
employers. In effect, employers must ``front'' or initially lend the
money for employees to purchase their health insurance. Many simply
cannot do that.
NFIB supports, and helped develop, the SHOP Act sponsored by
Senators Durbin, Snowe, and Lincoln. The committee's draft captures the
essence of SHOP in its market reform provisions, most prominently
guaranteed issue and renewal, the disallowance of medical underwriting,
and modified community rating. In addition, the Gateway/Connector
concept is a positive step to facilitate small employers increasing
their provision of employee health insurance. Gateways perform a
clearinghouse function, part of a small employer's HR function, and
insurance information functions. All substantially ease the small
employer's search, information, and transaction costs, directly
addressing the actuarial value of small group plans. Its section 125
capabilities also bring efficiencies and equity to affected employers
and employees.
Senator Dodd. Thank you. Thank you very much.
Mary, if you could bring that microphone close. I think
members are having a hard time hearing.
STATEMENT OF MARY ANDRUS, CO-CHAIR OF THE HEALTH CARE TASK
FORCE, CONSORTIUM FOR CITIZENS WITH DISABILITIES, WASHINGTON,
DC
Ms. Andrus. OK. Senator Dodd----
Senator Dodd. Thank you.
Ms. Andrus [continuing]. Members of the HELP Committee,
thank you for this opportunity to testify.
I am Mary Andrus, Assistant Vice President for Government
Relations at Easter Seals and I'm here today as a Co-Chair of
the Health Care Task force on the Consortium for Citizens with
Disabilities.
For people with disabilities and chronic conditions of all
ages, the goal of healthcare reform is to have access to high-
quality, comprehensive and affordable healthcare that allows a
person to be healthy and to live as independently as possible
and participate in his or her community.
This legislative proposal makes major positive changes in
the insurance market. The proposal would require guaranteed
issue, requiring insurance to be issued without regard to
health status, and guaranteed renewal so coverage couldn't be
dropped because of a change in someone's health status.
The proposal would prohibit health status from being used
in determining premium rates, making insurance more affordable
for people with disabilities and chronic conditions.
The prohibition of annual and lifetime insurance caps and
limits on out-of-pocket spending would immediately widen the
opportunity for people with disabilities to obtain and to
retain quality insurance coverage.
We strongly support the rehabilitation and habilitation as
well as mental health services that were included in the
outline of categories in the draft. However, we are concerned
that the existing categories may not include the durable
medical equipment, like wheelchairs or prosthetics, orthotics
or other assistive devices, that are primary needs for people
with disabilities.
CCD enthusiastically supports inclusion of the Community
Living Assistance Services and Support Section. The CLASS
proposal would create a new national insurance program to help
adults who have or who develop functional impairments to get
the support that they need to remain employed and independent.
The financing for that proposal is through a modest
voluntary payroll deduction and would provide a cash benefit to
be used for things that health insurance may not cover, such as
housing modification, personal assistance services or
transportation, to allow someone to remain in their home, to
continue to go to work, and to be part of their community.
Any one of us could become disabled any day and the cash
benefit could provide access to a wide range of services to
continue to function within families and communities.
Alternatively, many people will continue to have to spend
down their savings and go on to Medicaid. We support self-
sufficiency and independence rather than requiring people to
impoverish themselves to get the services that are needed.
We understand that one of the options under discussion is
to make adjustments to the current tax structure to incentivize
the purchase of long-term insurance. We believe that these
changes are not comprehensive enough to address the number of
people who need coverage and the consequences to an individual
or a family if these services are needed over the long haul.
Let me close with the idea that as you look at proposals
for healthcare reform, look at them through the experience of a
person with a disability and if the proposal meets those needs,
it's highly likely to meet the needs of the rest of the
population.
Thank you.
[The prepared statement of Ms. Andrus follows:]
Prepared Statement of Mary Andrus
Members of the HELP Committee, thank you very much for this
opportunity to tell you about how changes in our health care system
could impact people with disabilities. I am Mary Andrus, Assistant Vice
President for Government Relations at Easter Seals, and I am here today
as a co-chair of the Health Care Task Force and a representative of the
Long Term Services and Support Task Force of the Consortium for
Citizens with Disabilities (CCD), a coalition of national consumer,
advocacy, provider and professional organizations who advocate on
behalf of people of all ages with physical and mental disabilities and
chronic conditions, and their families.
OVERVIEW
CCD believes that the goal of health care reform should be to
assure that all Americans, including people with disabilities and
chronic conditions, have access to high quality, comprehensive,
affordable health care and long-term services and supports that meets
their individual needs and enables them to be healthy, functional, live
as independently as possible, and participate in the community.
INSURANCE MARKET REFORMS
The legislation that the HELP Committee has put forward, the
Affordable Choices Act of 2009, contains very constructive changes
regarding insurance market reform. These improvements to the private
health insurance market have significant positive implications on the
ability of all Americans to access affordable health insurance
regardless of their health status. Specifically, providing guaranteed
issue and guaranteed renewal rules on coverage in the individual and
small group market and prohibiting pre-existing health condition
exclusions in these markets would immediately widen the opportunity for
people with disabilities to obtain and retain quality insurance
coverage. To assure that insurance is not just available to people with
disabilities and chronic conditions, but to commit to seeing that it is
affordable, this legislation initiates restrictions on premium rating
practices in these markets to prohibit the use of health status in
determining premium rates.
The combination of these modifications to the way business is
currently conducted would constitute significant improvements for
people with disabilities. But this proposal takes another big step
toward protecting people from being overwhelmed by the cost of illness.
CCD strongly supports the prohibition of annual and lifetime insurance
caps. In addition, we strongly support limits on out-of-pocket spending
to meaningfully address either catastrophic medical events or the
accumulation of costs over years of living with a disability or chronic
condition. It is important for medically necessary prescribed
treatments and services that are eligible medical expenses under the
IRS rules to be considered out-of-pocket expenses. Many people with
disabilities and chronic diseases will be left without protections from
catastrophic financial costs for services or treatments that their
doctor prescribes but their plan fails to cover.
BENEFIT CATEGORIES
One of the most critical aspects of the health care reform debate
for the disability community is the assurance of an appropriate set of
benefits to meet the needs of people with disabilities and chronic
conditions. This community understands that the benefits package is not
defined in the legislative proposal and we enthusiastically support the
inclusion of rehabilitation and habilitation services as a category for
further definition of what would be covered. Provision of acute and
post-acute rehabilitation and habilitation services in multiple
settings of care to match the level of intensity of services needed by
individuals to return them to their home and community as quickly as
possible is key to the goal of overall health care reform.
CCD strongly urges the committee to include a category that
provides a full complement of durable medical equipment (such as
wheelchairs), prosthetics, orthotics (DMEPOS) and other assistive
devices and related services. Such devices are critical in enabling
people with disabilities to function. Without access to proper and
affordable equipment of this nature, people with disabilities and
chronic conditions can not have their needs met by private insurance
and will, ultimately, be forced to avail themselves of the public
programs that do offer such coverage. This result would not look a lot
different from the status quo and is not consistent with the goals of
this remarkable effort. We can not state strongly enough the importance
of the inclusion of coverage of DMEPOS and assistive equipment as a
general category in defining the essential health care benefits.
community living assistance supports and services proposal
An essential element of health care reform is ensuring that
vulnerable populations have access to coverage that meets their care
needs. For persons with disabilities and chronically ill older
Americans--arguably the most vulnerable populations in the Nation--
long-term services and supports are their primary unmet care need, and
are critical to promoting health and preventing illness. While
approximately 45 million Americans do not have medical insurance, over
200 million adult Americans lack any insurance protection against the
cost of long-term services and supports. The inclusion of the Community
Living Assistance Services and Supports (CLASS) language in this
proposal is the threshold to meaningful change ensuring that
individuals are able to function as independently as possible within
their homes, families, and their communities. We strongly support the
inclusion of the CLASS proposal. This provision should be retained as
the legislative process moves forward.
Many Americans who are born with or develop severe functional
impairments can access coverage for the long-term services critical to
their independence (such as personal assistance, assistive
technologies, long-term therapies, and training in basic skills) only
through the Federal/State Medicaid program. The Medicaid program has
become the default long-term services program and the last resort for
millions of individuals and families who have nowhere else to turn to
have their long-term needs met. Families must impoverish themselves by
spending down their life savings before they can access the care they
need under Medicaid. To a family struggling to make ends meet, there is
no difference between spending $20,000 on hospital care and spending
$20,000 on home care or nursing home care. It is still $20,000 coming
out of their pockets.
The CLASS provision would create a new national insurance program
to help adults who have or develop severe functional impairments to
remain independent, employed, and stay a part of their community. To
qualify for CLASS benefits, individuals must be at least 18 years old
and have contributed to the program for a minimum ``vesting'' period of
5 years. Eligibility for benefits would be determined by State
disability determination centers and will be limited to individuals who
are unable to perform two or more activities of daily living (ADL)
(e.g. eating, bathing, dressing) or its equivalent.
Financed through modest voluntary payroll deductions (with opt-out
enrollment like Medicare Part B), this measure would help remove
barriers to choice and independence (e.g., housing modification,
assistive technologies, personal assistance services, transportation)
that can be overwhelmingly costly, by providing a cash benefit to those
individuals who need support for basic functions. The large risk pool
to be created by this approach would make added coverage affordable. It
would give individuals added choice and access to supports without
requiring them to become impoverished to qualify for Medicaid. This
should have a significant beneficial impact on the Medicaid program in
the future as fewer people find it necessary to spend-down to become
Medicaid eligible. Furthermore, many beneficiaries of working age could
continue to remain in the workforce. We also believe that individuals
could supplement their CLASS coverage through the private insurance
market.
We believe that Option A would fail to make any progress in this
critical area. While some of the provisions of Option B would be
worthwhile in a limited market, it is not comprehensive enough and
would do little to increase essential insurance coverage throughout the
population.
MEDIGAP COVERAGE FOR MEDICARE BENEFICIARIES UNDER 65
People below age 65 become Medicare beneficiaries if they can no
longer work due to disability and receive benefits under the Social
Security Disability Income (SSDI) program, or if they require kidney
dialysis due to end stage renal disease (ESRD). However, these Medicare
beneficiaries have no Federal right to access supplemental insurance
through Medigap as seniors do. The need for this supplemental insurance
has been recognized by 27 States which mandate some level of Medigap
access to Medicare enrollees under 65.
As Congress considers how to improve the existing health care
system, the guaranteed issue of Medigap policies to all Medicare
beneficiaries with disabilities and ESRD below the age of 65 to bring
access to Medigap policies in line with seniors on Medicare, would
provide needed coverage to these individuals. Medigap policies should
be accessible and affordable to all Medicare beneficiaries regardless
of age or health condition.
NON-DISCRIMINATION IN INSURANCE MARKETS AND PRODUCTS
CCD appreciates the protections in this proposal to prohibit
discrimination for insurance eligibility and marketing. We would like
to suggest the addition of language that strengthens the protections
and prohibits plan coverage designs that would discriminate against
people with disabilities and chronic disease. Many people with
disabilities and chronic conditions are uninsured and under-insured.
With the consideration of this health care proposal, there is the
opportunity to better ensure that the design of plans and their
benefits (including any formulary and tiered formulary structure) do
not substantially discourage enrollment by individuals with
disabilities or chronic diseases.
Thank you again for the opportunity to address this committee and
for all the work you are doing to truly make a difference in the way
people with disabilities and chronic conditions can live, learn, work
and play in their communities.
For additional information, please contact any of the individuals
below.
CCD Health Task Force Co-Chairs
Mary Andrus, Easter Seals, (202) 347-3066.
Tim Nanof, American Occupational Therapy Association,
(301) 652-6611, Ext. 2100.
Angela Ostrom, Epilepsy Foundation of America, (301) 918-
3766.
Peter Thomas, American Academy of Physical Medicine &
Rehabilitation, (202) 466-6550.
Liz Savage, The Arc of the United States and United
Cerebral Palsy, (202) 783-2229.
CCD Long-Term Services and Supports Co-Chairs
Joe Caldwell, Association of University Centers on
Disabilities (301) 588-8252.
Marty Ford, The Arc and United Cerebral Palsy (202) 783-
2229.
Suellen Galbraith, American Network of Community Options
and Resources (703) 535-7850.
Lee Page, Paralyzed Veterans of America (202) 416-7694.
Senator Dodd. Thank you very much.
Dr. Rosman. Did I pronounce----
Dr. Rosman. It's Rosman, yes.
Senator Dodd. Rosman.
STATEMENT OF SAMANTHA ROSMAN, M.D., BOARD OF TRUSTEES, AMERICAN
MEDICAL ASSOCIATION, CHICAGO, IL
Dr. Rosman. Thank you. Thank you, Mr. Chairman.
My name is Samantha Rosman, and I'm a member of the
American Medical Association Board of Trustees and a Fellow in
Pediatric Emergency Medicine in Boston.
As an emergency physician in a city hospital, I see
uninsured kids every day who are sicker than they need to be
because they could not afford to seek care at the start of
their illness.
The AMA strongly supports making affordable health
insurance available to all Americans. This can best be achieved
through a combination of insurance market reforms and
healthcare exchanges that offer a variety of affordable private
insurance plans.
A health insurance exchange would increase individual
choice, simplify plan comparisons, and streamline enrollment to
help individuals in choosing coverage that best suits their
needs.
The AMA strongly opposes a public health insurance plan
operated by the Federal Government with a pay schedule that's
based on Medicare. Insurance is about more than coverage. It's
about access. Too often I see kids with public insurance and
yet no access because the clinics treating them are under-
funded and overwhelmed and so instead they end up in my
emergency department.
We also oppose proposals to compel physicians to
participate in a publicly sponsored plan as a condition of
continuing to see their Medicare patients. However, the AMA is
open to consideration of a new health insurance option that's
market-based and not run by government. Those several concepts
have been publicly discussed. No legislative details have yet
been put forth and we do look forward to reviewing those ideas.
Finally, the AMA strongly supports providing tax credits or
subsidies that are inversely related to income, are refundable
and payable in advance to low-income individuals who need
financial assistance to purchase private health insurance.
The AMA believes that once sufficient subsidies or tax
credits are in place so that every American has the means to
afford coverage, that every American should then have the
responsibility to obtain health insurance.
In closing, I would add that access to care for millions of
patients remains in danger without action to eliminate a
scheduled 21 percent cut in Medicare physician fees. Temporary
patches that serve only to make the problem worse are not the
answer.
This is the time to repeal the failed SGR formula and
ensure that our seniors will continue to have access to quality
healthcare.
Thank you.
[The prepared statement of Dr. Rosman follows:]
Prepared Statement of the American Medical Association (AMA),
Presented by Samantha Rosman, M.D.
Summary
We support making affordable health insurance available to all
Americans. This can best be achieved through a combination of insurance
market reforms and health care exchanges offering a variety of
affordable private insurance plans.
Insurance market reforms are needed to ensure greater accessibility
and affordability and to make the health insurance market work better
for both patients and physicians.
The AMA supports streamlined, more uniform health insurance market
regulation that establishes fair ground rules, while also protecting
high-risk patients without driving up health insurance premiums for the
rest of the population.
The AMA supports establishing a health insurance exchange or
exchanges to increase individual choice, facilitate plan comparisons,
and streamline enrollment that will assist individuals in choosing
coverage that best suits their needs.
Public Health Insurance Option: The AMA strongly opposes proposed
Option A--a public health insurance plan operated by the Federal
Government with a payment schedule that is set in statute and is based
on Medicare. The AMA is open to consideration of a new health insurance
option that is market-based, not run by the government, does not compel
physician participation, and truly competes on a level playing field.
Though several potential ideas have been publicly discussed, no
legislative details have been put forth. We look forward to reviewing
these ideas.
Upon implementation of subsidies or tax credits for those who need
financial assistance obtaining coverage, the AMA believes everyone
should have the responsibility to obtain health insurance.
The AMA supports helping low-income individuals obtain health
insurance coverage, and believes the safety net provided by public
programs needs to be maintained and strengthened.
The AMA supports providing tax credits or subsidies that are
inversely related to income, refundable, and payable in advance to low-
income individuals who need financial assistance to purchase private
health insurance.
______
The AMA is committed to working with the HELP Committee, Congress,
the Administration, and other stakeholders to advance proposals that
expand coverage, improve quality, reform government programs, reduce
costs, increase focus on wellness and prevention, and provide payment
and delivery reforms.
HEALTH INSURANCE AND MARKET REFORMS
We support making affordable health insurance available to all
Americans. This can best be achieved through a combination of insurance
market reforms and health care exchanges offering a variety of
affordable private insurance plans.
Insurance market reforms are needed to ensure greater accessibility
and affordability and to make the health insurance market work better
for both patients and physicians.
The goal of market reform should be to create a
competitive insurance market in which plans compete on price and
quality, and patients gain more control over their choice of health
coverage and their own care.
To that end, we support modified community rating, with
some degree of premium variation based on individual risk factors. Some
degree of age rating is acceptable, as are lower premiums for
nonsmokers.
Insured individuals should be protected from losing
coverage or being singled out for premium increases due to changes in
health status.
The AMA supports streamlined, more uniform health insurance market
regulation that establishes fair ground rules, while also protecting
high-risk patients without driving up health insurance premiums for the
rest of the population.
Explicit, targeted government subsidies should be provided
to help high-risk people obtain coverage without paying prohibitively
high premiums. Such subsidies could take the form of high-risk pools,
reinsurance, and risk adjustment. Financing risk-based subsidies with
general tax revenues rather than through premiums avoids the unintended
consequences of driving up premiums and distorting health insurance
markets.
AVAILABLE COVERAGE FOR ALL AMERICANS
The AMA supports establishing a health insurance exchange or
exchanges to increase individual choice, facilitate plan comparisons,
and streamline enrollment that will assist individuals in choosing
coverage that best suits their needs.
Insurers should provide understandable and comparable
information about their policies, benefits, and administrative costs to
empower patients, employers, and other purchasers and consumers to make
more informed decisions about plan choice.
Public Health Insurance Option
The AMA strongly opposes proposed Option A--a public health
insurance plan operated by the Federal Government with a payment
schedule that is set in statute and is based on Medicare.
The AMA does not believe that creating a public health
insurance option for non-disabled individuals under the age of 65 is
the best way to expand health insurance coverage and lower costs across
the health care system.
The AMA does not support expanding Medicare enrollment to
younger or non-disabled populations. Medicare is projected to
experience solvency problems in the next decade under existing
obligations.
The AMA opposes linking payment rates in a government-
sponsored plan to the Medicare fee schedule. Payment rates should be
negotiated with physicians and other providers on a level playing
field.
The AMA strongly opposes proposals to compel physicians to
accept patients in a publicly sponsored plan as a condition to see
Medicare patients.
The AMA strongly supports improvements in the private
health insurance market. In a reformed private health insurance market,
with a health insurance exchange like the Federal Employee Health
Benefits Program that provides a variety of plans from which to choose,
a public plan option is unnecessary.
Option B.--The AMA is open to consideration of a new health
insurance option that is market-based, not run by the government, does
not compel physician participation, and truly competes on a level
playing field. Though several potential ideas have been publicly
discussed, no legislative details have been put forth. We look forward
to reviewing these ideas.
Option C.--The AMA believes that with properly regulated private
plans offered through an exchange, and made affordable through
individual tax credits inversely related to income, a government run
health plan option is not necessary to ensure access to health
insurance.
individual and employer responsibility
Upon implementation of subsidies or tax credits for those who need
financial assistance obtaining coverage, the AMA believes everyone
should have the responsibility to obtain health insurance.
The American Medical Association has no position on an employer
mandate.
COVERAGE EXPANSIONS AND SUBSIDIES
The AMA supports helping low-income individuals obtain health
insurance coverage, and believes the safety net provided by public
programs needs to be maintained and strengthened.
There should be greater equity within the Medicaid program
through the creation of basic national standards of uniform eligibility
for all persons below the poverty line, and the elimination of the
existing categorical requirements, which would allow for the coverage
of low-income individuals based solely on financial need.
We also support allowing the use of public funds (through
tax credits or subsidies) to allow acute care patients to purchase
coverage individually and through programs available though an
exchange.
Access to care for Medicaid (and Medicare) beneficiaries
becomes more limited when physicians cannot afford to accept them as
patients. Limited access to care significantly impacts the level,
frequency, and location (e.g., emergency room) of care recipients
receive, potentially resulting in increased costs and poorer health
outcomes. The AMA supports setting Medicaid payment rates at a level
that encourages widespread physician participation in the program.
The AMA supports providing tax credits or subsidies that are
inversely related to income, refundable, and payable in advance to low-
income individuals who need financial assistance to purchase private
health insurance.
Individuals and families who can afford coverage should be
required to obtain it. Those earning more than 500 percent of the
Federal poverty level should be required to obtain at least
catastrophic and preventive coverage, or face adverse tax consequences.
Check with Rob about signalling that this threshold should be lowered
as other reforms are implemented to increase the affordability of
health insurance for those earning less than 500 percent of FPL.
Those who cannot afford it and do not qualify for public
programs should receive tax credits for the purchase of health
insurance.
Senator Dodd. Thank you very much.
Dr. Scheppach.
STATEMENT OF RAYMOND C. SCHEPPACH, Ph.D., EXECUTIVE DIRECTOR,
NATIONAL GOVERNORS' ASSOCIATION, WASHINGTON, DC
Mr. Scheppach. Mr. Chairman, I'm pleased to be here on
behalf of the Nation's governors. I'd like to comment on four
issues in your draft legislation and options paper: insurance
regulation, gateways, Medicaid, and implementation.
With respect to insurance reform, NGA is supportive of the
framework included in the draft legislation which has the
Federal Government setting market rules while giving States
time to conform but also leaving the overall State regulatory
structure in place.
There are a number of technical issues or problems in the
current draft with respect to grandfathering in individuals and
allowing providers to sell nonqualified plans outside the
gateway. These are potential impediments to the market. It's
also true that the draft is unclear whether the rate plans are
maximum or minimums that States can exceed.
With respect to the State role in gateways, NGA is
supportive of this structure and I believe States can make it
work well.
We do have some concerns regarding the ability to integrate
health IT into the gateway within 4 years and there are also
some concerns about the degree of Federal oversight. The bottom
line, however, is that the State role in creating and designing
gateways is appropriate.
On Medicaid, it seems that expanding to a 150 percent of
poverty is too high. It would bring in another 18 million into
Medicaid, bringing the total up to 76 million.
We also have a problem with providing temporary financial
assistance for the expansion. States are struggling to fund the
existing program and therefore need permanent financial
assistance.
While we support choice of individuals in Medicaid and
SCHIP, we are concerned about whether we would have to continue
EPSDT and all the wrap-around services if these populations
were to go through a gateway.
Overall, it may be better to leave this issue to the Senate
Finance Committee as opposed to this committee.
Finally, with respect to implementation, we appreciate the
State grants to build capacity and the flexibility for States
to implement when ready. However, if the final bill includes
individual mandates and corporate mandates and tax credits for
small business, work needs to be done to make sure that these
are synchronized by States.
It's important to perhaps set several benchmarks and
certifications of governors when the insurance market is ready
to receive the gateway and when subsidized populations come in
needs to be synchronized with the mandates and so on. It seems
to me additional work needs to be done in terms of the
implementation.
I thank you, and I look forward to working with the
committee.
[The prepared statement of Mr. Scheppach follows:]
Prepared Statement of Raymond C. Scheppach, Ph.D.
Summary
NEED FOR COMPREHENSIVE REFORM
Governors understand the vital role that health plays in
productivity, competitiveness and quality of life and have made
providing cost-effective health care to their citizens a top priority.
Given its unsustainable course, significant reforms of the health care
system are necessary. Health reform proposals must recognize that
changing any one component will have direct and indirect impacts on
other aspects of the health care system, and therefore, reform must
move on parallel tracks to expand coverage, improve quality, and
contain costs.
GOVERNORS' VIEWS ON HEALTH CARE REFORM
Medicaid. The primary Medicaid issue for most Governors is how the
expansions will be financed. Governors oppose changes to Medicaid that
result in unfunded mandates and therefore any additional costs must be
100 percent federally financed. Because future projections of State
fiscal capacity show weak growth in the long run, a permanent increase
in the Federal share of the program is also necessary. The other key
issue for Governors is how Medicaid will be operated. The program needs
greater State flexibility, not less. For example, States need greater
flexibility to develop evidence-based benefit packages.
Long-Term Care and the Dual Eligibles. Long-term care must be a
robust component of health care reform. Reforms should include greater
State flexibility and financial incentives within Medicaid to operate
home and community-based services programs. However, true long-term
care reform must acknowledge that Medicaid cannot continue to provide
the majority of services. Governors support the provisions creating
more options and tools for States to improve care for the dual
eligibles and reduce overall government costs for their health care at
the same time.
State Regulatory Authority. State authority to regulate insurance
must be preserved. While States are supportive of having the Federal
Government establish certain insurance market reforms on such issues as
the individual mandate and guaranteed issue, health care reform should
not diminish or impede the long standing establishment of State
regulation of health insurance. States need to maintain the authority
to: protect consumers; ensure solvency of insurance plans and licensure
of providers; and enact more stringent rating rules and other insurance
laws above established Federal minimums.
Support for State-Based Connectors or Other Exchange Mechanisms.
States should have the ability to design the structure, specify the
functions, and determine how insurance products operate within the
exchange. Exchanges need to be established, operated, and regulated at
the State, not Federal, level. States should also be able to choose to
participate in a voluntary multistate exchange. No more than one
exchange should be allowed to operate in any given State in order to
avoid behavior based on risk avoidance. State authority to collect
health insurance premium taxes must be preserved. There should be
Federal support for the start-up costs for State and multi-state based
exchanges.
Transition Periods. Significant health care reforms require a
lengthy process of State, Federal, and market changes. These cannot be
accomplished overnight.
______
Mr. Chairman and members of the committee, my name is Ray
Scheppach, and I am the Executive Director of the National Governors
Association. I appreciate the opportunity to be a part of this panel on
behalf of the Nation's Governors to discuss health reform and
specifically the important issues involving health care coverage. We
are prepared to work with Federal policymakers to ensure that reforms
are workable, cost-efficient, and sustainable over the long-term.
NEED FOR COMPREHENSIVE REFORM
Governors understand the vital role that health plays in
productivity, competitiveness and quality of life and have made
providing cost-effective health care to their citizens a top priority.
Given its unsustainable course, significant reforms of the health care
system are necessary.
More than 45 million Americans are currently uninsured, and
millions more are underinsured. Achieving greater access to affordable,
quality health care is a critically important goal. However, health
reform proposals must recognize that changing any one component will
have direct and indirect impacts on other aspects of the health care
system, and therefore, reform must move on parallel tracks to expand
coverage, improve quality, and contain costs.
GOVERNORS' VIEWS ON HEALTH CARE REFORM
Within the discussion on health care coverage, we wish to share the
views of governors in five basic areas:
1. Insurance Regulation
2. Medicaid
3. Exchange Mechanisms
4. Long-Term Care and the Dual Eligibles
5. Transition Timelines
1. Insurance Regulation
While States are supportive of having the Federal Government
establish certain insurance market reforms on such issues as guaranteed
issue, health care reform should not diminish or impede the long
standing establishment of State regulation of health insurance.
States strongly encourage Federal policymakers to avoid measures
that would pre-empt stronger State laws and regulations, and urge that
any Federal standards operate as floors rather than ceilings. Among the
many regulatory authorities that should remain under State
determination are to ensure the solvency of health insurance plans, and
the enforcement of marketing requirements on those plans; the proper
licensure of providers; and the protection of consumer rights and
benefits.
2. Medicaid
Governors recognize Medicaid's important role in meeting the needs
of our most vulnerable populations and they are committed to
modernizing the program so that it better responds to their needs.
There are several aspects of this transformation that I wish to
highlight.
Governors understand that proposals under consideration would
eliminate the categorical nature of the Medicaid program for
individuals under a certain income threshold. While there is a
reasonable case for streamlining eligibility policies, proposals to
mandate a significant expansion of the Medicaid program raise important
questions and some concerns.
Medicaid (Costs)--First of all is the cost. Governors oppose
changes to the Medicaid program that will result in an unfunded mandate
imposed on the States. Any increase in the mandatory minimum
eligibility threshold will cost States tens of billions of dollars per
year. States must take into consideration not only the actual cost of
including additional individuals on the rolls, but also the complex
interaction of reimbursement rates and access.
With any coverage expansion, States must consider the direct and
indirect impact on provider reimbursement rates as well as health care
workforce capacity, particularly primary care providers. There simply
are not enough providers willing to treat additional Medicaid enrollees
with complex conditions and situations at current reimbursement rates.
Currently, Medicaid reimbursement rates average 72 percent of Medicare
rates nationwide, and Medicare rates are often significantly lower than
rates paid by private insurance. Those States that have already
experimented with expanding Medicaid coverage broadly have demonstrated
that Medicaid reimbursement rates must be increased to approximately
Medicare rates to ensure access.
Combining the existing program expenditures with those required to
meet new requirements and needs, without other changes to the program
or adequate Federal funding, could overwhelm States' budgets. Our
initial estimate of the State impact of the Medicaid expansion as
described in the Senate Finance Committee's proposal, including the
reimbursement rates increases that would be necessary to ensure access
would cost tens of billions of dollars per year in State funds alone.
This would represent a significant percentage of total State general
revenues.
Finally, Medicaid has become the Nation's de factor source of long-
term care coverage as well as a critical source of coverage for
individuals eligible for both the Medicare and Medicaid program--known
as the dual eligibles. I will discuss those two issues later, but it is
critical to remember that Medicaid's continued coverage of these
responsibilities may be fiscally incompatible with an increased role in
coverage of all low-income Americans.
States are in dire financial straits now and any additional costs
in the short run must be 100 percent federally financed. Furthermore,
future projections of State fiscal capacity show a slow recovery and
weak growth in the long run. This will necessitate permanently
increasing the Federal share of the program to account for not only the
increased eligibility and reimbursement rates, but also the demographic
trends for long-term care, which alone could bankrupt the States.
Medicaid (reforms)--States would also like to work with Federal
policymakers to do more to streamline the Medicaid program and
eliminate cumbersome requirements which make the program difficult to
administer and sometimes work against the interests of both
beneficiaries and taxpayers. For example, the committee's proposals
seek to limit the use of categorical eligibility determinations, but
still leave in place a patchwork system for determining eligibility for
the program and for specific services.
Should Federal policymakers approve mandatory income eligibility
changes, these must be balanced by the pressing need to modernize the
Medicaid program as well as establish a path to incorporate State
innovations as permanent parts of the State Medicaid plan. States
require new flexibilities to administer a more efficient Medicaid
program that better meets today's needs of low-income and vulnerable
populations and reduces costs for both States and the Federal
Government.
Specifically, States support providing new flexibility to develop
evidence-based benefit packages. This could minimize complexity in
determining which services are medically necessary. States need
flexibility to determine which services are purchased and how they are
delivered. This would help ensure that expansion populations have
access to the Medicaid services they need while providing States
flexibility to improve the value of services offered to beneficiaries
and manage costs. In addition, if the exchange is used to connect any
low-income population to Medicaid coverage, new State flexibility will
be needed to break down barriers to building systems of care and
supporting care coordination.
3. Health Insurance Exchanges
A properly designed health insurance exchange can help correct
inefficiencies in the existing health insurance markets and should be
considered in the context of other proposed reforms. If Federal
policymakers adopt the exchange concept, States support the following
approaches for developing the exchange framework:
Exchange mechanisms should be established, operated, and
regulated at the state-level. States also should retain the right to
establish and participate in no more than one multistate-based
exchange. Enhancing the ability of States to establish such mechanisms
could help realize efficiencies in the health insurance marketplace as
well as coordination between Medicaid and other subsidized populations.
The number of exchanges in a State should be limited to
one and no other exchange should pre-empt, compete, or interfere with
State and multistate-based exchanges. The presence of multiple
exchanges in a State is likely to perpetuate competition based on risk
minimization.
State flexibility is needed to design the structure,
specify the functions, and determine how insurance products operate
within a marketplace that has an exchange. This state-based approach
can minimize disruption in the marketplace, ease the transition of
market reforms for all stakeholders, leverage existing State
infrastructure and public-private partnerships, and avoid disruption of
the reforms already underway in some States.
Provide Federal support for start-up costs for State and
multistate-based exchanges.
Preserve the right of States to collect health insurance
premium taxes on insurance businesses offered through the exchange.
4. Long-Term Care and the Dual Eligibles
It is clear that Medicaid can no longer be the financing mechanism
for the Nation's long-term care costs and other costs for individuals
eligible for Medicare and Medicaid--known as the dual eligibles. The
demographic changes and escalating costs make it critical for States to
begin to transition to the Federal Government much of their current
financial responsibility in Medicaid for financing of long-term care.
As stated in my testimony to the Subcommittee on Health of the Finance
Committee earlier this year, postponing the discussion on long-term
care perpetuates the fragmented system of care that exists today.
Efforts to improve the financing mechanisms, care coordination and
quality of long-term care services can be complementary and very
important in the efforts related to strengthening the rest of our
health care system.
Additionally, more than 7 million Americans are dually eligible for
full Medicare and Medicaid benefits, and nearly 2 million others
receive financial assistance to cover out-of-pocket costs, such as co-
payments and deductibles. These individuals represent just 18 percent
of Medicaid's caseload, and despite the fact that they are fully
insured by Medicare, a disproportionate percent of all Medicaid
expenditures is consumed by filling in the gaps in Medicare services.
In fact, they are responsible for over 42 percent of all Medicaid
expenditures and 24 percent of Medicare expenditures ($250 billion in
fiscal year 2008).
Health care reform must include a streamlining of the current
dysfunctional silos that dual eligibles currently access. There are at
least two options for approaching this challenge. Full federalization
of financing the care for this population would serve many policy
goals, including creating enormous efficiencies and savings for both
States and the Federal Government and treating the most medically
fragile citizens in a holistic manner that dramatically improves the
quality of their health care.
Alternatively, if the Federal Government does not provide the
financing to improve the care of these beneficiaries, provide States
with the tools to do so. Despite recent State and Federal efforts to
address structural problems, the existing system for dual eligibles is
predominantly a fragmented, uncoordinated, and inefficient system of
care. Misaligned benefit structures, opportunities for cost-shifting,
and unresolved tensions between the Federal and State governments as
well as an uncoordinated system of care for beneficiaries remain.
Specifically, States must be credited for generating savings to
Medicare when making Medicaid investments for this population. States
also should have a certain level of influence over the coverage and
financial decisions being made for the duals. And certain
administrative rules and policies between Medicare and Medicaid must be
streamlined to improve care for the dual eligibles.
In addition to specific reforms to improve care for the dual
eligibles, a stronger, more equitable partnership between Medicare and
States is essential to the success of health reform efforts. Medicare
has significant influence in shaping cost and coverage decisions in the
public and private domain and thus has a tremendous impact on health
care trends. Yet Medicare largely is not engaged in State specific
health reform initiatives which involve both public and private
stakeholders.
5. Transition Timetable
Federal policymakers should work with States and the territories to
determine an appropriate transition and implementation timeline for all
health care reform changes. This includes changes both to State
administered programs such as Medicaid and the Children's Health
Insurance Program (CHIP), as well as any national reforms to the health
insurance marketplace. It also may be helpful to have early planning
grants to States while the Federal Government promulgates rules. It
also would involve general certifications by governors at given
benchmarks.
Significant health care reforms will require a lengthy process of
State, Federal, and market changes. This includes sufficient transition
time for any coverage expansions, the proposed removal of income
disregards, changes to benefit package requirements and services, new
requirements which may involve a health insurance exchange entity, and
other changes being considered.
States also urge Federal policymakers to consider the health care
workforce capacity, particularly with regard to the implementation of
any coverage expansions that may be approved. Proposed coverage and
delivery system reforms must be coupled with Federal support for
developing and retaining health care workers who are prepared to
deliver quality care across the health care spectrum.
CONCLUSION
Any reforms approved at the Federal level must allow States
flexibility to adapt to local conditions and retain the primary State
roles of administration, regulation, and consumer protection. It is
also important that this framework support the role that States play in
innovations around delivery system reform and value-based purchasing.
If a Federal framework is developed it should include sustainable,
sufficient financing mechanisms (through a combination of public
programs and private sector incentives) to ensure that coverage and
delivery system reform goals can be met. On their own, States are not
well-positioned to sustain increases in their health care budgets.
Governors look forward to working with our Federal partners on a
bipartisan basis to address these important issues.
Senator Dodd. Thank you very, very much.
Mr. Shea.
STATEMENT OF GERALD SHEA, ASSISTANT TO THE PRESIDENT, AFL-CIO,
WASHINGTON, DC
Mr. Shea. Thank you, Senator Dodd, and thank you and
Senator Enzi and all the members of the committee and, of
course, Chairman Kennedy, for the commitment you have shown and
for your focus on this issue.
It is past time that we take up this issue and I think we
have a historic moment before us that we dare not let pass.
The current system, as you said, Senator Dodd, is truly
unsustainable, and America's unions have long supported a
social insurance model for healthcare provision and if we had
our druthers that's what we'd be focusing on today, but we've
also had a lot of experience in bargaining health benefits.
We negotiate health benefits every year for some 40-million
Americans and so if you're going to base this on the
employment-based system with public supplements, then I want to
comment on a few points that we think are essential, and my
main message is that you need to focus on stabilizing
employment-based coverage because right now employment-based
coverage has survived surprisingly long under the cost
pressures but it won't survive forever and in fact we're losing
people out of employment-based coverage very rapidly and other
people are just shouldering enormous costs.
You have to start, first of all, with cost containment and
I want to congratulate the committee for, in your draft,
addressing what to us are absolutely crucial long-term
structural issues in healthcare.
We need to reorganize healthcare, to modernize it, and to
improve the delivery so it is focused on quality and your draft
really reflects a lot of what has been done not by government
particularly, although government's been involved, but by
practitioners in the health field and what we've learned in
that process over the last 10 years. There have been tremendous
strides made in the last 10 years in improving the way
healthcare is delivered and they have great implications not
just for quality of care but also for efficiency and cost long-
term.
The second point on cost containment is, we think that, as
soon as feasible, an immediate implementation of a public
health insurance plan option is essential.
We have to put competition into the insurance market. The
private insurers have had plenty of opportunity to do this on
their own and they have failed to do it. I take at their word
that they want to do different and they're ready to change. I
think we need, as the president says, a way to keep them
honest.
Second, in terms of stabilizing employment-based coverage,
we have to have everybody participate. All workers should
participate and all employers should participate. Most
employers do now, as you know well, and those employers who
don't largely are in markets where most employers don't provide
coverage. It's not as if you're going to be disadvantaging
those employers by making or asking them to provide coverage.
They'd be in the same set of employers and, of course, many of
them are low-wage small employers who would require subsidies
and that would be absolutely appropriate, but it's essential
from our point of view to have everyone in.
I would say, by the way, that we particularly are pleased
with the provisions in the bill for pre-Medicare retirees that
you've put in. Employers who've been doing the good job of
providing healthcare for their retirees need relief from high
health costs and your re-insurance mechanism is one way, we
think it's a very good way to go at this issue and we would
congratulate you.
Last, in terms of financing, I just want to note that
there's much talk today about using health benefits and taxing
them as the basis for financing.
There is no surprise why this is being discussed. It is a
very large pot of money, as you know. It's the largest loss to
the Treasury, larger than the home mortgage deduction. It's
just a very large amount of money. But bear in mind that the
people who have sleepless nights over being able to afford
healthcare coverage now often have health insurance that is too
expensive for them to use. To ask them to pay more money for
that health coverage is not only unfair, we think it is really
politically very volatile.
Plus, as employer after employer has told us and testified
at various hearings before Congress, it is the sort of thing
that really could destabilize the entire employment-based
market.
With that, I thank the committee for your attention and
appreciate the opportunity to present to you.
[The prepared statement of Mr. Shea follows:]
Prepared Statement of Gerald Shea
Thank you for the invitation to participate in this roundtable
discussion and offer our perspective, on behalf of working women and
men, on the committee's draft legislative options for health care
reform. The AFL-CIO represents 11 million members, including 2.5
million members in Working America, our new community affiliate, and 56
national and international unions that have bargained for health
benefits for more than 50 years. Our members have a significant stake
in health care reform as consumers and, for some, as sponsors of
coverage and health care workers.
Even as we continue to negotiate benefits for our members, American
labor has long advocated for health care for everyone, not just those
in unions or with stable jobs. For over 100 years, America's unions
have called for universal coverage to health care built on a social
insurance model, an approach that has been proven effective and
efficient across the globe and one we have employed successfully for
decades to provide income security and health security for the elderly.
The AFL-CIO was the leading lobby force behind the enactment of
Medicare in 1965, and we have backed many legislative efforts since
then to expand coverage. We continue to believe that a social insurance
model is the simplest and most cost-effective way to provide benefits
for all.
It is in our national interest to assure health coverage for
everyone, from active workers to retirees, to those who lose their jobs
and those unable to work due to disability. Clearly, it would make
sense to cover everyone through the same program and system of
coverage. We regret that the social insurance approach to health care
has been marginalized to a great extent in the health care debate in
Washington, even as it remains very popular around the country.
But our health care situation is too problematic and too important
for those of us lucky enough to have good coverage to debate what would
be the best approach to health reform. And health reform has been
stymied for far too long by those who advocate one approach and reject
all the others.
Health care costs are hobbling American business and bankrupting
American families. Even those with good coverage worry about what will
happen next year if cost increases remain unchecked as they have for
decades.
It's time--indeed, its past time--for the comprehensive health care
reform that most in Congress and our President have called for.
So, in 2009, our members are ready to stand with President Obama
and Congress for a plan that builds on what works in our system while
creating new options for obtaining coverage and lowering health care
costs for families, business and government at all levels.
On behalf of America's working families, I want to thank the
committee, especially Chairman Kennedy, Senator Dodd, and Ranking
Member Enzi, for the leadership, commitment and determination you've
shown in assuring quality, affordable health care for all.
America's working families need comprehensive reform to constrain
the cost increases that are killing good jobs, to ensure people who
currently have coverage can afford it in the future, to bring everyone
into coverage, and to modernize the delivery of health care in America.
The draft ``Affordable Health Choices Act'' is a very strong start on
that path.
Employer-based coverage is the backbone of our health care
financing and coverage system. The majority of non-elderly Americans
obtain coverage through employer-sponsored health plans. And despite
its flaws--including higher cost sharing and the hassles and outright
denials they have come to expect from insurance companies--most
Americans are happy with their employer-based health benefits, in large
part because they know it is still far superior to being on their own
in the individual insurance market. Building on this core piece of our
health care system will both minimize disruption and garner greater
public support. Our comments on the options will focus on this element,
particularly since it is an area on which the committee has said they
are seeking input.
We strongly support the committee's proposal to stabilize the
employment-based system with ``Shared Responsibility'' and a
requirement that employers either offer coverage to their workers or
pay into a fund to subsidize coverage for uninsured workers. There are
significant benefits of this approach, sometimes called ``pay or
play.'' First, it will create a more level playing field between firms
that offer health benefits and those that don't. It will also eliminate
the cost shift that occurs when employers offering good family coverage
see their costs rise when they provide coverage for spouses employed in
firms that either offer too costly coverage or no coverage at all. To
the extent policymakers may choose to construct pay or play in a way
that allows families to be enrolled in the same employer plan, we
believe one approach to consider would be to require a dependent's
employer to make a contribution to the employer covering the whole
family.
Furthermore, given other policy elements under consideration and
the Federal fiscal challenges affecting health reform, pay or play will
be a necessary component if health reform is to succeed. If reform
includes a new requirement that all individuals obtain coverage,
expanding employer-based health benefits will be key to making coverage
affordable for workers that do not qualify for income-based public
subsidies. It will also generate revenue to help fund subsidies for
low-income individuals and extend coverage to many of the uninsured
since most are in families with at least one full-time worker. Finally,
without a requirement that employers participate in the new system,
health reform that includes publicly subsidized coverage for low-wage
workers will prompt many employers of low-wage workers to eliminate
their coverage to take advantage of public subsidies. The resulting
increase in Federal costs may well doom reform efforts.
The design issues involved in a pay or play approach are critical,
as they can create both opportunities and limits. Employers opting to
``play'' must be required to offer benefits that are at least adequate
enough to allow their employees to meet an individual requirement to
purchase coverage. The ``play'' test should also require employers to
make a defined minimum contribution to the premiums for that coverage.
For those firms not offering coverage, a ``pay'' requirement could
take a number of forms, from a payroll tax to an amount per worker, and
there are tradeoffs associated with each. Setting the contribution rate
based on payroll would lessen the impact on low-wage workers and would
be a better measure of a firm's capacity to contribute to health
benefits than the number of employees. Alternatively, a requirement
tied to each individual employee will be more effective at reaching the
entire workforce than a requirement tied to a percentage of total
payroll, since it will protect against an employer meeting the percent
of payroll test by offering relatively generous benefits to only a
share of their workforce. However, such an approach, if applied only to
full-time workers, would create incentives for employers in certain
sectors to hire part-time workers or reduce workers' hours to minimize
the application of the contribution rate. We support the approach
included in the summary of legislative options, in which the
contribution rate is prorated for part-time workers in order to protect
workers and to ensure adequate revenue for subsidized coverage.
Policymakers will also have to prescribe which firms are covered
under an employer obligation to offer coverage. While many proposals
exempt small businesses, since those firms face higher premiums in the
current market, we believe this ignores important factors. First and
foremost, the number of employees is a poor predictor of a firm's
ability to pay: a doctor's office or small law firm may have more
capacity than a larger restaurant or store. A carve out for small firms
also creates a potentially costly hurdle for firms near the threshold
to hire additional employees. In addition, the committee's legislative
options include a proposal that would allow small businesses to meet
the ``play'' requirement by allowing them to buy coverage that meets
fair rating rules through a newly constructed ``Gateway,'' including a
public health insurance plan that would make coverage more affordable
and a proposal to give low-wage employers additional subsidies. If
policymakers choose to treat small business differently in the
application of pay or play, we would prefer an approach that sets the
threshold based on payroll rather than number of employees. If set at
an appropriate level, a payroll threshold could effectively eliminate
small, low-wage firms from the employer requirement while protecting
against the cliffs associated with a requirement based on number of
employees.
Opponents to including an employer requirement in health reform
will raise objections based on new costs for firms. However, the vast
majority of firms will likely meet any new coverage requirement and the
impact on businesses that would be affected would vary depending on
whether they are currently offering health coverage or if they are
offering coverage that is inadequate. Those firms that do not offer
health benefits would be directly affected by a new ``pay''
requirement, and others will have to spend more on the benefits they
now offer in order to meet the requirement. These objections are
misplaced.
Opponents may argue that employers subject to new health care costs
may be less likely to raise wages in the short term; however, the
widely endorsed economic view is that these employers would still raise
wages over the long term. Opponents may also argue that employers
subject to new health care costs may eliminate jobs or hire more
slowly. However, we can expect results similar to the experience with
raising the minimum wage. Recent studies of minimum wage raises have
found no measurable impact on employment.\1\ Furthermore, economists
often note that employers faced with higher costs under a minimum wage
increase can offset some of the costs with savings associated with
higher productivity, decreased turnover and absenteeism, and increased
worker morale.\2\ We can expect similar results with a pay or play
requirement.
---------------------------------------------------------------------------
\1\ A. Dube, T.W. Lester, M. Reich, ``Minimum Wage Effects Across
State Border: Estimates Using Contiguous Counties,'' Institute for
Research on Labor and Employment Working Paper Series No. iiwps-157-07,
August 1, 2007.
\2\ J. Bernstein, J. Schmitt, ``Making Work Pay: The Impact of the
1996-1997 Minimum Wage Increase,'' Economic Policy Institute (1998); D.
Card, A. Krueger, ``Myth and Measurement: The New Economics of the
Minimum Wage,'' Princeton University Press, 1995.
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There are other factors that will compensate for any increase in
employer cost. First, the majority of firms that currently do not offer
health benefits are in markets where their competitors also do not
provide benefits, so they would see increases similar to those of their
competitors. Second, firms that will pay more for health care than they
currently do will see at least some of those costs offset by a
healthier workforce. Third, broadening the pool of employers that would
contribute to health financing could improve competition among firms
within sectors by creating a more level playing field based on health
benefit costs. Fourth, to the extent there is currently a shift of
uncompensated care costs to employer-sponsored plans, all firms now
offering coverage will see their costs decrease as we expand coverage.
Finally, our economy as a whole will benefit from more rational job
mobility and a better match of workers' skills to jobs when health
benefits are no longer influencing employment decisions.
Another element on which the committee is seeking input is the
inclusion of a public health insurance option, which we strongly
support. A public health insurance plan will be key to holding down
costs for consumers and government. It will make coverage more
affordable with lower administrative costs and will inject needed
competition into an imperfect market. And it can help drive delivery
system reforms in conjunction with private payers, as Medicare has done
with the quality improvement work underway already. Two of the options
included in the committee's summary in our view are not necessarily
mutually exclusive. We support a level playing field for a public
health insurance option to compete alongside private plans but believe
the payment schedule should be set at a fair and reasonable level that
ensures access to providers. The key will be to not hamstring the
public health insurance plan so that it can't produce the savings or
competition that are essential to the success of the plan and health
reform.
In addition, we applaud the committee's comprehensive plan to
foster innovation in health care delivery by building on the
significant quality measurement and improvement underway within health
care in recent years. Title II of the draft legislation, ``Improving
the Quality and Efficiency of Health Care,'' provides a blueprint for
how we can greatly expand this work and take a giant step towards a
truly 21st Century health system. It would put into place a system of
broad consultation with consumers, purchasers, physicians, insurers and
health care organizations in setting national priorities for health
care quality improvement and in implementing standardized measures of
quality throughout health care. With quality measurement as a
foundation, it empowers those who deliver care, pay for care and
oversee care to work with those who receive care to innovate and
modernize health service delivery.
The draft legislation also calls for the use of quality measurement
and improvement processes in private health insurance. There is very
strong support for this among insurers and purchasers. I would call the
committee's attention to the need for the legislation to link the
quality approaches in the private sector to those you've proposed for
the public sectors. We believe this could and should be more explicit
in the final legislation than in the draft released earlier this week.
Title II provides a comprehensive framework for quality measurement and
improvement that should--indeed must, in order to drive the kind of
systemic change that is necessary for improvement to take place--be
applied to private as well as public purchasing of coverage.
Beyond these elements, there are laudable provisions that lay the
groundwork for comprehensive, affordable coverage for all. The market
reforms for all buying coverage in the individual and group market will
make coverage more fair, transparent, affordable and secure. We fully
support the prohibition on rating based on health status, gender and
class of business, as well as the prohibition on the imposition of pre-
existing condition exclusions, guaranteed issue and renewal, and
greater transparency and limits on plans' non-claims costs. While we
would prefer a prohibition on rating based on age, we believe the
proposal to limit age rating to 2 to 1 is a strong alternative. Any
variation allowed above that limit threatens to make coverage
unaffordable for older individuals.
We strongly support the proposal to establish a temporary,
federally funded re-
insurance program for employers that provide health benefits to
retirees age 55 to 64. This provision represents a positive initiative
to address the health care needs of this vulnerable population. We also
support the Gateway proposal as a mechanism for simplifying enrollment
in coverage and applying standards for plans regarding benefits,
affordability, transparency and quality. We applaud the committee's
proposal to extend Medicaid coverage to all under 150 percent of
poverty, with sufficient resources to States to offset new costs, and
to provide subsidies for coverage to those with incomes up to 500
percent of poverty. We also support the inclusion of a new Medical
Advisory Council to make recommendations for evidence-based benefits
that plans in the Gateway would be required to cover. And we support
the inclusion of long-term care services and supports and in
particular, the Community Living Assistance Services and Supports
(CLASS) Act.
I want to offer one final note of caution. Some of your colleagues
in the Finance Committee are considering changes to the current
exclusion of health benefits from income and payroll taxes. We believe
this would be a step in the wrong direction. A cap on the tax exclusion
would disproportionately affect firms with higher cost plans because of
factors other than the level of coverage, including a higher percentage
of older workers, higher risk in the industry and firm size. There is
also likely to be some employer response even to capping the exclusion,
including increases to employee cost-sharing to a level where they may
become unaffordable for low-wage workers. Finally, capping the tax
exclusion would undermine the place where most Americans now get their
coverage before we have built a proven effective, sustainable
alternative to employer-based plans.
Thank you for the opportunity to offer our comments and participate
in this roundtable discussion. We commend the committee for your
commitment to enacting legislation that will guarantee quality,
affordable health care for all. We agree that we can no longer wait for
reform--our economy depends on the success of reform--and we stand
ready to help move this legislation forward. We thank you for the
leadership you are providing on this vital issue.
Senator Dodd. Thank you very much.
Mr. Rivera, thank you for coming.
STATEMENT OF DENNIS RIVERA, CHAIR, SEIU HEALTHCARE, SEIU,
WASHINGTON, DC
Mr. Rivera. I'm here today on behalf of 2.2 million members
and their families of SEIU, members like Pat DeLong of Libby,
MT, who works as a homecare aid.
Pat and her husband Dan were ranchers but had a hard time
finding affordable coverage and were uninsured when he was
diagnosed with Hodgkin's Lymphoma in 2000. The medical bills
pile up for Pat and Dan and eventually forcing them to sell the
land they love and that they had been in Dan's family for over
four generations. Dan succumbed to cancer and Pat remains
uninsured.
This is America. We can, we must do better for hard-working
families like the DeLongs. The American people will judge what
you do on healthcare reform based on whether it provides Pat
with the choice of affordable quality private and public
healthcare coverage.
Reform will be meaningless if working people cannot afford
to purchase coverage or cannot afford to get the care they need
once they are covered. American families must be protected for
unaffordable out-of-pocket costs and unaffordable premiums.
The reality of what our broken healthcare system is costing
American families is staggering. Over 60 percent of
bankruptcies filed in 2007 were largely attributable to medical
expenses and nearly 80 percent of those who filed for
bankruptcy had insurance coverage. Healthcare costs must be
reined in for all Americans. The best way to make this happen
is through a public health insurance plan.
Give Americans a choice: the choice to keep their current
plan or to join a public health insurance option that
encourages competition and guarantees everyone access to
better, more affordable healthcare solutions.
A public health insurance plan not only gives Americans
more choices, it will drive down costs for working families,
small businesses, everyone, by increasing bargaining power and
spreading risk, providing families savings and putting
resources directly toward healthcare.
Business, government and individuals must come together and
share responsibility in solving America's healthcare crisis.
Building on the employer-based system will help people keep
their healthcare if they like it. One in every five American
workers are currently uninsured, having increased by about 6
million in 10 years.
Employers who choose not to provide coverage for their
employees are putting responsible business at a competitive
disadvantage and increasing costs for everyone. Employers
should offer and continue to contribute meaningful coverage for
their employees or pay into a fund, a pay or play requirement.
A share responsibility will have minimal disruption to our
economy while providing greater security for worker stability.
Small businesses should be guaranteed protection to help
control costs and keep them competitive. Small businesses
should receive tax credits and the smallest businesses should
be exempt.
True healthcare reform means giving Americans the freedom
of choice to keep their current plan, including their current
doctor, or choose another private plan or to choose a quality
affordable public health insurance plan. True health reform
means families are guaranteed coverage--guaranteed coverage if
they had an illness 5 years ago or some other pre-existing
condition, guaranteed coverage if they are laid off and can't
afford payments, or guaranteed coverage, if they can't afford,
that provides quality care.
True healthcare reform means individuals, government and
business all share in the responsibility for a uniquely
American solution that gives Americans peace of mind that they
will always have quality affordable healthcare.
The American Healthcare Choice Act is an opportunity to put
policies aside and stand up for the American people by
increasing their healthcare choices and providing them with
quality care while addressing the cost crisis that is creeping
at our economy and driving working families into financial
ruin.
Thank you.
Senator Dodd. Thank you very much.
Katherine Baicker.
STATEMENT OF KATHERINE BAICKER, PROFESSOR OF HEALTH ECONOMICS,
HARVARD SCHOOL OF PUBLIC HEALTH, BOSTON, MA
Ms. Baicker. Yes. Thank you for the opportunity.
The focus on both coverage and value that the committee has
I think is crucial to the success of any health reform and
high-quality, high-value care is not just about insurance but
it's about the healthcare that Americans receive even when they
are insured.
There has been a lot in the news lately about the
geographic variation that we see in healthcare and having
started my research career at Dartmouth, I'm a huge fan of that
body of work that shows us that even people with insurance
coverage have very different quality of care and have a very
different amount of money spent on their healthcare to achieve
very similar outcomes. That highlights for us the importance of
driving people into high-value insurance that provides high-
value care.
Dennis and I sat together on a commission that examined
other inputs into health outcomes, besides healthcare. Public
investments that the bill touches on could be a really key
component in driving better health outcomes for everyone, in
addition to the health insurance reforms that you're talking
about.
High-value health insurance means ensuring that everybody
has access to the crucial financial protections that insurance
provides, not just today, for expenses you might incur because
of a sudden illness but against the risk of incurring high
costs for years going forward if you have an expensive disease
and that involves innovative disease management and innovative
insurance products that people can choose among to meet the
needs of their families as best they can.
That also means, I believe, providing a social insurance
component that transfers risks between high-risk groups and
low-risk groups, so that groups that face high and persistent
health costs are subsidized, but that needs to be coupled with
risk protection on the back end for insurers so that they don't
have an incentive to avoid enrolling high-risk enrollees and so
that those high health cost people, once insured, are
guaranteed access to high-quality services, so that insurers
continue to provide them access to the best specialists and the
best care that they can in the context of high-value disease
management.
Achieving that high-value system is both about the
insurance product that people get and the care that they
consume when they're in it and public dollars can drive higher
value in both of those dimensions by directing resources toward
care that promotes long happy lives and reducing subsidies for
care that's of questionable medical value.
[The prepared statement of Dr. Baicker follows:]
Prepared Statement of Katherine Baicker
My name is Katherine Baicker, and I am a Professor of Health
Economics in the Department of Health Policy and Management at the
Harvard School of Public Health. I would like to thank Senator Kennedy,
Senator Enzi, and the members of the committee for giving me the
opportunity to participate in this discussion of how we can address the
crucial policy challenge of comprehensive health care reform.
I would like to discuss several general principles about the nature
of health insurance that may be helpful in thinking about the impact of
particular provisions on cost and coverage, including how well
insurance markets pool risk and the value of care delivered. This
testimony is derived in large part from recent academic work with my
colleague Amitabh Chandra that appeared in the journal Health Affairs.
A key distinction can be made between health care and health
insurance. Insurance works by pooling risks: many pay a premium up
front, and then those who face a bad outcome (getting sick, being in a
car accident, having their home burn down) get paid out of those
collected premiums. The premium is the expected average cost of
treatment for everyone in the pool, not just the cost of treating the
sick. Because not everyone will fall sick at the same time, it is
possible to make payments to those who do fall sick even though their
care costs more than their premium. And this is also why it is
particularly important for people to get insured when they are
healthy--to protect against the risk of needing extra resources to
devote to health care if they fall ill.
Uncertainty about when we may fall sick and need more health care
is the reason that we purchase insurance--not just because health care
is expensive (which it is). Many other things are expensive, including
housing and college tuition, but we do not have insurance to help us
purchase them because they are not uncertain in the way that
potentially needing very expensive medical care is. The more
uncertainty there is, the valuable insurance is.
THE PROBLEM OF THE SICK AND UNINSURED
Insured sick people and uninsured sick people present very
different issues of public policy. People who have already purchased
insurance and then fall sick pose a particular policy challenge:
insurance is not just about protecting against unexpected high expenses
this year, but also about protecting against the risk of persistently
higher expenses in the case of chronic illness. This kind of protection
means that once insured, enrollees' premiums would not rise just
because they got sick, but this is not always the case today. In fact,
insurers have an incentive to shed their sickest enrollees, suggesting
a strong role for regulation protecting them. Nor are insurers held
responsible when inadequate coverage raises the costs of a future
insurer, such as Medicare for those over 65. These problems highlight
the limited availability of true long-run insurance offerings, a reform
issue that is often glossed over in the conflation of health care and
health insurance.
Uninsured Americans who are sick pose a very different set of
problems. They need health care more than health insurance. Insurance
is about reducing uncertainty in spending. It is impossible to
``insure'' against an adverse event that has already happened, for
there is no longer any uncertainty. If you were to try to purchase auto
insurance that covered replacement of a car that had already been
totaled in an accident, the premium would equal the cost of a new car.
You would not be buying car insurance--you would be buying a car.
Similarly, uninsured people with known high health costs do not need
health insurance--they need health care. Private health insurers can no
more charge uninsured sick people a premium lower than their expected
costs. The policy problem posed by this group is how to ensure that
low-income uninsured sick people have the resources they need to obtain
what society deems an acceptable level of care and ideally, as
discussed below, to minimize the number of people in this situation.
This highlights one of the many reasons that health insurance is
different from car insurance: the underlying good, health care, is
viewed by many as a right. Furthermore, we may want to redistribute
money from the healthy to the sick, in the same way that we
redistribute money from the rich to the poor. This kind of
redistribution is fundamentally different from private insurance: it is
social insurance, and it is hard to achieve through private markets
alone.\1\ Medicare, which insures the aged and disabled, is an example
of a social insurance program. Private markets can pool risk among
people starting out with similar health risks, and regulations can
ensure that when some members of those risk pools fall ill, insurers
cannot deny them care or raise their premiums, but transferring
resources to people who are already sick and uninsured or transferring
resources from lower health risk groups to higher health risk groups
requires social insurance.
How then do we provide the sick and uninsured with socially
acceptable care? Private health insurance alone is unlikely to achieve
this goal: no insurer will be willing to charge a premium less than
enrollees' likely health costs. Instead, they could be provided with
health care directly or a premium subsidy equal to their expected
health care costs. Alternatively, we could force sick people and
healthy people to pool their risks, such as through community rating
coupled with insurance mandates (to preclude healthy people from opting
out of subsidizing sick ones). These kind of transfers are based on
social choices about redistribution.
The advantage of social insurance programs, including a
nationalized health care system, is that they can achieve
redistribution that private markets alone cannot. They may also provide
benefits with lower administrative costs (although, in the case of
moving to a single payer system, the size of administrative savings
relative to overall health care cost growth is likely to be small).\2\
There are, of course, costs associated with social insurance programs
as well. First, there is the drag on the economy imposed by raising
revenues to finance them. Second, there is the loss of competition,
diverse offerings for diverse preferences, and market discipline that
private provision brings--and that promote higher value and innovation.
This means that the social insurance program may be both expensive and
inefficient, and thus impose an even larger burden on already strained
public budgets. These pressures have, perhaps unsurprisingly, spawned
additional misconceptions that suggest that the costs of expanded
insurance are lower and the benefits higher than the data support.
THE COST OF COVERING THE UNINSURED
A common and deceptively appealing argument for expanding insurance
coverage is that we could both spend less and achieve better health by
replacing the inefficient emergency room care received by the uninsured
with an insurance plan. Unfortunately, this argument finds little
empirical support. ER care for the uninsured is indeed inefficient and
might have been avoided through more diligent preventive care and
disease management. Diabetes treatment is a good example; it is much
cheaper to manage diabetes well than wait for a hospitalization which
requires a leg amputation. Having health insurance may lower the costs
of ER and other publicly provided care used by the uninsured through
better prevention and medical management. But empirical research also
demonstrates that insured people consume more care (and have better
health outcomes) than uninsured people--so universal insurance is
likely to increase, not reduce, overall health spending.\3\
Why does insurance cause greater consumption of health care?
Insurance, particularly insurance with low cost-sharing, means that
patients do not bear the full cost of the health resources they use.
This is a good thing--having just made the case for the importance of
the financial protections that insurance provides--but comes with the
side-effect of promoting greater consumption of health resources, even
when their health benefit is low. This well-documented phenomenon is
known as ``moral hazard,'' even though there is nothing moral or
immoral about it. The RAND Health Insurance Experiment (HIE), one of
the largest and most famous experiments in social science, measured
people's responsiveness to the price of health care. Contrary to the
view of many non-economists that consuming health care is unpleasant
and thus not likely to be responsive to prices, the HIE found
otherwise: people who paid nothing for health care consumed 30 percent
more care than those with high deductibles.\4\ This is not done in bad
faith: patients and their physicians evaluate whether the care is of
sufficient value to the patient to be worth the out-of-pocket costs.
The increase in care that individual patients use because of insurance
has even greater system-wide ramifications. R&D in new medical
technologies responds to the changes in aggregate incentives driven by
health insurance. While these technologies may improve welfare, they
also raise premiums because of larger armamentarium of treatments
available to the sick. There is evidence of these system-wide effects:
when Medicare was introduced in 1965, providers made spectacular
investments beds in high-tech care, and hospital spending surged over
25 percent in 5 years.\5\
Even increases in preventive care do not usually pay for
themselves: in general prevention is good for health, but does not
reduce spending. Some preventive care has been shown to be cost-
saving--such as flu vaccines for toddlers or targeted investments like
initial colonoscopy screening for men aged 60-64--but most preventative
care results in greater spending along with better health outcomes.
Indeed, some money spent on preventive care may not only cost money,
but may be no more cost-effective than some ``high-tech'' medical care.
For example, screening all 65-year-olds for diabetes, as opposed to
only those with hypertension, may improve health but costs so much
(about $600,000 per Quality Adjusted Life Year) that that money might
be better spent elsewhere.\6\
All of this suggests that insuring the uninsured would raise total
spending. This doesn't mean that it would not be money well spent
(which I believe it would be). Spending more to attain universal
insurance is not a problem if it generates more value than it costs,
and the view that health care is a right is not inconsistent with this
framework. First, and sometimes overlooked, is the security that
insurance provides against the uncertainty of unknown health care
expenses. The value of this financial smoothing alone is estimated to
be almost as much as the cost of providing people with insurance.\7\
Second, much of the additional health care that the newly insured would
receive is likely to improve health. (But this is by no means
automatic, for as discussed below, being insured is not enough to
guarantee good health care.) Extending health insurance coverage is
worth it for these reasons--but not because it would save money.
GETTING HIGH-VALUE CARE
Having insurance may increase the quantity of care patients
receive, but it is no guarantee that they will receive high quality
care. A recent study found that Americans received less than 60 percent
of recommended care, including preventive, acute, and chronic care, and
including such low-cost interventions as flu vaccines and antibiotics
for surgical patients.\9\ Beginning with the work of John Wennberg at
Dartmouth, an immense literature in medicine and economics has found
that even among Medicare enrollees, there are enormous differences in
the quality of care received: in fact, in areas where the most is spent
on Medicare beneficiaries, they are the least likely to get high
quality care. The use of mammograms, flu-shots, beta-blockers and
aspirin for heart attack patents, rapid antibiotics for pneumonia
patients, and simple laboratory tests to evaluate the management of
diabetes are all lower in higher-spending areas.\10\ Higher spending is
not even associated with lower mortality, which suggests that more
generous insurance provision does not necessarily translate to better
care or outcomes.
When these results showing the lack of relationship between
spending and quality were first reported there were two predictable
responses by skeptics: that high spending areas had sicker patients who
were (appropriately) less likely to receive these therapies, and that
patients in high-spending had higher satisfaction even if their
measurable health outcomes were the same. Neither claim is supported by
the evidence.
What, then, do patients in high-spending areas get? Evidence
suggests that this higher intensity is driven by greater use of
procedures with questionable clinical value--that may even be
associated with underuse of high value, less-intensive care. Patients
in high-spending areas are no more likely to receive surgery, but see
more specialists more frequently, have more diagnostic and imaging
services, and get more intensive care in the end of the life--none of
which has been shown through clinical trials to improve health.\11\
``Coordination failures'' in delivery may both raise costs and lower
quality, even among the insured. Investments in health services
research can help shed light on how we can consistently deliver higher-
value care.
Thus, while health insurance increases the quantity of care
patients receive, being insured alone is not sufficient to ensure high
quality care. Insuring the uninsured will give them access to the sort
of health care that the rest of us receive: a combination of valuable
care, overuse of some costly interventions with little proven benefit,
and underuse of some vitally important therapies, care that is
sometimes coordinated but often fragmented. This is better than no
care, but it highlights the problem of collapsing the entire debate
about U.S. health care reform down to the issue of uninsurance: health
insurance alone does not guarantee good health care.
THE ROLE OF EMPLOYERS
Employees ultimately pay for the health insurance that they get
through their employer, no matter who writes the check to the insurance
company. The view that we can get employers to shoulder the cost of
providing health insurance stems from the misconception that employers
pay for benefits out of a reservoir of profits. Regardless of a firm's
profits, valued benefits are paid primarily out of workers wages.\12\
While workers may not even be aware of the cost of their total health
premium, employers make hiring and salary decisions based on the total
cost of employment, including both wages and benefits such as health
insurance, maternity leave, disability and retirement benefits.\13\
They provide health insurance not out of generosity of spirit, but as a
way to attract workers--just like wages. When the cost of benefits
rises, wages fall (or rise more slowly than they would have otherwise),
leaving workers bearing the cost of their benefits in the form of lower
wages.\14\
The uncomfortable arithmetic of this wage-fringe offset is seen in
other contexts--for example, workers bear the costs of workers
compensation, and mandated maternity benefits primarily reduce the
wages of women of child-bearing age.\15\ When it is not possible to
reduce wages, employers may respond in other ways: employment can be
reduced for workers whose wages cannot be lowered, outsourcing and a
reliance on temp-agencies may increase, and workers can be moved into
part-time jobs where mandates do not apply. These adjustments are
neither instantaneous nor one-for-one for every person (depending, for
example, on wage rigidities, how much individuals value the insurance
benefit, and how heterogeneous the employees' income and health are)--a
fact that obscures the underlying connection. This also means that the
claimed connection between health care costs and the ``international
competitiveness'' of U.S. industry is murky at best: higher health
costs primarily lower current workers' non-health compensation, rather
than firms' profitability (although the same trade-off cannot operate
in retiree health benefits, making their effects more complicated).\16\
Why, then, do we have a private health insurance system based
primarily on policies offered through employers? There is a preference
in the tax code for premiums paid by employers relative to premiums
paid by individuals or direct payments for health care. This tax
preference drives both the predominance of employment-based policies
and the prevalence of policies with low cost-sharing, because care paid
for in the form of higher employer premiums comes at a lower after-tax
price than care paid for out-of-pocket. Of course, this tie between
employment and insurance comes at a well-known cost: workers who leave
or lose a job risk losing their insurance or facing much higher
premiums, sometimes forcing them to stay in a job to retain health
insurance.\17\ Furthermore, differences in rating regulations in the
large-group, small-group, and individual insurance markets can
undermine risk-pooling, which is particularly harmful for those with
high health costs who must find a new insurance policy.
This is not to say that there are not important advantages to
getting insurance through an employer instead of on the individual non-
group insurance market (especially given the current state of
individual market), including better pricing and risk pooling. The
employer market is the primary mechanism for maintaining cross-
subsidization from low-risk populations to high-risk ones, with tax
subsidies adding an element of social insurance (albeit one that is not
particularly progressive).\18\ It is these benefits that are the main
advantages of access to employer policies, not the fact that employers
nominally pay part of the premium.
EFFICIENT INSURANCE
Greater patient cost-sharing could help improve the efficiency of
health care spending, but it is not a cure-all. It is certainly true
that first-dollar insurance coverage (that is, insurance coverage for
the first dollar of health care expenditures or insurance with very low
cost-sharing more broadly) encourages use of care with very low
marginal benefit and that greater cost-sharing would help reduce the
use of discretionary care of questionable value. But there is also
evidence that patients under-utilize drugs with very high value when
confronted with greater cost-sharing (whether because they lack
resources or information). Worse, there is evidence that even $5-$10
increases in copayments for outpatient care can result in some patients
getting hospitalized as a result of cutting back too much on valuable
care, offsetting the reduced spending.\19\ Capping total insurance
benefits is also short-sighted and imprudent: not only does evidence
suggest that such caps result in adverse clinical outcomes, worse
adherence, and increased hospital and ER costs, but the presence of
caps means that patients are not insured against catastrophic costs--
exactly what insurance is supposed to protect against the most.
There is no reason to think that the optimal insurance structure
would look like the typical high-deductible plan. Rather, it might
subsidize high-value care such as treatments to manage diabetes or
asthma, while imposing greater cost-sharing on care of lower value,
such as elective surgeries with limited health benefits. People would
choose the insurance plans that offered them the best benefit mix--
trading off higher premiums for plans that covered care of diminishing
marginal value. Of course, what may be valuable to one patient could be
wasteful for another, and the key challenge for ``value-based insurance
design'' policies is to differentiate these cases. Many firms are
experimenting with these plans.\20\ Focusing exclusively on high-
deductible plans that rely on a blunt structure of patient cost-sharing
and perfectly forward-looking patients may forestall the development of
even more innovative plans.
This does not mean that competition and cost-sharing have no role
in driving higher value spending, however. Competition between insurers
to offer plans that have the mix of benefits enrollees find most
valuable could drive the kind of innovative plans described above.
Increased cost-sharing such as that promoted by high deductible
policies coupled with health savings accounts can also be an important
tool for improving the value of care. As the evidence from the RAND HIE
discussed above shows, the low-cost sharing plans fostered by the
current tax treatment of health insurance (which look more like pre-
paid health care than true insurance) promote the use of care that is
of limited health benefit. While most spending is indeed done by people
with very high total costs, well-designed cost-sharing programs could
still have substantial effects on spending decisions. Most spending is
not done in emergency settings, and even limited cost-sharing can have
an effect on a substantial share of total spending.\21\ This suggests
that carefully designed incentives could have a big effect on improving
the value of care delivered.
CONCLUSION
We know that our health care system is not delivering the
consistently high-quality, high-value care that we should expect. While
there are many open questions in the design of the ideal system, with
millions uninsured and rising costs threatening to swamp public and
private budgets alike, we cannot afford to wait to act.
Focusing on the underlying issues discussed here suggests that the
fundamental problems facing our health insurance system are unlikely to
be cured by the extremes of either a single payer system or an
unfettered marketplace. On the one hand, the unregulated marketplace is
unlikely to provide long-run stable insurance. Private insurers will
always have an incentive to try to shed their highest cost enrollees,
so without regulatory safeguards even the insured sick will be at risk
of losing the insurance protections to which they are entitled. Private
insurance fundamentally cannot provide the kind of redistribution based
on underlying health risk or income that social insurance can. On the
other hand, a single payer system does not automatically provide high
quality care: the provision of low-value care is as pervasive in the
single payer Medicare system as it is elsewhere. Single-payer systems
are also slow to innovate--as suggested by the fact that it took
Medicare 40 years to add a prescription drug benefit, long after most
private insurers had done so. Nor do calculations of the costs of a
single-payer system measure the utility loss from forcing people with
different preferences into a monolithic health insurance plan. The
private facilities that have sprung up in Canada to meet the demands of
those who want more health care than the public system provides
fundamentally undermine the ``single payer'' nature of the system.
How one balances these trade-offs is likely driven as much by
philosophy as economics, and any reform will involve tough choices
between competing values. Serious reforms would focus not exclusively
on lowering costs, but on increasing the value that we get from health
insurance and health care.\22\ Reforms that promoted higher-value
insurance could both extend coverage so that more people benefit from
the protections that insurance affords and ensure that those
protections are secure for those who fall ill. These reforms would not
be enough to achieve uniformly high-quality care, however. The frequent
failure of the use of best practices and the tremendous geographic
variation in the use of costly care of uncertain medical benefit are
often obscured in the focus on the uninsured. That many nations,
including both the United States and Canada, struggle with these
challenges suggests that reforms of the payment system alone are
unlikely to solve all of these problems. A comprehensive reform
proposal that aimed both to extend insurance protections to those who
lack them and to improve the value of care received by those who are
insured would be more likely to succeed at each goal than proposals
that focused on just one.
Thank you again for the opportunity to meet with you. I would be
happy to answer any questions that you might have.
References
1. Jonathan Gruber, Public Finance and Public Policy (New York:
Worth Publishers, 2007).
2. Henry J. Aaron, ``The Costs of Health Care Administration in the
United States and Canada--Questionable Answers to a Questionable
Question,'' New England Journal of Medicine 349, no. 8 (2003): 801-803;
Steffie Woolhandler, T. Campbell and David U. Himmelstein, ``Costs of
Health Care Administration in the United States and Canada,'' New
England Journal of Medicine 349, no. 8 (2003): 768-775; Ken E. Thorpe,
``Inside the Black Box of Administrative Costs,'' Health Affairs
(Millwood) 11, no. 2 (1992): 41-55; Joseph P. Newhouse and Anna
Sinaiko, ``Can Multi-Payer Financing Achieve Single-Payer Spending
Levels?,'' Forum for Health Economics & Policy 10, no. 1 (2007):
Article 2; Chapin White, ``Health Care Spending Growth: How Different
Is the United States from the Rest of the OECD?,'' Health Affairs 26,
no. 1 (2007): 154-161.
3. John M. McWilliams, Ellen Meara, Alan Zaslavsky and John Z.
Ayanian, ``Use of Health Services by Previously Uninsured Medicare
Beneficiaries,'' New England Journal of Medicine 357, no. 2 (2007):
143-153; Jack Hadley, John Holahan, Teresa Coughlin and Dawn Miller,
``Covering the Uninsured in 2008: Current Costs, Sources of Payment,
and Incremental Costs,'' Health Affairs (2008): hlthaff.27.25.
w399.
4. Joseph P. Newhouse, and the Insurance Experiment Group, Free for
All?: Lessons from the Rand Health Insurance Experiment (Cambridge, MA:
Harvard University Press, 1993).
5. Amy Finkelstein, ``The Aggregate Effects of Health Insurance:
Evidence from the Introduction of Medicare,'' Quarterly Journal of
Economics (2007).
6. J.T. Cohen, P.J. Neumann and M.C. Weinstein, ``Does Preventive
Care Save Money? Health Economics and the Presidential Candidates,''
New England Journal of Medicine 358, no. 7 (2008):661-663; L.B.
Russell, ``The Role of Prevention in Health Reform,'' New England
Journal of Medicine 329, no. 5 (1993): 352-354.
7. Amy Finkelstein and Robin McKnight, ``What Did Medicare Do? The
Initial Impact of Medicare on Mortality and Out-of-Pocket Medical
Spending,'' Journal of Public Economics 92 (2008): 1644-1669.
8. Report of the Robert Wood Johnson's Commission to Build a
Healthier America (2009).
9. E.A. McGlynn et al., ``The Quality of Health Care Delivered to
Adults in the United States,'' New England Journal of Medicine 348, no.
26 (2003): 2635-2645; John Wennberg and Megan Cooper, The Dartmouth
Atlas of Health Care (Chicago: American Hospital Association Press,
1999).
10. Katherine Baicker and Amitabh Chandra, ``Medicare Spending, the
Physician Workforce, and Beneficiaries' Quality of Care,'' Health
Affairs (Millwood) Suppl Web Exclusive (2004): W184-197.
11. Elliott S. Fisher, David E. Wennberg, Therese A. Stukel, Daniel
J. Gottlieb, F. Lee Lucas and E.L. Pinder, ``The Implications of
Regional Variation in Medicare Spending. Part 1: The Content, Quality
and Accessibility of Care,'' Annals of Internal Medicine 138, no. 4
(2003): 273-287; ___, ``The Implications of Regional Variation in
Medicare Spending. Part 2: Health Outcomes and Satisfaction with
Care,'' Annals of Internal Medicine 138, no. 4 (2003):288-298.
12. Lawrence Summers, ``Some Simple Economics of Mandated
Benefits,'' American Economic Review 79 (1989): 177-183.
13. Janet Currie and Brigitte Madrian, ``Health, Health Insurance
and the Labor Market,'' In Handbook of Labor Economics, edited by Orley
Ashenfelter and David Card. Amsterdam: Elsevier Science, 2000.
14. Katherine Baicker and Helen Levy, ``Employer Health Insurance
Mandates and the Risk of Unemployment,'' Risk Management and Insurance
Review 11, no. 1 (2008): 109-132; Katherine Baicker and Amitabh
Chandra, ``The Labor Market Effects of Rising Health Insurance
Premiums,'' Journal of Labor Economics 24, no. 3 (2006).
15. Jonathan Gruber and Alan Krueger, ``The Incidence of Employer-
Provided
Insurance: Lessons from Workers' Insurance,'' Tax Policy and the
Economy 5 (1991): 111-143; Jonathan Gruber, ``The Incidence of Mandated
Maternity Benefits,'' American Economic Review 84 (1994): 622-641.
16. Len Nichols and Sarah Axeen, ``Employer Health Costs in a
Global Economy: A Competitive Disadvantage for U.S. Firms,'' New
America Foundation Working Paper (2008).
17. Brigitte Madrian, ``Employment-Based Health Insurance and Job
Mobility: Is There Evidence of Job-Lock?,'' Quarterly Journal of
Economics 109, no. 1 (1994): 27-54.
18. Mark V. Pauly and Bradley Herring, ``Risk Pooling and
Regulation: Policy and Reality in Today's Individual Health Insurance
Market,'' Health Affairs 26, no. 3 (2007): 770-779.
19. John Hsu, M. Price, J. Huang, R. Brand, V. Fung, R. Hui, B.
Fireman, J.P. Newhouse and J.V. Selby, ``Unintended Consequences of
Caps on Medicare Drug Benefits,'' New England Journal of Medicine 354,
no. 22 (2006): 2349-2359; Amitabh Chandra, Jonathan Gruber and Robin
McKnight, ``Patient Cost-Sharing, Hospitalization Offsets, and the
Design of Optimal Health Insurance for the Elderly,'' NBER Working
Paper 12972 (2007).
20. Michael E. Chernew, Allison B. Rosen and A. Mark Fendrick,
``Value-Based Insurance Design,'' Health Affairs (Millwood) 26, no. 2
(2007): w195-203.
21. Katherine Baicker, ``Improving Incentives in Health Care
Spending: Properly Designed Health Spending Accounts Can Be a Major
Step,'' Business Economics (2006); Katherine Baicker, William H. Dow
and Jonathan Wolfson, ``Lowering the Barriers to Consumer-Directed
Health Care: Responding to Concerns,'' Health Affairs (Millwood) 26,
no. 5 (2007): 1328-1332.
22. Elliott S. Fisher, Douglas O. Staiger, Julie P.W. Bynum and
Daniel J. Gottlieb, ``Creating Accountable Care Organizations: The
Extended Hospital Medical Staff,'' Health Affairs 26, no. 1 (2007):
w44-57.
Senator Dodd. Thank you.
Dr. Jonathan Gruber.
STATEMENT OF JONATHAN GRUBER, Ph.D., ASSOCIATE HEAD, MIT
DEPARTMENT OF ECONOMICS, CAMBRIDGE, MA
Mr. Gruber. Thank you very much, Senator, and to the other
Senators for inviting me here today.
I'd like to congratulate the committee on a draft bill
which really provides a terrific framework for fundamentally
transforming healthcare in the United States. This really
builds on the success we've had in Massachusetts where we've
shown that such transformation can work and let me give you
some solid facts on this.
First of all, the uninsurance rate in Massachusetts is down
by more than two-thirds. We've now got fewer than 3 percent of
our population uninsured.
Second of all, employer-sponsored insurance is up in
Massachusetts by a 150,000 people. We don't have crowd-out, we
have crowd-in in Massachusetts.
Third, the costs within budget. If you don't believe me,
you can look at a report from the Mass Taxpayers Foundation, an
organization which is not inclined to be friendly toward big
government interventions, which has said we actually came in
under budget with our insurance reform.
Fourth, the mandate is working. We had mandated compliance
rates above 98 percent in the very first year, and fifth, it's
popular. We have 75 percent public support for our reform.
Now that said, the options memo before us today raises a
number of issues and I just want to hit the highlights on
things which I discuss in more detail in my written testimony.
First of all, medical underwriting in health insurance must
be banned. With guaranteed issue of insurance and modified
community rating that ensures real insurance coverage through
time for those who suffer adverse health shocks.
Second, lifetime and annual limits on services in insurance
contracts should be banned as well as other restrictions that
take place in many med plans which fool people into thinking
they have real coverage when they don't.
Third, there's no reason to have multiple competing State
exchanges. Exchange or gateway is a great process but there's
no reason to have more than one. Have the competition within
the exchanges, not artificially across them.
Fourth, and I think most important, an individual purchase
requirement or individual mandate is central to reform. Without
an individual mandate, a number of States have tried to reform
the insurance market and failed. You cannot fundamentally
reform insurance markets without individual mandate.
Fifth, private coverage subsidies must be part of this bill
and they must extend to four times the Federal poverty line. In
Massachusetts, our subsidies, probably the biggest failure of
our law, is that our subsidies only extend to three times the
poverty line. That's left some individuals unable to afford
health insurance in our State and we have to exempt them from
our mandate.
Fifth and finally, I would say that small business credits
should be offered and should be targeted most tightly to those
firms that are least likely to offer health insurance and
that's the smallest and lowest wage companies, not just the
smallest and smallest wage companies.
I think with a strong credit, small business can be a big
winner from this reform. In fact, just today the Small Business
Majority released a report for which I did the analysis which
showed that healthcare reform is a very positive feature of our
small businesses, not a negative as has sometimes been
suggested.
Healthcare reform can end job lock, freeing entrepreneurs
to leave companies and start their own small businesses. It can
provide continuous coverage in this most dynamic sector of our
economy as small businesses open and close, ensuring their
employees are constantly covered, and it can lead to major
savings through more effective administration of insurance and
bending the cost curve.
The bottom line is that small business has nothing to fear
from this reform. This can be a positive benefit for small
business if we look at the entire picture.
Thank you.
[The prepared statement of Mr. Gruber follows:]
Prepared Statement of Jonathan Gruber, Ph.D.
Summary
Thank you very much for allowing me to testify today on Health Care
Reform Legislative Options. To summarize, my conclusions are:
Medical underwriting in health insurance markets must be
banned, with guaranteed issue of insurance and modified community
rating that ensures real insurance coverage through time to those who
suffer adverse health shocks.
Insurance prices should be allowed to vary based on
tobacco use or other lifestyle elements that are unambiguously
associated with higher health care costs.
Lifetime and annual limits on services in insurance
contracts should be banned, as well as adding other restrictions that
rid the market of ``mini-med'' plans that don't provide real financial
protection against catastrophe.
Legislation must contain anti-discrimination provisions
that ensure that employer cannot charge lower income workers more than
higher income workers for their insurance.
Gateway must undertake selective contracting to obtain the
best prices and avoid confusion among consumers facing an enormous
range of choices.
There is no reason to have multiple competing exchanges; a
single State exchange should selectively contract and allow choice
within the exchange.
A monopoly exchange (with no competing outside nongroup
market) is necessary for proper risk adjustment. If the exchange is not
a monopoly, it can only function properly if the same regulatory
reforms are imposed on the exchange and the outside market.
Very low-income individuals should remain in, and become
eligible for, public insurance rather than coming into the exchange.
This will ensure that they receive the most cost-efficient coverage and
reduce erosion of group insurance.
Low-income employees who are income eligible for subsidies
should be allowed to come into the exchange, but should bring with them
their employer contributions as a ``voucher'' to offset government
costs.
An effective individual purchase requirement is central to
reform. Without this requirement fundamental market reform is
impossible, as has been illustrated by a number of States that have
undertaken reforms of their non-group markets. Auto-enrollment is a
complement to, not a substitute for, this requirement.
Private coverage subsidies should extend to 400 percent of
the Federal Poverty Line or some individuals will be unable to afford
health insurance coverage.
Subsidies should be expressed as a rising share of income.
Subsidies should not be determined by the percentage of the premium
that the individual pays, or there will be enormous inequities by age
and family structure, with older individuals and families paying a much
higher percentage of income.
Small business credits should be tightly targeted to the
smallest and lowest wage firms, with credits phasing out with both firm
size and wages.
______
Thank you very much for allowing me to testify today on Health Care
Reform Legislative Options. Your committee, and the Congress as a
whole, has before it a historic opportunity to fundamentally reform the
health care system in the United States, covering all of our uninsured
citizens, controlling health care costs, and improving health care
quality. That said, there are a number of hard choices that must be
made before this opportunity can be grasped. I am pleased that you have
set up this opportunity to allow myself and other experts to weigh in
on those hard decisions.
Your options memo lays out a number of key questions about reform.
In this testimony I will provide comment on some of them.
SUBTITLE A: HEALTH INSURANCE MARKET REFORMS
1. No Medical Underwriting
I think it would be appropriate and useful to have premium
variation based on both tobacco use and adherence to wellness/lifestyle
programs. We know that financial incentives can induce proper behavior
in these arenas. Indeed, the recent reform in Massachusetts allowed
insurers in the State for the first time to differentiate premiums by
smoker status.
It is important to note that some have suggested not varying
premiums, but rather varying cost-sharing within insurance plans (e.g.
deductibles), based on these factors. That would be a mistake. The
level of cost-sharing within a plan is a crucial determinant of medical
access and utilization. Making those who smoke, or who do not undertake
wellness activities, face a higher marginal price of medical care could
be inefficient. If financial incentives are to be used, they should be
used on the up-front premium.
2. Modified Community Rating
A crucial accomplishment of this legislation must be to remove
underwriting on the basis of health. Insurance markets that allow
insurers to charge individuals much more based on unanticipated and
unpredictable health shocks is an insurance market that doesn't work. A
key goal for this legislation should be to provide ``insurance for
insurance:'' to make sure that all can access insurance at affordable
prices, even if they get sick.
Age variation is a somewhat different issue because age is
predictable. As such, the decision to charge more or less to workers of
different ages is simply a question of redistribution from younger to
older insured. A restriction that age bands be narrow invokes larger
redistribution from young to old than does a restriction that age bands
be broad.
But there is one other consideration with age rating: the
interaction with low-income subsidies. Most low-income subsidy schemes
would charge individuals an income-dependent amount, regardless of age.
But when subsidies end individuals are facing a market with age-varying
prices. If there is large age variation, then older individuals could
see a particularly large jump in their premiums when subsidies run out.
This section also discusses consumer rebates based on insufficient
medical loss ratios. I do not think this is a good idea, at least
initially. Medical loss ratios are complicated because (a) it is very
hard to define what is a legitimate medical care/management-related
expense and (b) the insurance companies will always be one step ahead
of the government in figuring out how to make these loss ratios look
favorable. I think a much more sensible starting point would be with
reporting requirements on medical loss ratios, and to revisit this
issue down the road rather than impose rebates now.
3. Other Reforms
No Lifetime or Annual Limits: To my mind this is one of the most
important aspects of insurance reform. Many individuals buy insurance
today where they do not understand the risk they are taking on by
accepting limits on the insurance company's exposure either on a
lifetime or annual basis. Real insurance reform requires that
individuals be protected against extreme health shocks, and that in
turn requires that insurance be an open-ended commitment to pay the
medical bills associated with those shocks.
Moreover, I would amend this section to say that the government
should more broadly rule out ``mini-med'' or ``indemnity'' plans that
don't necessarily include annual or lifetime limits, but instead impose
a reimbursement schedule to the consumer which is well below the likely
cost of the service. Plans which only cover, for example, $500/day
towards the cost of a hospital stay place consumers at needless and
unanticipated risk.
More generally, I would suggest you follow what is currently in the
regulations for minimum creditable coverage (MCC) in Massachusetts.
These regulations rule out indemnity schedules of benefits, which is
defined as ``A fixed dollar amount per service, set forth in the
subscriber's certificate of coverage as the maximum amount that a
health plan is required to pay to the beneficiary or to reimburse the
provider of that service.'' The Massachusetts regulations also rule
out:
1. an overall annual maximum benefit limitation for the plan that
applies to all covered services collectively;
2. an overall annual maximum benefit limitation based on dollar
amount or utilization that caps covered core services for any single
illness or condition, except as otherwise may be permitted by
applicable law.
Incentives for Quality Care. My only comment here is that I think
allowing premiums to vary by tobacco use and other wellness elements
provides an appropriate financial incentive, as noted above.
Equitable Treatment for All Workers. This section must not be
dropped and is a key element of reform which strives to maintain
employer-based insurance--and minimize government costs. If firms are
allowed to discriminate across workers on the basis of wages or income,
then the saavy employer will charge his low-income workers (who are now
eligible for government subsidies) a much higher contribution rate than
his higher income workers. In this way the employer can induce his low-
income workers to leave the plan and take government subsidies, eroding
the workplace pool and raising government costs.
SUBTITLE B: AVAILABLE COVERAGE FOR ALL AMERICANS
1. Connector/Gateway
Establishing the Gateway: There are a number of important issues
here:
a. It is critically important that Gateways do selective
contracting, based on providing value and access, for subsidized
consumers to readily compare options--to allow hundreds of licensed
carriers to offer thousands of different benefits packages will miss
the opportunity for price competition and will only confuse low-income
consumers.
b. There are a number of activities that can be coordinated at the
Federal level to provide economies of scale to State connectors:
The development of comparison shopping tools (Web site,
decision-support, physician-finder software, etc.) that can be given to
the State gateways.
A federally established annual open enrollment period will
significantly reduce the costs and confusion of giving consumers
choice.
A federally established risk-adjustment process and
software will focus competition among carriers on value, access and
quality of care rather than risk selection.
c. Multiple, competing exchanges would create confusion,
administrative waste, and undermine any exchange's ability to improve
purchasing with Federal and private dollars. There is simply no reason
for multiple competing exchanges.
Market Regulation: The exchange will function best if it has
monopoly power in the nongroup (and perhaps small group) market. If it
does not, it is hard to conceive of doing proper risk adjustment. Risk
adjustment involves taking from plans with healthy enrollees and
redistributing to plans with less healthy enrollees. But if this risk
adjustment occurs only within an exchange, and not outside, then there
will be a natural tendency for less healthy individuals to select the
exchange (where they are cross-subsidized) and more healthy individuals
to stay outside of the exchange (where they do not have to cross-
subsidize). This will destabilize the exchange and undo the notion of
market reform.
If the exchange does not have monopoly power, it is critical that
the regulations on insurance be the same inside the exchange and in the
outside market. If not, this will further exacerbate the adverse
selection problem noted above. For example, if health underwriting is
allowed outside the exchange, but not within the exchange, then it will
further skew prices downward for the healthy if they stay outside the
exchange, raising prices inside the exchange and undoing market reforms
there.
Qualified Individual: It would be a mistake to allow low-income
individuals eligible for Medicaid into the exchange. This is for three
reasons:
a. Medicaid coverage is less expensive than coverage in the
exchange for this population because of low provider rates under
Medicaid and tight management of some benefits (e.g. pharmacy).
b. Low-income individuals who obtain coverage from their employer
will be more likely to exit that coverage and move to employer-like
exchange coverage than they would be to exit that coverage to move to a
government-run Medicaid program (since the exchange would appear to be
a closer substitute to what they already have). As such, if the
entitlement for low-income individuals is to an exchange, disruption of
existing employer insurance arrangements will be higher than if it is
to a Medicaid.
c. It is not clear how well consumer choice and structured
competition can work for the lowest income populations who cannot
afford to pay differentials across health plans.
In light of these considerations, I would suggest a clear breakline
for public insurance eligibility below which individuals are eligible
for free public insurance, and above which they can come into the
exchange.
Eligible Employee: One of the thorniest issues with subsidized
exchanges is how to address the problem of low-income individuals who
are offered employer-sponsored insurance, but at a cost that may be
unaffordable. There are essentially three options here:
a. A ``firewall:'' exclude such individuals from eligibility for
exchange subsidies. This is by far the least expensive option--but also
may leave millions of low-income Americans unable to afford insurance.
b. Allow low-income individuals into the subsidized exchange if
their employer-sponsored insurance is deemed unaffordable. This option
addresses the fundamental inequity noted in (a), but at a high cost.
c. An employer ``voucher:'' Allow low-income individuals into the
subsidized exchange if their employer-sponsored insurance is deemed
unaffordable, but their employer in this case must send to the exchange
the monies they would have otherwise spent insuring that individual.
This option addresses the fundamental inequity noted in (a), but at a
lower government cost than (b). This seems to me to be the best option.
SUBTITLE D: INDIVIDUAL AND EMPLOYER RESPONSIBILITY
1. Individual Responsibility
Shared Responsibility Payments: An individual requirement to
purchase insurance is the centerpiece of successful reform. Without
this requirement market reform may not be possible. Every State that
has tried to community rate its non-group market without a mandate has
in the process dramatically raised prices and restricted the size of
the market.
An effective individual requirement means an effective penalty on
those who do not comply. There is no ``right answer'' as to how large
that penalty has to be. The penalty in Massachusetts for noncompliance
is 50 percent of the lowest cost insurance option available to
individuals. This penalty has been sufficient to motivate at least two-
thirds of our uninsured to obtain coverage in the very first year.
Auto enrollment of individuals should be considered as a complement
to the individual mandate, not as a substitute. Auto enrollment does
not reach many of the crucial uninsured who will determine the success
or failure of market reform.
Reporting of Health Insurance Coverage: A fundamental failure in
the market for employer-sponsored insurance is that employees have no
idea of the cost of insurance they are purchasing, limiting their role
as advocates for lower cost coverage. Including that cost on the
worker's W-2 form would help mitigate this problem.
SUBTITLE C: COVERAGE EXPANSIONS AND SUBSIDIES
1. Medicaid Expansion
As noted earlier, dropping the Medicaid expansion and enrolling
individuals in the exchange would, in my view, be a mistake. Medicaid
expansions are cheaper and reduce disruption of existing employer
relationships, and many low-income individuals do not have the
disposable income necessary to shop across multiple options.
2. Private Coverage Subsidies
Premium Credits: The fundamental affordability problem facing the
uninsured cannot be resolved without sizeable credits towards the
purchase of insurance. Given the high cost of insurance, such subsidies
must extend to 400 percent of the Federal Poverty Line. Below that
level, insurance may be unaffordable for many, in particular older
persons and families within an age-rated system. In Massachusetts,
where we were restricted from extending subsidies beyond 300 percent of
the Federal Poverty Line, we were forced to exempt many individuals
above that level from the mandate because of affordability issues.
It is critical that credits be based on income and not be
determined as a share of premium costs. That is, the tradeoff with low-
income subsidies should be all about affordability, to the individual
vs. to the government. This suggests that the debate should be over
what percentage of income individuals are required to pay. This debate
has nothing to do with the premium rates actually facing those
individuals.
For example, a sensible credit scheme would be one where
individuals pay a percentage of their income that rises with income
(e.g. 1 percent of income at 100 percent of poverty to 10 percent of
income at 400 percent of poverty). Such a system would ensure
affordability for the individual, and the levels could be set based on
the interplay between individual affordability and government budgetary
needs.
A much less sensible scheme would be one where individuals receive
a subsidy as a percentage of the average premium in their area, which
can lead to enormous differences in what individuals pay as a
percentage of income based on age and family structure. Consider, for
example, individuals with income of $25,000. Imagine that a single
policy for someone who is 40 years old is $4,000. Suppose we decide
that someone at that level should be paying 6 percent of income based
on affordability considerations. This would imply that everyone at that
income level charged a premium of $1,500. That same target could be
obtained with a subsidy that is a percentage of premiums of 62.5
percent; if the government pays 62.5 percent of the costs of insurance,
then the 40-year-old individual pays $1,500.
While this example works for this particular individual, it leads
to huge underlying differences across individuals. Suppose that the
market allows 3:1 age rating. This would imply that, for example, the
premium for a 64-year-old is $9,000 and the premium for a 25-year-old
is $3,000. If you offer each the same percentage subsidy (they each get
62.5 percent off the price of insurance), then the 25-year-old pays
$1,125 (which is 4.5 percent of income) and the 64-year-old pays $3,375
(which is 13.5 percent of income). So you could end up with individuals
earning only $25,000 a year who have to pay 13.5 percent of their
income towards premiums, which is much too high. This problem is only
exacerbated when you consider differences across couples and families.
For this reason, when we discuss low-income credits, the
conversation should be focused on the percentage of income that
individuals have to pay, and not on the subsidy rate towards the cost
of insurance.
3. Small Employer Credits
Small business credits can be an integral part of reform by
promoting health insurance offering among small firms. But there is a
clear efficiency gain to targeting such credits to those firms least
likely to offer without the credit. These types of firms are clear:
small and low wage firms. Firms that are above 25 employees, or firms
where average wages are more than $40,000 per year, are much more
likely to offer insurance.
Moreover, the amount that the firm contributes towards insurance
does not much determine the likelihood that individuals enroll in that
insurance. Numerous studies over the past decade have shown that
employee participation decisions in employer-sponsored insurance are
fairly in-sensitive to the prices charged those employees.
These two considerations suggest that small business credits focus
on small- and low-wage firms, and do not focus much on how much those
firms contribute towards health insurance (subject to contributing some
minimum percentage of the cost, say 50 percent). Given these
suggestions, there are some flaws with the small business credit
proposed here.
The credit should be focused on firms with fewer than 25
employees, not 50 employees, which is where non-offering is most
concentrated. In particular, the bulk of any new dollars should flow to
firms with fewer than 10 employees. Among firms with fewer than 10
employees, the rates of insurance offering in 2008 were below 50
percent; for those firms 10-24 employees, the rate was 78 percent, and
for those firms 25-49 employees, the rate of offering was 90 percent.
Thus, the more that credits can be focused on the smallest firms, the
more effective they will be.
The credit amounts should decline with firm average wages,
or otherwise be targeted to the lowest wage employees in a firm. A
cutoff at a fixed wage level such as $50,000 can lead to adverse firm
behaviors when paying a worker $1 more can lead to thousands of dollars
less in employer subsidies. A more sensible scheme would phase the
credit out smoothly as worker wages rise rather than having such a
``cliff ''.
Bonus payments for higher employer contributions do little
to increase coverage. Available funds should be spent solely on
encouraging employers to offer insurance since that is the key
determinant of coverage.
Senator Dodd. Very good. Thank you very much, Doctor. That
was very helpful.
Janet, thank you for joining us.
STATEMENT OF JANET STOKES TRAUTWEIN, EXECUTIVE VICE PRESIDENT
AND CEO, NATIONAL ASSOCIATION OF HEALTH UNDERWRITERS,
ARLINGTON, VA
Ms. Trautwein. Well, thank you very much for inviting me. I
do want to stress that we do believe this is an historic
opportunity to put in place real solutions to improve quality,
to reduce costs, if we do things the right way.
Given that we're under a very short time table, given the
mark-ups that are coming, I would like to talk about all the
things that could be done the right way, but I think I need to
comment very specifically on some of the things that are in
this bill that we find particularly troubling and that need to
be changed.
First of all, where we observe change being needed is in
the individual and small employer market. The market that's
larger than that works pretty well already today and so I want
to comment very specifically on some things that we think are--
I believe, I'm hoping that they are--unintentional in this
legislation and I want to comment on those.
First of all, one thing that I think is not unintentional
are the rating rules that do apply to the 2 to 50 market.
They're currently listed as 2:1 age bans and this is really--
this would cause significant rate shock for people that are
trying to get coverage and for people that are covered already
today.
Given the grandfathering rules and the way they're
structured, it would dump a lot of people in. They wouldn't be
able to be grand fathered for very long.
Now, I want to specifically talk, though, about the size
definitions. One thing that was very interesting in this
legislation is that typically we see things like this addressed
to the individual market, the small group market, the large
group market, and that's not what happened in this bill. It was
the individual market and the group market and I'm sure that
some of this was done intentionally so that we would bring some
of the reforms into all markets and we would support some of
those reforms being in all markets, but the rating reforms are
what I want to focus on right now.
We would specifically request that you change the
legislation to allow claims experience to be used in groups of
over 50. Now, I often hear people say, well, ``employer markets
already use community rating'' and that's true, but let me
explain to you how the community rating works.
The community rate their own group of employees, based on
the claims experience of their own group of employees. The way
this legislation is written today, any group that chose to
fully insure, and there are many groups over 50, over 250, over
a thousand, that for whatever reason fully insure their
policies, they would be subject to the same modified community
rating rules that an individual would be subject to and this
would cause significant rate shock. It would be horrible for
employers. The cost increases for them and their employees
would be dramatic, and I highly encourage you and would be
happy to work with you on how to change this provision so that
we don't have this severe unintended consequence.
I also want to remark on the navigators that are in the
bill. You know, we're really unclear on exactly what the
purpose of the navigators is. The role of the navigators is
already played by agents, brokers, and consultants in the
market today.
We really question whether entrusting organizations that
have absolutely no health experience at all, to advise people
about their insurance decisions is really a very good idea and
at best, it seems a giant duplicative waste of money that could
better be used to subsidize people who really can't afford to
buy coverage.
Beyond that, I would be remiss to not mention that we have
serious concerns about the creation of a government-run public
health insurance plan and the corrosive consequences it would
have on the private health insurance market and we do not
believe that a level playing field can be established or
maintained for a number of reasons.
And finally, I do want to re-inforce that we do support
change. We are very much in favor of an enforceable and
effective individual mandate and a mandate for those
individuals is one thing. A mandate for employers is something
else all together.
We know that this is well-intentioned. We believe this
would hurt American workers, particularly in the format that
it's been recommended, and we can't really imagine one that
wouldn't do that. We're concerned that it would actually harm
current insurance levels and it would decrease jobs and
economic growth and we don't think that's what we need in
today's economy.
Thank you very much.
[The prepared statement of Ms. Trautwein follows:]
Prepared Statement of Janet Stokes Trautwein
EXECUTIVE SUMMARY
The National Association of Health Underwriters (NAHU) is pleased
to be able to play a constructive role in crafting bipartisan,
comprehensive health care reform legislation this year. We have an
historic opportunity to put in place real solutions to reduce costs,
improve quality and ensure choice and access for all Americans in a way
that will strengthen our health system and our economy.
There are a number of desirable improvements to our health care
delivery system that are included in The Affordable Health Choices Act,
however other proposals should be considered further, as our experience
reveals they could pose unforeseen and unintended problems in health
insurance marketplaces.
Our first concern is the rating reforms that have been proposed.
NAHU believes that these should only apply to individual health
insurance products and fully insured small group plans of 2-50 lives.
The rating rules need to allow variations for applicant age at the
natural age breakdown rate of at least 5 to 1 with additional
variations allowed for participation in wellness programs, smoking
status and geography. We also specifically request that groups over 50
be permitted to use claims experience. This is different than
prospective health status rating and is the way all large groups
develop premiums today. When we hear that large groups ``community
rate'' their employees, what this really means is that the group
develops rates that are the same for all participants in their employer
group based on that employer's claims experience. Eliminating the
ability to develop premiums in this manner will result in significant
rate shock for many employers and their employees.
NAHU is unclear on the purpose health insurance navigators will
serve and feels that their functionality is duplicative of some of the
role licensed agents and brokers already serve in the marketplace. Many
services provided by agents and brokers would never be able to be
assumed by a navigator because they lack the expertise to perform those
functions. NAHU questions the wisdom of entrusting organizations with
no prior health insurance background with the authority to advise
individuals on their insurance decisions. It is doubtful that community
organizations with no relevant health care background can deliver the
policy knowledge, service, value, and accountability that distinguishes
the professionally licensed and trained agent, broker, and benefit
specialist. If a State feels the need to establish navigators as part
of its Gateway, then NAHU feels that such navigators should be subject
to the same rigorous licensing and continuing education requirements
that licensed agents and brokers are required to abide by. Concerning
the proposed Gateways, any subsidies or other insurance requirements
should mirror to the largest extent possible existing State laws and
regulations. This is discussed further in our primary testimony.
NAHU has significant concerns about the creation of a government-
run public health insurance plan and the likely corrosive consequences
it would have on private insurance markets because a ``level playing
field'' cannot be established or maintained. Would a government plan
comply with the many requirements placed on private plans, such as
State licensure, capital requirements, financial solvency, provider
network adequacy standards, rate approval, and Federal and State taxes
and assessments, just to name a few?
The idea of an enforceable and effective individual responsibility
requirement for all Americans to purchase health insurance could help
with adverse selection issues which exist in our current system and we
support this concept. A mandate to force employers to provide health
insurance to their employees is another matter. While well intentioned,
this could actually hurt American workers and health insurance coverage
levels. It would decrease jobs and economic growth and do little to
address the current uninsured population compared to other initiatives.
Our full testimony follows.
______
As an association representing more than 100,000 health insurance
agents, brokers and benefit specialists from every State in the
country, the members of the National Association of Health Underwriters
(NAHU) work with both individual and corporate health insurance
consumers to help provide them with high-quality affordable health
plans specifically suited to their unique needs. NAHU has analyzed the
proposed American Health Choices Act and has the following questions,
comments and concerns.
There are a number of desirable improvements to our health care
delivery system that are included in The Affordable Health Choice Act,
such as promoting health prevention initiative, enhancing nutrition
labeling, increasing our health care workforce, setting up more
mechanisms to combat health care fraud and abuse, and providing for the
development of follow-on or generic biologics.
PROPOSED MARKET REFORMS
The legislation creates significant market reforms to both the
individual and group insurance markets. It would require all health
plans, whether fully insured or self-funded, to accept enrollees
regardless of health status, and would eliminate the use of pre-
existing conditions exclusions and annual or lifetime limits on
benefits. For all fully insured plans, regardless of size, it would
impose strict modified community rating standards consisting of
variances only by family structure, community rating area (defined by
the HHS Secretary based on the recommendation of the NAIC), actuarial
value of the benefit and age bands that would limit premium differences
for the oldest insured individuals to differ from the youngest insureds
by a ratio of 2 to 1. No premium variations would be permitted for
health status, gender, class of business, claims experience or any
other factor not specifically described in the legislation.
NAHU has very significant concerns about the proposed reforms,
particularly that there is no distinction between small and large
employer groups, as there is in today's marketplace. Under current law,
fully insured employer groups over 50 lives are treated very
differently than the small group market, and these groups are typically
rated based on their past claims experience. This market is the health
insurance market working best today, and the rating reforms proposed by
this measure, which would apply to all fully insured groups regardless
of their size would significantly increase costs in this market. It
also would create adverse selection to the fully insured market, as the
larger groups that chose to fully insure would only do so if they had
concerns about their group's claims experience. NAHU does agree that
reforms need to be made to the individual and small group markets
concerning the way that premium rates are determined at the time of
application. It is NAHU's view that these markets would benefit from
greater premium standardization. The first step should be a uniform
application for coverage. A clear and understandable uniform
application would ensure full disclosure of accurate and consistent
information, and it would make the process easier for consumers
applying for coverage with several different insurance carriers.
The second issue is that the rating reforms proposed should only
apply to individual health insurance products and fully-insured small
group plans of 2-50 lives. Furthermore, in order to protect against
runaway costs, the Federal Government should ensure that wide-enough
adjustments may be made for several key factors. At a minimum,
variations need to be allowed for applicant age at the natural age
breakdown rate of at least 5 to 1 (meaning that the rate of the oldest
applicant may be no more than five times the rate of the youngest
applicant). In addition to age, variations in premium rates should also
be allowed for participation in wellness programs, smoking status and
geography.
Finally, we specifically request that groups over 50 be permitted
to use claims experience. This is different than prospective health
status rating and is the way all large groups develop premiums today.
When we hear that large groups ``community rate'' their employees, what
this really means is that the group develops rates that are the same
for all participants in their employer group based on the employer's
claims experience. Eliminating the ability to develop premiums in this
manner will result in significant rate shock for many employers and
their employees.
We are pleased that the 250 employer size limitation on self-
funding was removed from the bill and we hope that change is permanent.
The decision whether or not to self-fund or partially self-fund an
employer group plan is based on many financial and other factors, group
size being only one of them. A financial business decision of this
magnitude should be left to the individual discretion of the employer,
and should not be subject to an arbitrary cap imposed by the Federal
Government.
We do urge caution in eliminating annual limits on benefits. This
could be a problem for services that have appropriate durational
limits. It would be important if this is done to have a strong
provision to allow limits based on medical necessity to avoid overuse
of some services. We feel similarly about the elimination of lifetime
caps. Lifetime caps are rarely met, even by the sickest individuals,
but they do help provide a control on pricing for medical costs for all
covered individuals. Private reinsurance for an unlimited maximum is
expensive for both health plans and self-funded employers and will
impact premium levels. While we do not want any
individual to have coverage arbitrarily cut off due to a lifetime
limit, we wonder whether a Federal financing/re-insurance backstop for
those rare individuals whose medical expenses are so great they would
exceed lifetime caps might not better serve the affordability goals we
share for all consumers.
In a similar vein, we would advise that a different mechanism be
used than the risk adjustment system proposed. Especially during the
time that market reforms are being put into place and the individual
mandate is being enforced, a better system would be a system of re-
insurance at the State level, with some Federal funding assistance.
This would ensure a much more stable transition to the new system. Once
all of the reforms are in place, the issue of risk adjustment can be
re-
addressed to determine the best approach to long-term risk selection
issues.
MINIMUM LOSS RATIOS
For all fully insured health plans the legislation specifies
minimum loss ratios. The measure requires insurers to track
reimbursements for clinical services, activities that improve health
care quality and all other non-claims costs. The Secretary will
determine what ratios are appropriate for the individual and group
markets. If non-claims costs cannot exceed those percentages,
beneficiaries must be rebated on a pro-rata basis for the excess.
NAHU has concerns about a minimum loss ratio requirement, as it
does not address the true problem that is driving health insurance
premium costs--the skyrocketing cost of medical care. The definition of
administrative expenses in the bill is quite broad and may encompass
many services that actually benefit consumers. In addition to profits
and marketing, non-claims expenses include quality management, disease
management programs, health information technology investment, claims
processing, legal compliance, Federal and State taxes, employee
salaries, consumer education, etc. A 2005 Price Waterhouse Coopers
study found that health plan administrative costs were not a factor
contributing to health care cost increases, rather increased
utilization of services, an aging population, lifestyle choices, and
new technologies were the primary cost drivers. In States that have
adopted high loss ratio standards, consumers have suffered from less
competition, fewer choices, and higher premiums.
GATEWAYS
This provision requires each State to establish a variation of a
health insurance connector or exchange which is termed a Gateway. If a
State does not establish a Gateway within 4 years, the Secretary must
establish one for them. The Gateways will use risk adjustment
mechanisms to remove incentives for plans to avoid offering coverage to
those with serious health needs. The stated purpose of the Gateway is
to facilitate the purchase of health insurance coverage and related
insurance products at an affordable price by qualified individuals and
qualified employer groups (including self-employed individuals). The
legislation specifically allows for group and individual private market
coverage to exist outside of the Gateway. If individuals like their
current coverage, they can keep it. State insurance regulators will
perform their traditional obligations regarding consumer protection and
market conduct.
NAHU believes that if Gateways are part of greater health reform,
it is critical that they be structured in such a way that does not
damage or eliminate the traditional private insurance marketplace.
While we appreciate the state-level approach concerning the structure
of the Gateways, NAHU is concerned that this measure may still result
in the creation of multiple state-level bricks-and-mortar institutions.
This approach has proven costly in Massachusetts and is duplicative of
existing private-market functions.
It is important to keep in mind that a Gateway would not truly pool
the risk of all participants. The structure of a Gateway would be more
as an aggregator of plans. In this type of arrangement where multiple
plans from different insurers compete, there is no common pooling among
plans. For example, a pool with 5,000 participants that has 500
enrollees in each of 10 different plans does not get a discount for
having 5,000 participants. Even before the Massachusetts model, group
purchasing arrangements like this were tried by many States, and few
survived due to anti-selection issues among participating carriers, and
the fact that they were unable to offer a less expensive product
through the grouped arrangement. That's why pools have historically not
been very successful in lowering cost, although they may provide
choices for individual employees in small-group plans. Of course the
cost of this choice has been more limited options than were available
outside of the purchasing arrangement, resulting in most of these
programs only being able to offer HMO coverage. The most successful
State purchasing cooperative was operational in California for 13
years, and the costs for small businesses always exceeded what was
available in the traditional private market. This pool, the Health
Insurance Plan of California (HIPC), closed its doors on December 31,
2006, because it was not financially viable.
With these facts in mind, we are concerned about any expectations
some may have that a Gateway is going to lower cost, and even more
important, to be sure it is not structured in such a way that it might
increase cost. For this reason, we have grave concerns about attempting
to create a single pool of risk within the Gateways for individual and
group purchasers. Our experience in States that permit self-employed
individuals to be a part of their small employer market is that small
group rates are higher in those markets. This seems an unfair burden on
small employers and we hope that if both individuals and small groups
are permitted to participate in Gateways it will continue to be
permissible to pool them separately.
We feel strongly that Gateway subsidies and other requirements
should mirror State laws outside the Gateways, otherwise adverse
selection will be rampant. National experience with purchasing pools of
all kinds shows that pools that operate at the State level that also
fairly compete with plans outside the pool are the least disruptive to
the market.
NAVIGATORS
The legislation allows States to enter into contracts with
``navigators'' and provides them with Federal support to do so. Health
coverage navigators could be private and public entities that could
assist employers, workers, and self-employed individuals seeking to
obtain quality and affordable coverage through Gateways. Entities
eligible to become navigators could include trade, industry and
professional organizations, unions and chambers of commerce, small
business development centers, and others. The navigators will conduct
public education activities, distribute information about enrollment
and premium credits, and provide enrollment assistance. Health insurers
or parties that receive financial support from insurers to assist with
enrollment are ineligible to serve as navigators.
NAHU is troubled by a number of aspects of these recommendations.
Many of the roles described for navigators are already performed by
licensed agents and brokers in every State. We know that the services
of agents and brokers will be needed more than ever in a Gateway, and
that they will continue to be needed to serve as counselors and
advocates for the American consumer. Since agents and brokers are
clearly an integral part of the health insurance market regardless of
the setting, and are already performing these services as a normal
course of business, we question the wisdom of spending precious
financial resources on a new system such as the navigators described in
the bill.
Licensed specialists design benefit plans, explain coordination
issues of public and private benefits to individuals/employees, and
solve problems that may occur once coverage is in place. They are also
at the forefront of helping to design and implement cutting-edge health
promotion and wellness programs for employers--a focus that everyone
agrees is key to combating increasing health care costs.
Agents and brokers are subject to rigorous licensing and continuing
education requirements and serve a proud and important role as
advocates for their clients. They perform extensive needs analyses for
their clients, and help them gain coverage matched to their unique
needs. After coverage is placed, they provide extensive assistance to
ensure that claims are paid on a timely basis, that questions are
answered, and that their clients' specific needs are met.
NAHU is unclear on the purpose of health insurance navigators will
serve and feels that their functionality is duplicative of some of the
role licensed agents and brokers already serve in the marketplace. And
many services provided by agents and brokers would never be able to be
assumed by a navigator because they lack the expertise to perform those
functions. If a State feels the need to establish navigators as part of
its Gateway, then NAHU feels that such navigators should be subject to
the same rigorous licensing and continuing education requirements that
licensed agents and brokers are required to abide by. In addition, NAHU
feels that navigators, if used, should be limited to entities with
prior experience in this area such as the SHIPs that provide seniors
with assistance relative to the Medicare program.
MEDICAL ADVISORY COUNCIL
The measure provides for the creation of a Medical Advisory Council
by the Secretary of HHS, in consultation with NIH, CDC and others for
the purpose of making recommendations on: (1) the schedule of items and
services that constitute the essential health care benefits eligible
for credits including the amount, duration, and scope of such items and
services; (2) the coverage that should be considered minimum qualifying
coverage and (3) the conditions under which coverage shall be
considered affordable and available coverage for individuals and
families at different income levels.
Although we are supportive of new research that could be done to
gather more information about best practices and better information on
the efficacy of different treatments, NAHU has concerns about a
creation of a new government-run entity tasked with making coverage
determinations for the American people. In addition, we are unsure that
this is an appropriate role for the NIH and CDC, as they have no
expertise in the area of private insurance.
Concerning the standard for minimum creditable coverage, we believe
the goal should be one of ensuring that basic appropriate services are
available. The standard should merely list those services, rather than
the quantity of those services to preserve plan, employer and
individual consumer flexibility. Just as an example, the standard
should require inpatient and outpatient hospital services, physician
services, lab and x-ray, and prescription drugs. The quickest
implementation standard would be to use an existing definition, like
the definition for HIPAA creditable coverage. Using this standard would
ensure comprehensive coverage and would allow States to be of immediate
assistance in helping with enforcement because this is a standard that
is already embedded in law for all States.
GOVERNMENT-RUN PUBLIC PLAN
The legislation leaves the structure of a public plan option to be
determined. The initial draft of the legislation included a public plan
option to be known as Affordable Access to be sold through the Gateway.
If a provider accepts Medicare it must accept as payment in full the
amount of the payment from an Affordable Access plan and the Affordable
Access plans will pay Medicare rates plus 10 percent. The measure
specifies that Affordable Access premiums must be an amount that will
cover the costs of the plan.
NAHU strongly opposes the creation of government-run plans to
compete with the private insurance market. A government-run public plan
could never compete fairly with the private market, nor would it be
financially feasible in the long-run. The legislation, as proposed,
would likely displace tens of millions of happily insured Americans
from the conventional marketplace and exacerbate the worst elements of
the current system: gross inefficiency, high costs and bureaucracy.
NAHU believes that a far better use of Federal efforts and monies would
be helping lower income Americans afford the cost of private coverage.
INDIVIDUAL SUBSIDIES
The legislation creates a complicated system of sliding scale
subsides for people purchasing coverage through the Gateway with
incomes between 100-500 percent of the Federal poverty level (FPL).
NAHU has serious concerns about limiting the use of the credit to
products purchased through the Gateway. The credit should apply
regardless of the place of purchase; otherwise the result will be an
unlevel playing field of some kind. If subsidies are available only
inside the Gateway, ``crowd out'' from existing private plan coverage
will be dramatic and could destabilize the market. Subsidies only
available in the Gateway can also result in higher-than-expected costs
for those in the Gateway and an apparent larger number of uninsured
than actually exist.
Past market-reform experience clearly shows that whenever an
unlevel playing field is created through a financial incentive or other
means, one of the coverage options is always selected against, which
ultimately harms the viability of all coverage options in the market.
By allowing for an unlevel playing field between the Gateway and the
rest of the private market, we are concerned that these options set the
stage for long-term market failure.
NAHU also objects to subsidies for families earning up to 500
percent of the Federal Poverty Line (FPL), which for a family of four
would be $110,000. We believe that this is far too great of an
expansion of government assistance, particularly considering the
current state of the Federal budget deficit. Similarly we also have
concerns about the provisions that also would expand Medicaid to 150
percent of the FPL when the current Medicaid program is financially
unsustainable, particularly for the individual States. NAHU believes
that any expansion of this program should be limited to the truly
needy--no more than 100 percent of the FPL. Furthermore, to prevent
reducing the crowd out of the private market that could occur with a
Medicaid expansion, NAHU supports mandatory premium assistance when
private coverage is available.
INDIVIDUAL MANDATE
The legislation creates an individual mandate for coverage with a
Federal income tax penalty on any individual who does not have in
effect qualifying coverage for any month during the year. Health plans
must provide a return to individuals as documentation of coverage.
Exemptions will also be made for individuals for whom affordable
health care coverage is not available or for those for whom purchasing
coverage creates an exceptional financial hardship. The Secretary of
the Treasury in consultation with DHHS will determine the minimum
penalty needed to accomplish the goal of substantially increasing
coverage. The mandate is not applicable in States where Gateways are
not yet operating.
NAHU supports the concept of individual responsibility in health
coverage reform and believes that, in order to achieve universal
coverage and ensure that market reforms are successful, an enforceable
and effective individual mandate to obtain health insurance coverage is
necessary.
Concerning the consequences of non-coverage, NAHU believes these
penalties may not be sufficient to ensure adequate compliance. An
individual mandate needs to be both effective and enforceable to make
other market-reform ideas work. To improve this mandate's chance of
success, we believe the Federal reporting by individuals and insurers
should be accompanied by measures at the State level, including
enforcement through schools and drivers' license bureaus, late
enrollment penalties, and auto-enrollment and requirement of proof of
coverage through employers.
EMPLOYER MANDATE
The measure establishes definitions for an employer mandate or some
other form of shared employer responsibility but leaves the policy
details of this section to be determined. There is an exemption for
employers in Hawaii.
NAHU believes that the employer-based system must be at the core of
any health reform effort. However, we believe that the provision of
benefits must be a voluntary action on the part of the employer. We are
opposed to an employer mandate as it would impact job availability,
suppress wages and could result in some employers actually contributing
a lower percentage of the premium for their employees' coverage than
they had in the past.
HEALTH IT
NAHU supports the measures efforts to extend health IT financial
incentives to a broader range of providers as we feel that increased
utilization of health IT will help reduce health care expenses and lead
to higher-quality care for American consumers by reducing errors and
improving patient satisfaction. In addition, we support the
specification that interoperable technology be used, so that all record
systems and providers are able to communicate with one another and
individual health records are always up to date and complete.
LONG-TERM CARE/DISABILITY PROGRAM
The bill creates a new national insurance program to help adults
who have or develop functional impairments to remain independent,
employed and stay a part of their communities. Financed through
voluntary payroll deductions (with opt-out enrollment similar to
Medicare Part B), this program will provide a cash benefit to
individuals unable to perform two or more functional activities of
daily living.
To promote the purchase of private long-term care insurance, the
bill allows LTC insurance premiums to be included in section 125 plans.
NAHU believes the cost of providing long-term care to our aging
population is one of the greatest burdens on our national medical
safety-net. But rather than the creation of a large-scale government
program, NAHU would prefer to see Congress enact some simple reforms
and tax incentives to make it easier for people to purchase private
long-term care insurance and ease the strain of providing long-term
care coverage on the Medicaid system. In addition to the inclusion of
LTC insurance premiums in section 125 plans, NAHU also believes that
Congress should allow a tax deduction from gross income for long-term
care insurance premiums and include long-term care insurance in
flexible spending arrangements.
We appreciate the opportunity to provide comments and look forward
to any questions you may have.
For questions following the hearing, please contact me at (703)
276-3800, [email protected], or contact Jessica Waltman, Senior Vice
President of Government Affairs, [email protected], (703) 276-3817.
Senator Dodd. Thank you very much, Janet.
Ms. Praeger.
STATEMENT OF SANDY PRAEGER, KANSAS INSURANCE COMMISSIONER,
TOPEKA, KS
Ms. Praeger. Thank you, Senator Dodd, Senator Enzi, and
members of the committee.
I am Sandy Praeger. I'm the Insurance Commissioner in
Kansas, and I also Chair the National Association of Insurance
Commissioners Health Insurance and Managed Care Committee.
I really thank you for the opportunity to participate in
the roundtable and to present the views of State insurance
regulators who will be responsible for implementing much of the
legislation that's before the committee, and I just want to
tell you I believe we are up to the task.
I want to applaud the committee for its recognition in the
bill that health reform will be a State and Federal partnership
and thank you, too, for preserving the State oversight of the
health insurance industry.
State regulators are closer to the consumers that they are
protecting and have over a 135 years of experience regulating
insurance products in the United States.
We appreciate that most of the reforms contained in the
bill will be implemented at the State level and we're pleased
to see that the gateways envisioned through which millions of
Americans would purchase their coverage will also be based at
the State level.
We also applaud the committee for enacting some long
overdue reforms in the individual market to ensure that health
insurance coverage is available to all Americans, reforms that
are not possible without including a strong enforceable
individual responsibility requirement.
Now while there are many good pieces to the bill, I want to
take--and I do believe it does take a very important step in
realizing the committee's goal of expanding coverage, reducing
costs, improving quality and protecting consumers, we've
identified a few areas where we do believe some technical
improvements can be made to avoid adverse selection issues and
to smooth the implementation of the reforms.
First, we would recommend that the implementation timeframe
of the bill be extended to allow States 4 years from the date
on which the final regulations are published in the Federal
Register rather than from the date of enactment, as the bill is
currently drafted, and I think that 4-year timeframe is
critical and the States need to know what the rules are before
they can really begin the implementation process.
We would also suggest that the committee think carefully
about how the insurance marketplace outside of the gateways
will interact with the markets within the gateways and ensure
that there is no room for the two markets to be played off one
another, so there is uniformity and level a playing field.
And finally, we'd recommend that the States be closely
involved in the drafting of the rules that will apply to
coverage sold through the gateway for marketing and network
adequacy and would recommend a model similar to the regulation
of Medicare Supplemental Insurance, one that the former
Commissioner in Kansas Kathleen Sebelius, she's that other
person with the white hair. She's quite familiar, quite
familiar with the way the States have worked over the years and
are still working to develop the Medicare Supplemental
policies.
I would just remind the members of the committee, too, that
we've expressed concerns over the last several years about the
Medicare Advantage products that are sold through Medicare
where we don't have oversight and regulatory authority and we
have identified marketing abuses.
Again, I want to thank you for the opportunity to join in
this conversation this afternoon and for the seriousness with
which you have approached this historic opportunity to improve
the health of our Nation.
I look forward to the discussion and we look forward to
working with the committee in enacting comprehensive reforms
this year.
Senator Dodd. Thank you very much, Ms. Praeger.
Dr. Gottlieb.
STATEMENT OF SCOTT GOTTLIEB, M.D., RESIDENT FELLOW, AMERICAN
ENTERPRISE INSTITUTE, WASHINGTON, DC
Dr. Gottlieb. Thank you for the opportunity to be here
today.
The American healthcare system is capable of delivering
unparalleled care. Our medical product sector is the world's
source of innovation, but as you noted, for too many people
these opportunities are inaccessible.
When I worked at the Centers for Medicare and Medicaid
Services, I spent my weeks at the agency here in Washington and
my weekends back home practicing medicine in an acute setting
of a busy urban hospital.
I can tell you firsthand that our perception of the
problems inside the Humphrey Building often didn't comport with
what was really taking place on the wards and as you'd expect
neither did our policy prescriptions for fixing what was wrong.
For example, you look at data on all the variation that
exists in the way doctors in different geographies approach
similar problems and it's easy to conclude that supply must be
creating its own demand. More cardiologists must mean more
catheterizations. The solution seems obvious. We need to
closely regulate pay to shift money between providers. We need
to limit the number of specialists we train. We need to
restrict certain services at point of demographics while based
on comparative data we develop a new agency or guidelines we
write on another one.
I would suggest that the data isn't so clear and it shows
that we can identify the variations but we don't really
understand its causes nearly as well as we think we do.
There are complex factors that go into local medical
conventions. There are misaligned incentives driving medical
behavior that have corroded over many years of shortsighted
payment rules. Problems exist precisely because of fixed rules
and pay schemes hashed here in Washington, not in spite of
them.
As the largest purchaser of healthcare services, Medicare
shapes the entire market by its pricing schemes. It's not the
medical decisionmaking that's flawed but the incentives driving
those judgments, incentives detached from the outcomes we want
to achieve.
Or take for example the refrain around the need for more
comparative data. There is no question many important clinical
questions remain unanswered but the reasons are often complex.
A lot of uncertainty about the relative benefits of two
treatments remains in doubt because answering those questions
is very hard. It takes very long and large clinical trials to
discern small differences between active treatments, yet we are
proposing to do shorter, cheaper studies based on backward-
looking databases rather than forward-looking trials to probe
these questions.
We should pay for rigorous trials out of public funds but
we shouldn't cheat ourselves to believe that simple and cheap
studies can resolve questions that persist despite close
attention. Proponents of comparative effectiveness research
almost all point to the treatment of back pain or early
prostate cancer as two areas in need of more research.
On PubMed there are literally thousands of studies
addressing these topics. Questions persist because none of the
studies are large enough and long enough to provide definitive
answers that address all the variations in patient conditions.
Managing disease isn't a commodity service amenable to
designs and workforce rules hatched here in Washington. This
isn't like building cars. The current proposals for fixing
healthcare rely on a lot of the usual patches. They increase
political rather than individual controlled medicine through a
collection of new commissions, boards and agencies.
The plan before this committee shifts to the government and
probably Medicare where more of the clinical decisions are
properly left to people and their doctors.
Thank you.
[The prepared statement of Dr. Gottlieb follows:]
Prepared Statement of Scott Gottlieb, M.D.\1\
Mr. Chairman, Mr. Ranking Member, thank you for the opportunity to
share my testimony with the committee. The American healthcare system
is capable of delivering unparalleled care. Our medical products sector
is the world's source of innovation.
---------------------------------------------------------------------------
\1\ The views expressed in this testimony are those of the author
alone and do not necessarily represent those of the American Enterprise
Institute.
---------------------------------------------------------------------------
But for too many people, these opportunities are inaccessible. The
same system capable of delivering innovative, intensive services
sometimes fails to provide for the most routine care. High technology
medical products that extend lives are leaving some families bankrupt.
There is no single cause for these shortcomings, and no
straightforward solutions. But as we embark on an effort to take the
best attributes of our system and make these benefits more accessible
and affordable to people closed out of these opportunities, we need to
be mindful not to embrace solutions whose abiding quality isn't that
they are optimal, but just undemanding.
When I worked at the Centers for Medicare and Medicaid Services
(CMS), I spent my weeks at the agency here in Washington, and my
weekends back home, practicing in the acute setting of a busy, urban
hospital. I can tell you first hand, our perception of problems from
inside the Humphrey Building often didn't comport with what was really
taking place on the wards. As you'd expect, neither did our policy
prescriptions for ``fixing'' what was wrong.
For example, look at data on all of the variation that exists in
the way doctors in different geographies approach similar problems and
it's easy to conclude that supply must be creating its own demand. More
cardiologists mean more catheterizations. The solution seems obvious.
We need to more closely regulate pay to shift money between providers.
We need to limit the number of specialists we train. We need to
restrict certain services according to demographics, or based on
``comparative'' data we develop in a new agency, or guidelines we write
up in another one.
I would suggest the data also shows that we can identify the
variation, but we don't understand its causes nearly as well as we
think we do.
There are complex factors that go into local medical conventions.
There are misaligned incentives driving medical behavior that have
corroded over many years of short-sighted payments rules. There are, as
well, equal quantities of research that suggests that much of the
geographic variation in health spending can be explained by differences
in peoples' characteristics.
Our problems exist precisely because of fixed rules and pay schemes
hatched here in Washington, not in spite of them. As the largest
purchaser of healthcare services, Medicare shapes the entire market by
its pricing schemes. It's not the medical decisionmaking that is
flawed. It's the incentives driving those judgments, incentives
detached from the outcomes we want to achieve.
Moreover, every hospital can't be a Mayo Clinic or Geisinger Health
System. There are plenty of poorly performing hospitals, for example,
which hobble along with the crutch of their not-for-profit status. I
doubt that is going away. Paying for episodes of care rather than
procedures--as many private insurers are increasingly doing--would
better align incentives. But here again, politics has been the enemy of
the optimal. I doubt Congress is willing to ``capitate'' doctors. Or
exclude poor performing physicians from participation in Medicare. Or
turn over care to private plans better able to implement payment
reforms, as well as manage local delivery of care.
Another idea for fixing Medicare is risk-adjusted or capitated
payments that can adjust with quality, so people or Medicare would pay
more for better overall quality. Right now, you can be certain that
setting more payment and practice rules here in Congress, or at a new
Federal Health Board, will shift the volumes but won't change the
outcomes.
Or take, for example, the refrain around the need for more
comparative data. There is no question many important clinical
questions remain unanswered. But the reasons are often complex. A lot
of uncertainty about the relative benefits of two treatments remain in
doubt because answering these questions is very hard. It takes long and
large trials to discern small differences between two active
treatments. Yet we are proposing to do shorter, cheaper studies based
on backward looking databases rather than forward-looking trials to
probe these questions.
The knowledge we glean from looking back through databases of
patient information adds context to these clinical questions. But it
won't definitively answer them.
If it were so easy to resolve these issues, simply by sifting
through existing information, you'd think insurers or academic
researchers would gather the $2 million it takes to do a really good
database study. In many cases, definitive answers won't even come from
a single study.
We should pay for these rigorous studies out of public funds. But
we shouldn't delude ourselves to believe that simple and cheap studies
can resolve questions that persist despite close attention. Proponents
of comparative research almost all point to the treatment of back pain
or early prostate cancer as two areas in need of more research. On
PubMed there are literally thousands of studies addressing these
topics. Questions persist because none of the studies are large enough
and long enough to provide definitive answers that address all the
variation in patients' conditions.
Getting those answers is going to be harder than sifting through
payer claims. Simply placing the government's imprint on a finding
won't close off scientific debate either. The underlying evidence needs
to be rigorous. If we're going to set binding rules in Washington based
on the results, we need to do these things with precision.
This means we need to invest in a better infrastructure for doing
more rigorous research, modeled perhaps after the success of the
National Cancer Institute's (NCI) cancer cooperative groups. We need to
make it less expensive, and easier to do these more rigorous
investigations. But getting real answers that endure scrutiny isn't
going to be nearly as easy as our policy proposals envision.
Finally, take the catch phrases around ``access to affordable
insurance.'' If you read the Washington Post, you'd think that
insurance is synonymous with good healthcare. That is hardly true. But
insurance has become the end in itself, paying no heed along the way to
serious problems with our current programs.
Medicaid recipients technically have insurance. But in some parts
of this country, they might as well be uninsured when it comes to their
ability to access specialized services or expensive procedures. Some of
the most vulnerable Americans are confined to an insurance product that
is healthcare in name only.
Payment rates are so low, and regulations so burdensome, many
doctors opt out of Medicaid entirely. More are also declining Medicare.
As we supplant Federal for State regulation of health insurance, or
create a new ``public'' plan modeled off Medicare, the best doctors may
leave the system entirely, especially in urban markets that will
support cash-only practice.
Our efforts to fashion a more egalitarian system are creating more
tiers of care based on income.
In Medicaid, as in all these challenges, it seems our solutions
always involve more rules. We call for more regulation of medical
practice and more payment changes. When I was at Medicare, we compared
this policy behavior to the carnival game ``whack-a-mole.'' As soon as
we spotted a problem, we passed a rule to fix it, only to find that our
solution wasn't the repair we expected. We had only caused a new
problem to pop up somewhere else.
Managing disease isn't a commodity service amenable to designs and
workforce rules hatched here in Washington. This isn't like building
cars. We shouldn't mislead ourselves to thinking we can understand all
the reasons treatments often deviate from guidelines or to set
treatment plans here in Washington to smooth out these variations.
Agencies like Medicare can't even keep up with the guidelines as
technology and science changes. By the time CMS issues a coverage or
coding change, sometimes the standard of care has already changed.
The current proposals for ``fixing'' healthcare rely on a lot of
the usual patches. They increase political, rather than individual,
control of the medicine, through a collection of new commissions,
boards, and agencies. The plan before this committee shifts to the
government, and probably Medicare, more of the clinical decisions
previously left to people and their doctors.
That means my colleagues at CMS, and all 20 of the agency's
doctors, are going to be calling more of the shots on what patients can
get access to. That's the rub. More political control, through Federal
regulation or a public plan that displaces individual decisionmaking,
doesn't mean better decisions. Medicare made 165 decisions about
covering, and not covering, certain cancer products since 2000 without
a single oncologist on its staff. We shouldn't let that kind of a
process displace individual control over medical decisions by patients
acting through private insurance.
Senator Dodd. Thank you very much, Doctor.
And last, the last witness, and thank you again, Mr. Burd,
for being with us.
STATEMENT OF STEVE BURD, PRESIDENT AND CEO, SAFEWAY, INC.,
PLEASANTON, CA
Mr. Burd. You are welcome. I, too, appreciate the
opportunity to share the experience we have at Safeway and also
maybe share a few ideas.
I have been a long-time advocate of healthcare reform,
going back some 15 years, getting everybody in the insured
system and I feel that we're on the precipice of getting that
done and I applaud the Senate for addressing that in a
bipartisan fashion.
I want to address something that I don't think any of the
other panelists have yet addressed. I want to talk about
bending the cost curve because it's important to get everybody
in but we also need to control these costs and that's where
Safeway's had a tremendously positive experience.
About 4 years ago, we realized that about 70 percent of all
healthcare costs are driven by behaviors and as a business guy
that was good news because it said if we could influence the
behavior of our 200,000 employees, we could actually bend that
cost curve and improve the health of our employees.
The bottom line is if you don't improve the health of
Americans, you won't control healthcare costs. We designed a
healthcare plan that focused on the fact that about 75 percent
of all healthcare costs are confined to four chronic
conditions: cardiovascular disease which is about 80 percent
preventable, cancer which is about 60 percent preventable,
diabetes, particularly Type II, that's at least 80 percent
preventable and reversible, and then, finally, conditions of
overweight and obesity.
We designed an incentive plan that has a premium difference
between people that have the healthiest behaviors and those
that don't have as healthy behaviors. So, there's that large
dose of personal responsibility.
There is a little known provision in HIPAA that allows for
that. There is an overlay that ADA has on top of that to
further constrain you, but one of the things that I would
suggest to the Senate here is that we create more ability to do
that.
We've had a remarkable experience. In the last 4 years,
we've held our healthcare costs flat and we didn't do that by
terminating 20 percent of our workers. That is the per capital
healthcare cost is flat and for the healthiest employees in our
organization, their contribution to healthcare is down some 25
percent.
If the entire country had taken Safeway's plan design in
2004, by my calculation, since they're up by about 38 percent,
we would have a healthcare bill in this Nation that's $600
billion lower than it is today. So, the cost curve can in fact
be bent.
The other thing I would focus on is transparency. I think
everybody here has come to understand that there are vast
differences in charges for some standard procedures. Within 30
minutes of our general office in California, there's a tenfold
difference in the cost of a colonoscopy. Within 10 minutes of
our offices a fivefold difference in the cost of a blood test.
The only thing we've done to flat-line our costs is focused
on plan design and behavior and its role in driving costs and
the health of Americans. We're cobbling together transparency.
We could get some help from the Senate on that and you would
see another dramatic step down.
If we do healthcare reform correctly, I believe you can
take 45 percent of the costs out of the system because it's
terribly inefficient and I believe you can cover all of the
Americans that are not covered today.
Senator Dodd. Well, that's very exciting news.
Congratulations on what you've been able to achieve with your
company.
Well, this has been very, very helpful, and again it's a
large group of witnesses and I'm grateful to all of you for
sharing your thoughts with us here.
Let me put the clock on here for 5 minutes and I'll try and
move through these quickly, if I can, and then turn to my
colleagues for their comments and thoughts, as well.
Let me begin, if I can, with Dr. Rosman, of the AMA. They
made some news today by talking about how the AMA would oppose
a government-sponsored insurance plan and yet in your testimony
and the press release that went out, you left the door open, it
seems to me, a bit, as well.
As I read it, and again I don't want to put words in your
mouth or that of the AMA, obviously the position of the AMA is
important, but you indicated you're open to consideration of
some new health insurance options that are market-based, not
run by the government, do not compel physician participation,
truly competes on a level playing field and that you haven't
seen some of these.
There have been several ideas. Our colleague, Senator
Conrad, has been talking about a cooperative option. Senator
Jack Reed, who's not here right now, has been talking about
using state-based health organizations that already have
experience in this as a possibility.
There are ideas of contracting out, where the government
would contract out with, say, a non-profit BlueCross BlueShield
where there's some experience.
Give us some ideas, put a little bit more flesh on this, if
you will, other than just sort of the vague concept here that
you're willing to support something other than a public option.
Dr. Rosman. Yes. Thank you, Senator. I think that you
stated it very accurately, that we are very committed to
getting everybody affordable coverage. Our position is that we
think this can be done with market reforms in the private
insurance market, but we're very interested in some of these
alternatives that have been put out there. As you mentioned,
Senator Conrad's co-ops.
I think that we really need to see more details of those
plans before we can comment specifically, but we are certainly
interested in those as options for covering everybody.
Senator Dodd. Options for what? Options for what are we
talking about? What do you see as the value in having an
alternative idea? What is the point?
Dr. Rosman. Well, again, I think we need to see more
details before we can comment on the specifics. We believe that
everybody can be covered by--in a private insurance market with
tax subsidies or tax credits to allow people who cannot afford
coverage to purchase into that private insurance market, choose
the plan that works best for themselves and their families.
We believe that with that, we can give everybody access to
affordable coverage and not only coverage but, most
importantly, access to the care that they need.
Senator Dodd. What I wanted to get at here is do you see
any value in an alternative idea--using your definitional
terms--that alternative idea to be a cost bender? There is cost
obviously in bending that curve. There is a tremendous
interest, overwhelming interest obviously.
As Mr. Burd has pointed out and others, if we don't bend
the cost down here, and just go through and adding cost to the
system, then obviously we've achieved nothing. In fact, the
fears of reaching 30 or 34 percent of GDP become far more real.
The value in this idea to those of us who are advocating
something like this is to bend that cost. I'm presuming you're
seeing a bending cost value to these alternative ideas, as
well?
Dr. Rosman. Again, I think we need to see details of the
plan----
Senator Dodd. I understand.
Dr. Rosman [continuing]. Before we can comment to that, but
we are very committed to reducing health costs and excited to
work on mechanisms through quality measures, and best
practices, to reduce the gross of health costs.
Senator Dodd. Let me jump quickly here to, if I can, Dr.
Gruber, as well, and we thank you for your work in
Massachusetts and there's been a lot of conversation over the
last number of days about Massachusetts as we're meeting among
ourselves.
There is a pay or play provision in the Massachusetts
healthcare plan, is that correct?
Mr. Gruber. A very modest one.
Senator Dodd. Well, tell me how it's working and how modest
is it and what's the effect of this in terms of employers that
are participating or non-participating and the like?
Mr. Gruber. Sure. We have a pay or play requirement which
says that employers with more than 10 employees who do not
offer health insurance have to pay $300 per employee per year.
It's a very modest pay or play requirement. We've not collected
much revenue from it and, quite frankly, we don't think it's
having a very big influence on the market.
We think the main reason that employer-sponsored insurance
is up in Massachusetts is not the pay or play component but the
individual mandate which has led individuals to go to their
employers and ask for insurance coverage so they can meet that
legal requirement.
Senator Dodd. So what is the number? How did you come up
with $300? Where did that number come from?
Mr. Gruber. That was basically a compromise. Initially,
there was desire to have a higher level among some, none among
others, and it was viewed as a compromise to where it was a
real employer contribution. It was substantive but not viewed
as too onerous by the business community.
Senator Dodd. Mr. Dennis, of the NFIB, I wonder if you
might comment. One of the suggestions here that's being talked
about is to provide tax credits for smaller businesses. There
has been constant complaints here from all of our constituents
for providing some tax relief for them obviously if they're
going to take on these additional costs in an environment like
this and yet there be a requirement, I suppose, if you're going
to get these tax advantages, that you also then provide some
basic healthcare for these employees.
What's your reaction to that?
Mr. Dennis. Well, it seems to me that if you're going to
do--why would you give tax incentives if--excuse me. Let me
reverse that.
Why would you require somebody to do something if you're
going to turn around and give them tax incentives to pay for
the same thing? In other words, it's like putting it in one
pocket and pulling it out of the other pocket. That doesn't
seem to make a lot of sense.
One of the things you're trying to do with the taxes that I
have seen is that you're focusing those tax provisions you do
have on certain employers which employ lower-wage employees and
they're the ones that tend not to provide insurance.
One of the things to remember is that the small employers
who don't provide insurance also tend to be those employers who
don't take very much out of their businesses and their
flexibility is severely limited. In fact, there's a direct
relationship between what an employer takes out of his
business, smaller businesses now, what they take out of their
business, the wages they pay--whether or not they have a
pension plan and whether or not they provide insurance.
When you're targeting those tax subsidies on folks who tend
not to pay very much, you certainly have the right target.
Senator Dodd. All right. My time has expired.
Senator Enzi.
Senator Enzi. Thank you, Mr. Chairman, and I want to thank
everybody that testified.
This is a huge panel. What you may not know is that you
volunteered to answer questions that Senators may submit, as
well, and hopefully you will do that in a timely manner so that
we can use your information as we go through the legislation
and we're on a fast track to get the legislation done, too, and
that was the message Senator Coburn asked me as he left.
Senator Dodd. Can I make a suggestion in that regard, too,
by the way?
All of you have made some various suggestions and some
technical ideas and it's awfully hard just listening to this,
in addition to your testimony, if you've got some of those
ideas, you could submit them to the committee as quickly as you
could. It would be very helpful to us in these coming days to
have those ideas in front of us.
I apologize.
Senator Enzi. That's fine. Mr. Burd, I wanted you to go
into a little bit more how--I know that there's a proximity of
different prices in the market that your employees can tap.
Can you tell me a little bit more how that transparency of
prices helps out?
Mr. Burd. The transparency component is something that
we're just building now, but let me tell you how we framed it.
In the local Bay Area of San Francisco, there's this--you
can get a colonoscopy for $700 and one for $7,000, and so we
did some research with the help of our claims processor to
determine what was the right set of quality and costs that
would be a reasonable cost and there was a time when we paid 80
percent of the costs for colonoscopy. We stepped that up to a
100 but we were paying a 100 even for the $7,000 colonoscopy.
We now believe that a $1,500 colonoscopy in that market is
the appropriate number and so we pay 100 percent because we
think it's preventative to have that colonoscopy done and if
someone wants the $7,000, the other $5,500 is essentially on
them.
We're using our own claims data to cobble together a
transparency system. Our employees will go on our Web site,
they'll put in their zip code, a 30-mile radius will be drawn,
and they'll be told what it costs for the procedure that
they're looking at in each of those items.
Senator Enzi. Thank you. I know that's just one small idea,
one big idea from a number of them, and I appreciate the time
that you've taken on the Hill to help educate us all on
possibilities for really bending that cost curve because that's
one of the things we're wrestling with in the bill.
Mr. Johnson, could you tell me what impact the employer
mandate would have with your members and their ability to
create jobs, particularly at this time in the market?
Mr. Johnson. Well, of course, we are dealing with a bit of
an unknown since it's not spelled out in the bill, but when you
have a mandate on employers and it costs X amount of money,
that X amount of money is not just going to be created. It's
going to come out of some other pocket of the employer, whether
it's profit margins or operating expenses or money he set aside
to expand.
Studies, ranging from CBO to the RAND Corporation have said
that this will result in some job loss, particularly impacting
lower-income workers, because the money has to come from
somewhere. There is not a free ride here.
It's tough to extrapolate exactly what the effect would be
on it, but when the RAND study is talking in terms of $9 to $12
billion, $9 to $17 billion for premium contributions and
penalty payments and, of course, there's the play part and then
there's the pay part and I'll call it a civil fine which is
what I think it would be. For penalty payments ranging from $4
to $12 billion, that's going to have an impact and it's not a
new concept, that when the Congress imposes a mandate in one
area, that's going to be paid for from another area.
Senator Enzi. Thank you. Dr. Baicker, I'm hearing some
concern that if we do a government-run health plan, we'll wind
up with something like Fannie Mae or Freddie Mac.
Are those concerns that a government-run health plan could
have with the private market?
Ms. Baicker. I think there are a number of concerns one
might have with the public plan. Clearly the devil is in the
details in terms of whether it would provide real competition
for private plans or inhibit competition with private plans
because it had either unfair advantages or unfair
disadvantages.
I think the key things that I would look at to figuring
that out are the pricing that the public option can use. Is it
negotiating based on additional clout beyond which private
plans wouldn't be able to compete or is it required to take on
sicker enrollees and subject to worst risk selection and those
issues show up as well in the Medicare Advantage Plans which
maybe provide a model of what you might expect from a public-
private hybrid.
I would look to that to see, first of all, the potential
success of risk adjustment. We do have a risk-adjustment
element in the Medicare Advantage Plans that I think is really
promising for thinking about risk adjustment among private
insurers, if we look out at a reform that lets people go to a
variety of different insurers but also then the risk of
administered pricing where the variation that we see in the
cost of care for Medicare beneficiaries in high-cost parts of
the country relative to low-cost parts of the country can be a
factor of two or three times as much for care that doesn't seem
to go to patients that start out sicker or end up healthier.
It's very hard to explain that level of variation in care
through any story about efficiency. It looks more like extra
money is going into parts of the country that practice a more
intensive style of medicine in a way that the government
regulation is not inhibiting.
That makes me very nervous about a monolithic public plan.
Senator Enzi. Thank you. My time has expired. I have
questions for everybody and I'll get those out.
Senator Dodd. Thank you very much, Senator Enzi.
Senator Harkin.
Statement of Senator Harkin
Senator Harkin. Thank you, Mr. Chairman.
Again, it comes as no surprise for anyone here that I have
a great deal of admiration for Mr. Burd and what he's done at
Safeway because I think the only way we're ever going to bend
this cost curve is keeping people healthier in the first place.
I don't mean to get on my soapbox but--as long as we continue
to dance around this issue--but unless and until we put more
emphasis on prevention and wellness, we're just pouring money--
we're just throwing it out there and we'll never get our costs
under control.
Mr. Burd is right. That's the only way to bend our cost
curve and we've got to put more on prevention and wellness and
we just haven't done this in the past. None of us, none of us
have done it.
It seems to me in this health care reform that that really
ought to be a central part. That's what we ought to be focused
on. How do we incentivize healthy behavior? All the incentives
now in our health care system is to patch and fix and mend.
It's pills, surgery, hospitalization, disability. Why don't we
put more incentives up front? We know how to do it. Safeway did
it. They know how to incentivize this. Pitney-Bowes did it.
They know how to do it and there are other smaller companies
out there that have done this and yet we keep wrestling with
all this when the focus ought to be, I think, on how we keep
people healthy in the first place and provide those incentives
out there and move those incentives up front.
Dean Ornish has this famous cartoon he uses all the time.
There is a sink and it's overflowing. The faucets are on. The
water's going on the floor and there's two guys furiously
mopping up the floor. His point is, that we got to shut the
faucets off and we haven't been very good at doing that but we
know, we've got good data on this.
In the next panel, we have the Trust for America's Health
coming on and they have done some really good work on that, but
a lot of our private businesses have done this, and I'll just
throw that out there that we've got to pay more attention to
that.
Mr. Williams, you and I have talked about this in the past
from Aetna. You're an insurance company. What do you think
about this? Should we put more into prevention and wellness or
should we just keep jacking up insurance rates?
Mr. Williams. Taken in the spirit in which it's offered,
sir.
I think that there is a fundamentally important opportunity
to focus on wellness and prevention. We do it with our own
employees. Every Aetna employee can earn $1,200 of credits for
participating, voluntarily, in wellness programs where they
know their numbers in terms of blood pressure, their statins
levels, cholesterol, and their BMI, and participating in
fitness and wellness programs. There is an opportunity to earn
$1,200, $600 for the employee and $600 for the spouse, and what
we saw last year was our medical costs go up 3 percent. No
benefit changes, strictly based on the engagement of the
employees in their own wellness and fitness.
Ihave heard Steve Burd many times, and I agree 100 percent,
that there's a huge opportunity to focus on prevention, focus
on wellness. Now that's not the whole problem and there's much
more we have to do. We have to get everybody covered. We have
to make it affordable for people. We have to make certain
people have good solid coverage, not just coverage.
Senator Harkin. Yes.
Mr. Williams. I do believe wellness is absolutely important
and prevention is absolutely important and the individual
really has to get in the game and within the appropriate level
of their participation be able to help participate.
Senator Harkin. The problem is we can address this on a
clinical basis, but if we don't address it outside the clinic,
it doesn't do much good. If people don't have access to better
foods, to better exercise, having more of a knowledge base on
how to stay healthy, you can do all the clinical work, but if
our communities are unhealthy and our schools are unhealthy and
our workplaces are unhealthy, it doesn't do much good to have
it clinically-based.
That's why I keep saying that prevention and wellness must
be clinically-based, community-based, school-based, workplace-
based.
Mr. Williams. It has to be a holistic program, Senator, as
you're describing. Of our 19 million members, we have 2.2
million members who are identified as in chronic disease
management programs where they have diabetes, hypertension,
asthma, allergies, but the object is to avoid the creation of
the next 2.2 million which is exactly through the mechanisms
you're describing.
Senator Harkin. I'm out of time.
Dr. Flowers. Do I have time to speak?
Senator Dodd. Quickly.
Dr. Flowers. I wanted to make the comment from the
perspective of a primary care provider on prevention.
I mean, the reason that having a national health system
would actually improve our public health is that the incentives
completely change. Right now, so much of our healthcare is
driven by profit.
When you have a national health system, it's actually
driven by providing better health and we see this in other
countries around the world that have national systems. They
know that if they have a healthier population, they spend less
money on their population's health and since they're
responsible for paying that money, it makes it more of a
responsibility for them to save money and so there's a greater
incentive to create these public policies that you're talking
about, like improving transportation, improving food, but also
in this country we have a shortage of primary care doctors and
a lot of that is because, as I left practice, we're not
reimbursed easily by the health insurance companies for the
work that we do.
We're required to see more patients and spend less time
with them and spend less time doing, for me, well-child visits
where I could actually take the time to explain to parents the
things that they need to know to raise healthy children and so
we've got to change that so that again if we're fighting for
reimbursement and having to see more and more patients and
spend less time with them, we're not going to have a healthy
population.
Thank you.
Senator Dodd. Senator McCain.
Senator McCain. Senator Hatch.
Senator Dodd. Fine. All right. I'm just following the
Kennedy rules here. I apologize.
Orrin, you've been chair of this committee.
Senator McCain. Senator Hatch has been very patient.
Senator Dodd. All right. Fine. Orrin, welcome.
Senator Hatch. I have to defer to John. It's fine with me.
Senator Dodd. Speak in there, Orrin. These microphones are
not very good. So I apologize.
Statement of Senator Hatch
Senator Hatch. Ms. Trautwein, there's been a lot of talk
recently about creating a level playing field between a
government-run plan and private plans. First of all, I
personally think that's impossible because of all the State and
Federal regulations that are imposed on private plans that a
government plan would never be subjected to, including paying
State assessments in all 50 States, for example, along with
Federal taxes.
History already teaches us this lesson. In 1965, Medicare
started as a political compromise where it would pay the same
rates as the private sector. Faced with rising budgetary
concerns, Congress soon decided to implement price controls in
the program and today, as you know, it pays doctors 20 percent
less and hospitals 30 percent less than the private sector.
Now, do you think it's possible ever to really truly create
a level playing field between a government-run plan and the
private plans?
Ms. Trautwein. Well, I don't think it's possible, but I'm
not just saying that for some sort of philosophical
perspective. This is a reality.
There are many things that we can do. We could say that
everyone had to pay the providers the same price. We could have
a whole list of ways that we tried to make things equal.
One of the ways that I don't think that it will ever be
equal is something just as simple as State premium tax. Now, I
can't imagine a Federal or a State public program paying State
premium taxes as just one item of those to a State. I can't see
that happening.
Maybe Ms. Praeger could comment more on that, but it's a
significant amount of money and when they don't pay equally,
what happens is the cost shift increases and we have that much
more that's shifted over to the private sector and then that is
an undue--it's completely at odds with these affordability
goals that we have.
Senator Hatch. That's just one idea.
Mr. Williams, what do you have to say about that question?
Mr. Williams. Yes, I would say that I have tried to avoid a
philosophical response to the notion of the government plan to
really wait to see the specific proposals that have come
forward and based on what I have seen so far, I would be
opposed to a government plan.
I think there's a great confusion about profit in the for-
profit sector. The total profits of the publicly traded
healthcare sector is about $12 billion. The taxes that we pay
are roughly equal to what we earn in profits. In our case, we
earn about 6 percent in profit and we pay in State, Federal and
premium taxes 5 percent, and we believe the value that we add
in the system more than makes up for the 1 percent difference.
You have to also look at the fact that only half of the
members are in plans that are for profit. I think we get
diverted from the fundamental issue which is how do we get and
keep individuals and small groups covered and focus on the
particular barriers to accomplishing that and develop
meaningful and substantive programs along with prevention and
wellness, including changing the reimbursement structure so
that we do pay primary care better and pediatricians better.
Senator Hatch. Let me ask Randy Johnson and Dr. Baicker
this next question.
Our national unemployment rate is almost 10 percent and
it's rising. It's the highest rate in decades and one of the
policies being discussed here, of course, is the employer
mandate, where employers would be charged a penalty if they
don't provide a defined level of coverage.
According to a 2007 National Bureau of Economic Research,
imposing an employer mandate could result in the loss of more
than 220,000 jobs in this country. In an environment where we
should be creating jobs, I'm afraid that we're simply creating
more incentives for employers to actually stop offering jobs
and move their operations overseas, as some have already done,
and I'd like your thoughts very briefly on this, both of you.
Mr. Johnson. Well, I certainly agree with your
observations, Senator Hatch. I think there is the cost that a
smaller business or any business would have to bear under this.
Either the new healthcare mandate or pay the civil penalty,
which--I have to take some disagreement with others who have
pretended the Massachusetts miracle is in fact--they had lots
of other studies that have shown there's problems with
Massachusetts, including the pay or play mandate and we could
submit some follow-up studies on that.
There is another problem, also, Senator, with regard to
even companies that provide a generous package. One of the
questions that's come up as we've talked to members of my
Employees Benefits Committee is with their plan, which is seen
as generous by their employees, fit the definition of what the
play part of the mandate would be.
In other words, they could have X-plus, but that X-plus may
not fit exactly what--how this medical board under the
legislation is going to define as the minimum benefits package.
People think it's easy to define these plans as actuarial
values, but we've been told it's really not that easy. There is
the question of cost and can smaller employers bear that, and
then for our larger employers, will what they do for their
employees now fit the so-called play part of the pay or play
mandate?
Senator Hatch. Dr. Baicker.
Ms. Baicker. Thank you. I think there's a real difference
between employer mandates and individual mandates and the real
risk of the employer mandate is that employers don't pay for
health insurance premiums, employees do, either in the form of
lower wages because, as healthcare costs rise, their wages rise
more slowly than they would otherwise or even fall, or in the
form of fewer jobs. If healthcare costs rise so high, then
employers can no longer afford to offer a job with benefits and
they either cut down on their workforce or move workers from
full-time jobs with benefits to part-time jobs without
benefits.
I think employer mandates really are about shifting the
burden of who's bearing costs among employees and risking low-
wage workers in particular losing their jobs rather than
getting more employer dollars in the game because I don't think
employer dollars are in the game to begin with. Those costs are
borne by workers. That's a real risk of employer mandates,
particularly for smaller firms that are on the cusp of offering
insurance already.
Senator Hatch. Thank you. My time is up, Mr. Chairman.
Senator Harkin. I'm sorry. I guess I'm now in charge.
Senator Mikulski. Senator Barb.
Senator Harkin. Senator Barb.
Statement of Senator Mikulski
Senator Mikulski. Senator Barb is OK. Senator Barb's OK.
First of all, I want to thank everyone here for
participating in the roundtable. You did it on a very short
notice and with very content-rich presentations. I think we
could engage in substantive conversation with each and every
one of you.
My questions, I'm going to start with Mr. Burd, go to Dr.
Flowers and, if time, to Dr. Rosman.
Mr. Burd, first of all, as a Marylander, I would like to
thank Safeway for having the guts to have a presence in cities.
We've had a terrible time in Baltimore being able to attract
and retain grocery stores and the only ones who've shown a very
visible and aggressive presence have been you and Giant.
I want to thank you for that because in many of our
communities, we can talk about fruits and vegetables and
healthy foods and body mass and so on, but if all you have
available for your food is going to convenience stores to buy
potato chips or fast food stores to buy fast food, you've got a
tough job.
I want to thank you for your presence in two neighborhoods,
Canton and Charles Village, neighborhoods that were teeter-
tottering. The mere fact that you are there helped turn those
neighborhoods around.
Mr. Burd. I appreciate that.
Senator Mikulski. So you helped do healthy habitat.
Now, the other thing that I'd like to ask because it's come
up as we worked on quality which was my job, prevention, along
with Senator Harkin, is behavior and you identified that 70
percent of your employees' issues were related to behavior,
particularly the chronic conditions.
How did you impact on behavior? Did you use a carrot? Did
you use a stick? Are you a nanny corporation with school-
marmish admonitions?
Mr. Burd. Sure. I'd be happy to answer that. The statement
I gave earlier was across this Nation 70 percent of the
healthcare costs are driven by behaviors and that really is one
of the keys to cracking the code here for how to bend the cost
curve.
Because we're self-insured, which means we pay every
dollar, there really is no insurance company. The insurance
company behind us really processes claims. We're free, as are
all other large companies, people with over a thousand
employees, to design their own healthcare plans. That's what we
did.
We focused on the chronic conditions and the behaviors that
lead to them and we set up a series of incentives. We
structured it as a carrot, but I would quickly tell you that
the carrot is nothing more than the mirror image of a stick and
vice versa.
Senator Mikulski. What were they?
Mr. Burd. We have a program we call Healthy Measures which
you opt into. Seventy-four percent of our organization has
opted in and we measure body mass index. We measure smoking. I
mean, we actually test for it. Cotton swab tests. High blood
pressure and high cholesterol levels.
In the Healthy Measure effort this last year, 17 percent of
our employees discovered that they had hypertension. That was a
good thing because we could prevent some future event.
The way our program works, if you are a smoker, you will
pay more for your insurance. You will pay roughly a little over
$300 more than a nonsmoker. Then we provide 100 percent of the
cessation products that you typically buy to wean yourself away
from smoking and if you quit smoking by the end of the year or
if your body mass index is reduced by 10 percent or if your
hypertension is under control or if your cholesterol is under
control, we write you a refund check equal to the elevated
premium.
Senator Mikulski. Do you have a health coach? In other
words, say ``stop smoking'', ``here's, the patch'', or ``do you
actually have health coaches''? ``What is it that you do?''
Mr. Burd. We have a--you know, in 3 minutes, it's hard to
describe the whole system--but we have a very elaborate
holistic approach to healthcare that includes calorie
information in the cafeteria, subsidies only for healthy food,
although we have cheeseburger and fries. We have a 17,000-
square foot fitness center on campus with a nurse practitioner.
We have a 24/7 hotline for any issue that may develop 7 days a
week. We have a med expert service that deals with chronic
conditions. We have nutrition coaches. We have counseling
coaches.
We allow employees to work out midday if they have a weight
issue. We actually believe, I know this sounds bold, but we
believe that we've cracked the code on obesity and we actually
think we can continue to reduce the obesity levels in our
company. Our obesity rate is 28 percent. The Nation's is 40.
Our smoking rate is 14 percent, the Nation's----
Senator Mikulski. And that's in a grocery store?
Mr. Burd. Yes.
Senator Mikulski. You got a lot of temptation. I'm in your
stores.
Mr. Burd. I know.
Senator Mikulski. The ones I have talked about, I know
about them.
Mr. Burd. Yes.
Senator Mikulski. There have been sightings in them.
Mr. Burd. We've made good progress and I have challenged a
couple of other CEOs. We're going to try to bend the obesity
curve in this country and I challenged them. I said, ``Look,
you've got to do it in your own organization first,'' and I
committed that in 120 days I would make further progress on
obesity and we just did and so these incentives work.
The problem I have is the incentives that we're able to put
in place don't come anywhere close to matching the cost
implications. A smoker is $1,400 a year. Toby Cosgrove is here.
He'll give you a number that's probably close to $3,000. It's
at least $1,400 and yet the premium difference is only $300.
I took notice when the tobacco taxes went into effect. They
were raised the equivalent of about $300 a year for a one pack
a day smoker. In the State of Michigan, the cessation centers
that offer free products for quitting smoking had a 19-percent
increase in their calls. California, which has the second
lowest smoking rate in the country, had a 300-percent increase
in their calls.
You know, my e-mail box is full of thank yous from
employees that have: lost a hundred pounds, 120 pounds, 40
pounds, became marathon runners, or stopped smoking; and they
said the incentives were the key. Seventy-eight percent of our
employees absolutely love this plan. They said it's good, very
good or excellent, and 74 percent asked for changes that were
increased financial incentives.
Senator Mikulski. Well, thank you. I know my time is up.
Dr. Rosman, actually Senator Dodd asked me to ask some of
the questions I would have for you.
Just one quick question for Dr. Flowers. First of all, Dr.
Flowers, I wanted you to know, No. 1, you're welcomed here and
we really welcome your insights. As a sister Marylander, we're
glad to see you.
Dr. Flowers. Thank you.
Senator Mikulski. Your testimony was excellent. Why doesn't
a public option meet your needs, the needs that you've outlined
as you articulated the needs for a single payer?
When we do a public option, why wouldn't it accomplish the
six things that you talked about?
Dr. Flowers. I wish it would, but the reality is, that the
problem is that we have about 1,300 different insurance plans
in this country, and it's this fragmentation which is keeping
us from being able to take all of our dollars and actually use
them for healthcare because so much money is wasted to create
this fragmentation.
Creating another public plan is going to further fragment
our pool and what we've seen--two things. One is that if you
look at our experience with Medicare Advantage Plans, and this
happens over and over again, is that the private insurers are
very good at attracting the healthier patients, we call this
cherry-picking, and so the public plans are often left with the
patients who have the greater health needs and therefore carry
a greater proportion of the burden of the cost. That's one
thing that's a problem.
The other is the whole billing infrastructure because
there's so much talk about, well, if we go to a uniform billing
infrastructure, is this going to help things? We already have
that for hospitals, but we still have hospitals with many, many
billing employees and what happens for us is one of the first
things when we admit a patient to the hospital is we get a
visit from the utilization review department and those people
have to be employed to be an interface between the insurers and
the hospital and that costs a lot of money and so we don't do
away with that if we're adding one more plan.
We just can't see the cost savings with the public-private
partnership. It further complicates things. If you look at
what's happened in Massachusetts with their connector which
you're talking about an exchange, it adds 4 percent to the
cost. Those are the problems.
Senator Mikulski. Well, thank you. That was a great
clarification. I appreciate it. My time's up.
Senator Dodd. Senator McCain.
Statement of Senator McCain
Senator McCain. Thank you, Mr. Chairman.
Mr. Scheppach, there's been--we're in uncharted waters here
as far as a national healthcare program is concerned.
For the record, perhaps you could give us what's been tried
in other States, ranging from Massachusetts to various other
States. We'd be very interested in knowing because the States
are generally the laboratories for this kind of innovation and
experimentation and on a number of areas, particularly in
healthcare. OK?
Mr. Dennis, as you know, one of the proposals is that the
small businesses either provide a certain level that is yet
unspecified healthcare for their employees or they pay a
certain amount of whatever you want to call it, tax levy or
penalty, and that number has been unspecified. But if it's too
high, then we know it drives small business people to lay offs
and if it's too low they pay it and go on with business as
usual.
What's your view on employer health insurance mandates and
their impact?
Mr. Dennis. Well, pay or play is a mandate by another name,
but essentially they're opposing it but it's important to
remember why. We have to remember what the consequences of this
are and that is employees pay the cost of this in the long run
and what employees pay for it, it's normally lower income
employees that pay for it. So there's a real problem there.
There is a problem initially when a small employer has to
absorb the initial cost before they pass it on. That's a
problem. A lot of small employers don't have that flexibility
and then, finally, there's also another thing and that is that
we found in some research that was done over at George Mason in
the Experimental Economics Lab that frequently low-margin
larger margin employers, I don't mean great big ones, but low-
margin larger employers act very much like small employers and
some of the more profitable larger employers who basically
already provide health insurance tend to act a little bit more
like the larger ones.
So you have a marginal profitability issue, as well. Those
are the three reasons why I think this doesn't make a lot of
sense.
Senator McCain. Dr. Gottlieb, we have the elephant in the
room is how we pay for all this. Estimates range from $1
trillion to $2 trillion to more trillion dollars.
One of the proposals that's now being bandied about is the
taxation of employer-provided healthcare. The proposal I made a
long time ago was also accompanied by a $5,000 refundable tax
credit to families in America but now the part that's being
considered, although certainly no one has yet confirmed that,
is the removal of some or all of the individual tax exclusion
for employer-provided healthcare.
What's your view of that particular proposal?
Dr. Gottlieb. Well, whether we do it as some kind of tax
treatment, a tax rebate or by making the Tax Code equivalent,
whether you go out and purchase your insurance in the private
market or get it through your employer, I think we need to
consider strongly trying to level the playing field between
people who are buying insurance in the open market on their own
and those who are getting it from their employer.
We know one of the reasons why insurance is so unaffordable
in the private market is because people don't have the benefit
of the tax subsidy that's being afforded when they purchase it
through their workplace.
Generally speaking, we need to consider how we go about
trying to level that playing field so people in the private
market can have the same benefits as if they were getting it
through their employer.
Senator McCain. Ms. Trautwein, same question. What do you
believe? Do you believe that the idea of removing the tax
exemption for employer-based healthcare benefits is a good idea
and taxing it?
Ms. Trautwein. We have a lot of concerns about doing that,
frankly. We're very concerned about unraveling the employer-
based system.
You know, having said that, we know that we have to find
some money to pay for a lot of the health reform and so we're
very interested in looking at the alternate proposals, such as
those for putting some caps in and so forth, but we do--I would
just agree, though, relative to the individual market, that at
a bare minimum, we've got to make sure that we have tax equity
in every market so that individuals can have the same benefit
that those in employer-sponsored plans have.
Senator McCain. That's not the case today.
Ms. Trautwein. It's not, and that we would need at a
minimum to have that.
Senator McCain. Dr. Gruber.
Mr. Gruber. Yes, Senator McCain. I actually think that
reforming the tax exclusion to employer-provided health
insurance is absolutely a win-win source of financing for the
kind of bill we're talking about today.
We can take a source of financing which right now is
regressive. It's inefficient. It induces excessive health
insurance consumption and by capping that in one form or
another, we can raise the money we need to achieve the goals
we're talking about today. I think it's a terrific direction to
go for financing healthcare reform.
Senator McCain. Dr. Baicker, you have----
Ms. Baicker. I couldn't agree more that the way we finance
private health insurance through the Tax Code today subsidizes
disproportionately high income people and the least efficient
health insurance plans and that if we could capture some of
that public expenditure on high-income, high-cost health plans
and redirect it toward ensuring everybody has access to at
least basic care, that would both improve efficiency and
improve progressivity. It seems like a win-win option.
Senator McCain. Mr. Rivera, how are we going to pay for the
healthcare reform?
Mr. Rivera. Well, I think that what we need to do is find
the efficiencies in the healthcare system, namely by making it
more efficient.
We're spending 17.5 percent, right now probably more than
any country in the world, and at the same time when we do
studies with other countries in the world, we are getting less
in terms of outcomes.
In that sense, we believe that inside the healthcare system
we could find efficiencies and savings, particularly in terms
of bending the curve going forward.
The other thing that I believe, and going back to what
Senator Harkin was saying, is the whole question of wellness.
Ms. Baicker and I, we're part of the study of the Robert Wood
Johnson Foundation for over a 2-year period which we concluded
that we need a new national culture of health which is
basically we have a healthcare system which is a curative
healthcare system. We've got to prevent people from getting to
our hospitals and our healthcare facilities and basically we
believe that that's a responsibility of the government, of the
individuals, of the communities and we can't even make it
happen.
Right now, for example, Senator McCain, the government buys
about $60 billion in food a year. We buy $40 billion for people
who are on food stamps--excuse me, no, children's school
breakfasts and school lunches, and we basically don't have any
limitations on what food we serve there. Only about 2 percent
of the high schools in America have physical education.
I believe this is a very complex issue and I believe that
we can find the savings, but it will be--there's no silver
bullet. We have to work all the moving parts to make it happen.
Senator McCain. Remarkable. Dr. Rosman.
Dr. Rosman. Yes, thank you.
Senator McCain. Do you also believe that efficiencies and
then wellness and fitness will solve our problems? That's good.
I appreciate that.
Mr. Rivera. Thank you.
Senator McCain. Go ahead.
Dr. Rosman. We believe----
Senator McCain. You're welcome.
Dr. Rosman. Is your question about payment or prevention?
I'm sorry.
Senator McCain. I'm talking about how we pay for----
Dr. Rosman. Yes.
Senator McCain [continuing]. The trillion and two trillion
dollars or more of costs associated with any proposal that
seems to be being considered now by this committee or by the
Finance Committee.
Dr. Rosman. I would start by picking up on your former line
of questioning. We absolutely support eliminating the tax
exclusion and redirecting those funds in the form of tax
credits or vouchers on a sliding scale to the low-income and
uninsured so that they can afford to purchase health insurance.
As several people mentioned, it is currently a regressive
subsidy to the tune of a $125 billion and we believe that can
certainly go a long way in helping to fund coverage for those
who need it.
We are working hard on comparative effectiveness research
on quality measures. I agree that we certainly need to focus on
prevention. One of the most heartbreaking things as a physician
is to see--I'm a pediatrician. I'm seeing kids not even barely
into their second decade of life who already have serious
health consequences of lifestyle issues and that is costing our
system beyond the measure at this point. There are a lot of
aspects that need to go into this.
Thank you.
Senator McCain. Thank you, Mr. Chairman.
Senator Dodd. Thank you, Senator.
Senator Bingaman.
Statement of Senator Bingaman
Senator Bingaman. Thank you all very much. Dr. Gruber, let
me ask you a couple of questions.
You endorsed the idea of premium variation based on both
tobacco use and adherence to wellness lifestyle programs. I'm a
little unclear as to what you believe we need to do in this
legislation to bring that about.
Mr. Burd has certainly described what he's doing which
amounts to that. He has indicated that we need to change HIPAA
because HIPAA does not allow him to give a sufficient financial
incentive, as I understand it, and he would like that change.
What else should be done in this legislation to bring about
this or to encourage this premium variation based on tobacco
use or advance wellness and lifestyle?
Mr. Gruber. Senator Bingaman, that's a great question
because it has an easy answer which is nothing.
What this legislation should do is not rule out the
possibilities of doing what Mr. Burd----
Senator Bingaman. Do you think that the community rating
that we're talking about does rule that out?
Mr. Gruber. I believe in the language as it's written, it
may rule it out.
Senator Bingaman. We need to clarify that nothing we're
doing in community rating would interfere with the variation of
premium to accomplish these kinds of programs that Mr. Burd
talked about?
Mr. Gruber. Absolutely.
Senator Bingaman. OK. You also talk about your view that
the proposal to have consumer rebates based on insufficient
medical loss ratios is a mistake. It's a mistake to put that in
the legislation at this time and instead we should require
reporting on medical loss ratios and then come back in the
future if we think this is something that the Congress or the
government really needs to legislate on, is that right?
Mr. Gruber. Yes, I believe that's right. I think medical
loss ratios are very hard to define because the key question is
what defines an acceptable expense. If a company spends money
on wellness and management, we clearly think that is an
acceptable expense.
How are you going to separate that from other kinds of
expenditures, not to mention the fact that companies are very
good at figuring out how to make things look like qualified
expenditures versus not, and I think we really need to learn
more in a more transparent environment about where companies
are spending their money before we dive in and commit to a
rebate of this magnitude.
Senator Bingaman. Let me ask a question of all the panel.
It seems striking to me--we've been talking about differences
of opinion that exist--but it's striking to me that it seems to
me that there's near uniform agreement on several things.
I know Dr. Flowers feels differently and favors the single-
payer program, but with that exception, it seems as though all
of the panel are in favor of the various insurance market
reforms, at least substantial number of the insurance market
reforms that we have--that we contemplate in this draft
legislation. All panel members are in favor of the individual
mandate which we contemplate in here. Maybe that's wrong.
Mr. Dennis, you are not in favor of an individual mandate?
Mr. Dennis. We're kind of up in the air. We're open to it,
but it depends upon a lot of things.
Senator Bingaman. You're agnostic on the question?
Mr. Dennis. We're agnostic. I like that. Thank you very
much.
Senator Dodd. So are members of this committee.
Senator Bingaman. Are there others who do not favor, yes?
Dr. Gottlieb. Senator, we believe that everyone should have
health coverage and every employer should offer health coverage
and help fund health coverage. In that context, we think
individual mandates are appropriate.
To simply rely on individuals, we think is inappropriate
and puts the burden on the wrong place.
Senator Bingaman. So if we're not able to also require
employers to have it, you think we should not require
individuals to have it?
Dr. Gottlieb. With all due respect, I would put it the
other way. You should require both to do it and you can do
that.
Senator Bingaman. Well, I know that. I know that's your
view, but I'm just saying if we were to require it of
individuals, would you support that?
Dr. Gottlieb. Senator, we would support that if there were
substantial subsidies to pay to make it affordable.
Senator Bingaman. Right. That was my----
Dr. Gottlieb. That is a very expensive prospect.
Senator Bingaman. Yes. That was my next question. It seemed
to me that all members of the panel were in favor of
substantial private coverage subsidies, is that correct? I
believe everyone on the panel is in favor of small employer
credits to encourage small employers to provide coverage, is
that accurate?
Mr. Burd, you're not in favor of that?
Mr. Burd. I'm not. I know that you know, it'll probably
upset the Small Business Administration, but the reality is
that large businesses that have insurance, like us, are paying
the tab for those that do not have it.
I'll give you one example of a local Bay Area hospital that
lost $70 million on their Medicare patients, $20 million on
their Medicaid and underinsured patients and then made a $110
million on their insured patients for a $20 million profit and
so I don't really buy into the notion that small business--I
like the individual mandate.
I don't buy into the notion that small business, if you go
the other way, should in any way be exempted because maybe the
cost of cleaning a shirt at the laundry will go up 20 cents but
it'll go up 20 cents for everybody and a pizza may normally
cost $8, it may cost $8.50. That's fair. That's OK.
I don't buy the argument that they'll go out of business. I
think they'll adjust their price structure.
Senator Bingaman. So your view is there should be an
employer mandate, it should apply to all employers----
Mr. Burd. No. My view is that I like what you said
originally. I would favor an individual mandate. I think it's
cleaner. Senator McCain didn't ask me, but I would not be in
favor of eliminating the tax deductibility for business because
my first reaction would be if I'm not going to get a tax
deduction for that, then what I'll probably do is put it in
wages and allow them to buy on the open market, but I will lose
my influence and control over their behavior and the reason
most larger employers want to stay in this game is they believe
that they get additional benefits and productivity from the
wellness of their workforce and so there's no one in the
Coalition to Advance Healthcare Reform of the 61 companies that
are in it that want to get out of the insurance game because
they believe that they can fundamentally affect behavior.
If you want to do a mandate, I'm in favor of the individual
mandate as opposed to the business mandate because I'm afraid
somebody will exempt small business which I think is wrong.
Senator Bingaman. Thank you very much.
Senator Dodd. Do you agree with that too, Ron?
Mr. Williams. Yes, I would basically say that I think that
the individual mandate is, in fact, the way to go.
I think that there are strong feelings on multiple sides of
the employer mandate, and I think the real issue is getting at
the individual in the sense that the individual either can
afford insurance or that we have mechanisms to really help them
come up with insurance.
Just a couple of other critical points I would like to
make. There was a question on the whole medical loss ratio
question, and I think that one of the points I would make is
that if there were to be such a thing, I think you have to have
it for health plans. I think you have to have it for hospitals.
I think you have to have it for physicians because I think it
has to be a level playing field.
I think a big problem with it is that it is a GAAP
accounting measure that is created to measure an accounting
notion, not a how we direct our resources. If, for example, we
have 2 million members who are in chronic disease management
programs, under a medical loss ratio definition that would be
bad administrative expense that we would be penalized for
investing in.
The $1.8 billion we've spent in the past 4 years investing
in health information technology, would be viewed as bad
administrative expense, and I think the marketplace is much
better able in the form of people like Steve Burd and other
sophisticated purchasers to decide whether they're getting
value through the overall administrative expense structure we
have which, by the way, in our case is about 11 percent and is
nowhere near the allegations that are made in the context of
it.
Again, I think it's a red herring. I think we should focus
on what we're doing to change the medical trend.
I have got one other quick point I'd like to make, if I
may. If I told you that in year one medical costs went up 8
percent, in year two I could take it down to 5 percent, in year
three 1.1 percent, and in year four I could make the trend go
negative by 1 percent, people would feel that was a pretty good
performance, I would assume.
Now the reality is that's what happened in 1992, 1993,
1994, and 1995. Medical costs went negative. Now the problem is
that we got there through mechanisms that turned out not to be
the right mechanisms. We had mandatory medical homes which we
called the gatekeeper. We had bundled payments which we called
capitation. We had neural networks that limited the access of
members where they couldn't go to the physician they wanted to
see. We had coordinated care that we called referrals required,
and we had very low cost-sharing because everything was on a
co-payment and physicians had great incentives, it was risk-
sharing, and there was great concern about the physicians being
inappropriately remunerated for denying care as opposed to
providing care.
We bent the trend and I think the opportunity as we go
forward is to make certain that we do bend the trend through
more appropriate mechanisms, like wellness, like administrative
simplification where the industry has committed one claim form,
one method of providing eligibility information, one method of
really interfacing with the whole physician community.
I think there's a lot we can do and I do believe that we
can bend the trend because it's been done before, but I think
this time we have to do it collaboratively with physicians,
with consumers, with the provider community, and the government
and regulatory apparatus.
Just a couple of points.
Senator Dodd. Thank you. Senator Sanders.
Senator Sanders. Thank you, Mr. Chairman, and----
Mr. Johnson. I'm sorry. Just for the record, the medical
loss ratio provision has been troublesome to some of our
members. It's interpreted as a cap on profits, a governmental
cap on profits.
I'm sorry, Senator. Just for the record because Senator
Bingaman asked about that.
Statement of Senator Sanders
Senator Sanders. Mr. Chairman, thank you very much for
holding this hearing. I want to thank all the panelists for
being here and I especially want to thank you for allowing for
the first time in this debate an advocate for a single-payer
program to be here tonight.
[Applause.]
Senator Dodd. Shh. You may get arrested.
Senator Sanders. The truth is that of any program out
there, single-payer is the most popular. It has the support of
most people. There are 15,000 physicians onboard. It has the
major nursing organizations onboard and it's about time that we
at least began to hear at least for a few minutes from a
single-payer advocate.
The truth of the matter is that our current healthcare
system is disintegrating. You have not only 46 million
Americans without any health insurance, you have even more who
are underinsured and what's not talked about very often is that
at a time when we have 60 million who do not have a doctor of
their own, close to 18,000 people die every single year because
by the time they get to the doctor, it's too late to treat
their illnesses.
Meanwhile, in the midst of that disaster, we end up
spending far, far more than any other country on earth, all of
which guarantee healthcare to all of their people.
I think we can't just tinker with the system. We have to
understand the system is fundamentally broken. We have to
understand why it is broken and we need a new system.
Now, I want to start off by asking Dr. Flowers a very
simple question and that is, tell me in your judgment why it is
that our current healthcare nonsystem costs so much and gets so
little value, not only in terms of the people who are uninsured
and underinsured but in terms of healthcare outcomes, like
longevity and low-weight babies and so forth and so on. Why are
the outcomes so poor, despite the fact that we spend so much?
Dr. Flowers. Right. Thank you very much. We spend two to
three times more than what the other industrialized nations
spend on healthcare and their health outcomes are much better
than ours in terms of infant mortality.
Our maternal mortality is two to three times more what the
other industrialized nations have. Our life expectancy is lower
and it's because we don't have an actual system. We have this
hodgepodge. It's very fragmented. It's very nontransparent.
There are a lot of barriers that are put into place between
the patients and their healthcare providers and so our whole
incentive is wrong. It's not based on creating better health.
It's based on--and I'm sorry, I disagree, Mr. Williams. It is
based on profit because the number of these insurance
administrators are there to cherry-pick, to deny and to
restrict care.
Also, we've linked our health insurance to employment and
that leaves us in the most insecure position because when a
person becomes ill, if they are unable to work, they lose their
job and then they have nothing. They have no access to care, no
treatment.
Also, because people will lose their insurance if they
change jobs, they won't change jobs. People are now getting
married for health insurance.
Senator Sanders. Right.
Dr. Flowers. It's perverse. It's crazy, and so now doctors
are spending about--with all this health insurance model, we're
spending up to a third of our time on paperwork and telephone
calls to get authorization.
What makes it a little crazy is, if you think about it, a
doctor writes a prescription for a medication, right, they hand
that to the patient, the patient takes it to the pharmacist and
then the doctor gets a call from the pharmacist, you have to
call the insurance company and get authorization for this
patient to have this medicine. Well, doesn't the prescription
serve as authorization? Didn't they make that decision?
Senator Sanders. I have limited time.
Dr. Flowers. I'm sorry. OK. Well, anyway, so it's because
we don't have coordination. It's not comprehensive.
Senator Sanders. I want to ask Mr. Williams. He's sitting
right next to you.
Dr. Flowers. OK.
Senator Sanders. I want to ask you, sir. What do you think
about the appropriateness and morality of private insurance
companies denying people coverage because of pre-existing
conditions? A woman has breast cancer 3 years ago. Clearly
that's what's on her mind and yet there are many insurance
companies, I don't know about Aetna, who deny her insurance.
My understanding is that in some cases pregnancy is a pre-
existing condition, not to be covered. What sense does that
make?
Mr. Williams. I would say, Senator, that in 2005 I called
for the insurance industry to guarantee issue insurance to all
comers in order. To assure affordability that requires that
everyone be in the insurance market.
In States where----
Senator Sanders. Wait.
Mr. Williams. You asked me a question.
Senator Sanders. I know, but I don't--I have a limited
amount of time. I asked you a simple question.
Mr. Williams. And I want to answer it.
Senator Sanders. The morality or the appropriateness of
denying coverage to somebody because of a pre-existing
condition. That's what goes on today. Not what you called for 3
years ago.
Mr. Williams. Senator, I am personally and as an
organization in support of issuing insurance to everyone
without a pre-existing condition. If there's another answer
you'd like me to give----
Senator Sanders. That's great. Does that----
Mr. Williams [continuing]. I'd be glad to give it.
Senator Sanders. Does that exist today? I'm glad that you
believe that, but that reality of denying people coverage to
pre-existing conditions exist all over the industry today, does
it not?
Mr. Williams. The answer to your question, Senator, is in
many States, based on State laws and regulations and the 60
different entities that regulate the industry, there are many
States where health status is a basis for----
Senator Sanders. Wow.
Mr. Williams [continuing]. Issuing insurance. That is
correct.
Senator Sanders. OK. Let me ask you this, Mr. Williams.
There are 1,300, as I understand it, separate private health
insurance companies in this country providing thousands of
different plans and at a time when we have a desperate need for
primary healthcare doctors and dentists and other healthcare
professionals, in the last 30 years the number of
administrative personnel, that's the bill collectors, that's
the bureaucrats who work for private health insurance
companies, has grown by a rate of 25 times greater than the
number of physicians in the United States of America.
Do you think it makes sense that we are seeing a rate of
increase by 25 times of healthcare bureaucrats who do not
deliver one baby, do not care for one cancer patient, just
shuffle paper, driving people crazy about their bills? Do you
think that makes sense if we're trying to move toward a cost-
effective health insurance program?
Mr. Williams. Well, Senator, what I can tell you is what I
know about Aetna which is 20 percent of the staff who work in
our company are clinical personnel who are involved in trying
to make certain that our patients who have chronic conditions
are identified, that they understand the condition that they
have, that they're getting the opportunity to make certain they
can have a good constructive dialogue with their physician.
I don't know your numbers. I certainly can't speak to them.
I'd be----
Senator Sanders. A dialogue with their physicians. That
sounds to me like what Dr. Flowers was saying, that she
prescribes a drug and some bureaucrat working for an insurance
company tells her that that's not the right drug. Is that the
dialogue we're talking about?
Mr. Williams. No, Senator. We'd be glad to have you visit
and explain what we do and how we do it.
Senator Sanders. How do you feel--everybody here,
regardless of political persuasion, is worried about the
soaring costs of healthcare. My understanding is that in
California, $1 out of every $3 in healthcare goes to
administration and bureaucracy. Does this sound like a sensible
system to you?
Mr. Williams. Senator, I would find that hard to believe as
a fact personally.
Senator Sanders. You would?
Mr. Williams. Yes, our administrative expense is 11
percent.
Senator Sanders. We will get those--well, it's not only
you, it's the people at the other end. There was a study that
came out recently that doctors spend 2 weeks a year arguing
with insurance companies about forms of therapy. That's an
administrative expense. Nurses, every small practice in America
has to have somebody who does nothing else but fill out forms.
All of that adds up. I think the number of one-third may well
be----
Mr. Williams. Senator, if that's true, I'd love to see it,
but what I would say is that whatever we're spending, it's too
much. There is--and I think the industry has worked very hard
and has a whole series of comprehensive proposals that are
designed to significantly enhance administrative expense.
Senator Sanders. Thank you. Last question is for Dr.
Rosman.
A recent poll came out done by the Kaiser Family Foundation
which said that 67 percent of Americans either strongly favor
or somewhat favor a public health insurance option similar to
Medicare to compete with private health insurance plans.
Why do you think two-thirds of the American people want to
see at the very least a Medicare-type plan for all Americans,
yet the AMA does not think it's a good idea?
Dr. Rosman. Senator, I don't think I can speak to those
individuals' reasons, but I can tell you the reasons for the
AMA's concerns are based on the history that Medicare and
Medicaid are public insurance options.
Senator Sanders. Medicare is a much more popular program
than Aetna is, with all due respect.
Dr. Rosman. I would absolutely agree that we need an
insurance market reform so that we have uniform standards, so
that there are high-risk pools, so that people can renew their
insurance, even if they develop a health condition. We
absolutely agree with those market reforms.
We are concerned with a Medicare-based public plan option
because reimbursements aren't high enough that physicians can
keep their offices open. My adult colleagues see patients day
after day who can't get into a primary care physician. Nobody's
accepting their Medicare and they can't find a primary care----
Senator Sanders. I think we need to take a hard look at
reimbursement rates.
Dr. Rosman. OK.
Senator Sanders. Thank you very much, Mr. Chairman.
Senator Dodd. Thank you, Senator, very much.
Senator Alexander.
Statement of Senator Alexander
Senator Alexander. Thank you, Mr. Chairman. Mr. Burd, as
we've talked in the committee, one area where we have great
consensus is the importance of prevention and wellness and we,
on the Republican and the Democratic side, have heard from you
about what Safeway has done.
We were served confirmation today that the Kennedy proposal
we're considering would get rid of the 20 percent premium
variation in the HIPAA regulation that allows employers like
Safeway more flexibility to incent healthy behaviors.
Can you tell us what this would do to your efforts to
incent healthy behaviors among employees of Safeway?
Mr. Burd. Let me start my answer by thanking a staff member
back in the Bay Area that quantified that number for me.
It would raise our costs $27 million if we were just
prevented from doing what we did right now and I think it would
have a fundamental effect on the ability to improve the health
of our employees. I really believe that without financial
incentives, you have no chance of changing the behavior of
Americans to lead a healthier lifestyle. That's how strongly I
feel about it.
Senator Alexander. Just to review, in your company, if you
could in three sentences just summarize what you've
accomplished so far, the number of employees, the savings in
the dollars.
Mr. Burd. Yes. We have 200,000 employees, 28,000 of them
are on this particular plan because it's an opt-in plan. Most
of the incentives that we've applied but not all are focused on
the nonunion population, the union population, about 170,000.
We're probably about 30 percent the way through getting those
incentives placed in the union contracts and I believe, given
my discussions with Joe Hansen of the UFCW and other union
leaders, that they're eager----
Senator Alexander. And if I may because time is limited,
and you've saved how much money?
Mr. Burd. Well, we saved--well, let's see. It's 37 percent.
It's about $60 million.
Senator Alexander. And the results in terms of healthiness
among the employees?
Mr. Burd. Obesity 70 percent of the Nation's, smoking rate
70 percent of the Nation, and declining virtually every day.
Senator Alexander. Your testimony at other times is to say
rather than get rid of the flexibility you now have to reward
healthy behaviors by incentives, you'd like to have more
flexibility, is that not right?
Mr. Burd. We would like more flexibility and that
translates into more personal responsibility for behavior.
Senator Alexander. How much more flexibility would be
helpful to you?
Mr. Burd. You know, given the fact that a smoker costs
$1,400 or more, obesity costs $800 or more, hypertension costs
$600 or more, you could--not to mention high levels of
cholesterol, you could--if you have two family members and you
could have more with dependents. Next year we'll measure BMI
for dependents.
You could easily reach a number close to $5,000 which would
be closer to a 50 percent premium.
Senator Alexander. Thank you, Mr. Burd.
Mr. Burd. Senator, if I could just ask you, I have a board
meeting in 5 minutes and an airplane to catch after that. I'm
enjoying the discussion. I hate to walk away, but I would
appreciate it if maybe I could be excused.
Senator Dodd. We'll let you go.
Senator Alexander. I'd like to be able to ask the rest of
my questions after you----
Mr. Burd. We have no pre-existing conditions at Safeway for
200,000 people.
Senator Dodd. My other colleagues are here who haven't had
a chance, we'll leave the record open so we can submit some
answers to their questions.
Mr. Burd. All right. I'll be happy to send you some
thoughts that you asked about at the beginning.
Senator Dodd. We would appreciate any data and statistics
which you think would be helpful to the committee, as well.
Mr. Burd. We'll do it.
Senator Dodd. We would appreciate it very much.
Mr. Burd. All right. Thank you very much.
Senator Alexander. May I take a couple more?
Senator Dodd. Yes.
Senator Alexander. Mr. Chairman, I'd like to address a
question to Dr. Ray Scheppach, who's been with the National
Governors Association for a long time.
Governors have seen firsthand the burden that Medicaid
causes. I mean, the fact of the matter is that it's completely
out of control and is the main factor, in my view, in terms of
bankrupting States, that it is filled with consent decrees,
delays, inefficiencies, that the rates of reimbursement for
doctors are so low that many Medicaid patients aren't properly
served, and that the costs are literally out of control for
States because continuous changes in Federal policy imposes new
burdens on States.
One of the results is the dramatic deterioration of the
American Public University and Senator Mikulski and I are
writing a letter to the National Academies to ask them to take
a look at the condition of our research universities and our
great universities, like the University of California as an
example, are suffering greatly from lack of State support.
What I'm getting to is this. I got some information today
from the Governor of Tennessee about what the effect of
expansion of Medicaid to 150 percent would mean for our State.
If our State picked up its share of the cost, which is about a
third, it'd be nearly $600 million, according to our State.
That would be equal to imposing a new State income tax of about
5 percent on the people of Tennessee. We don't know where we'd
get that money.
If the Federal Government were to pick it all up, the cost
to the Federal Government of just Tennessee's would be $1.6
billion, unless the bill also requires reimbursing physicians
at 110 percent of Medicare and then the cost would be even
higher. That would suggest that the cost overall of taking
Medicaid to a 150 percent to States is going to cost somebody,
either the Federal Government or the State governments, $4-$5-
$600 billion over the next 10 years.
I wonder if you'd want to comment about what your view is
of increasing the Medicaid expansion to 150 percent of Medicaid
and whether you believe that the Federal Government will
actually pick that up or whether it's likely to shift the costs
back on the States within a few years.
Mr. Scheppach. Well, as you know, Senator, the rate of
growth of Medicaid since it came into place has been about 11
percent per year. State revenues have probably grown 5.9
percent per year, and as you indicate, the reimbursement rates
for the average State is about 72 percent, but some of the big
States, California, New York, New Jersey, are less than 50
percent.
There is clearly great concern when you essentially bring
in another 46 million people of whether, in fact, reimbursement
rates are going to have to go up to the Medicare rates or even
in fact higher than that and, in fact, it's that increase in
reimbursement rates on the base that's actually more expensive
than the expansion is.
If you go up to a 150 percent of poverty, you're talking
about bringing in an additional 18 million individuals, taking
Medicaid from 58 million to about 75-76 million.
Our preliminary estimates are that this could cost,
depending upon your assumption, $50 to $60 billion a year in
terms of the State share. To give you a sense of that, that's
about 10 percent of general State revenues and both of the
bills, of course, essentially do a temporary pick-up of that
expansion for about 5 years but then----
Senator Alexander. Excuse me. You said $50 or $60 billion a
year of the State, would be----
Mr. Williams. The State----
Senator Alexander [continuing]. An increase in the State
share of Medicaid if we go to a 150 percent. So over 10 years
that's $500-$600 billion?
Mr. Williams. That's right. That's a very preliminary
number.
Senator Alexander. That's the States' share and that's
typically about a third, right?
Mr. Williams. It's probably about 42 percent.
Senator Alexander. About 40 percent. The other 60 percent's
going to be paid by the Federal Government?
Mr. Williams. That's right.
Senator Alexander. And if your figures are right and it's
going to cost $500 or $600 billion to the State and that's just
42 percent, then you've got $600 or $700 billion Federal, so
we've already got a Kennedy bill that will cost $1.2 trillion
just with that one provision.
Mr. Williams. Significant.
Senator Alexander. Thank you, Mr. Chairman.
Senator Dodd. Thank you. Senator Casey.
Statement of Senator Casey
Senator Casey. Mr. Chairman, thank you very much, and I
want to thank the panel for being here.
We missed the topic here. We haven't said much about
children and I realize the next panel's going to deal more with
that, but here's the reality that we face with regard to
children unless we get this right.
This committee's done incredible things for children in
this bill and I want to commend especially Senator Dodd because
he's got a long record on this, as do others, but unless we get
this right in this committee, but more directly and more in a
more determinative way in the Finance Committee, and I favor
the lifting of Medicaid to a 150 percent of poverty, but even
just by doing that, we could put some poor children and
children with special needs at risk.
I think the rule ought to be here not just to go oh and not
just a nice thing to do, not just an aspiration, the goal--the
rule ought to be here four words when it comes to poor kids and
kids with special needs: no kid worse off, no kid worse off. If
we fail at that, I think we failed in very large measure.
That's just my opinion.
I wanted to get into this question of Medicaid for a
second. I want to read something as part of the record. This is
a Finance Committee document, but I do want to make sure it's
clear here in terms of what States--because I realize governors
are wrestling with this and it's a very tough problem for
governors. Here's the proposed option with regard to what is
called Medicaid Program Payments. It's in that section what
they're talking about.
``Through 2015, the Federal Government would, would
fully finance all expenditures for benefits provided
individuals newly eligible for Medicaid as a result of
increases in income eligibility,''
and then it goes the other way.
All right. ``The States' share of these costs would be
phased in over the next 5-year period,'' and then it goes on to
say, ``after this phase-in period, the States' share of this
cost would be equal'' and little by little the State would have
to continue to pay it at a level.
I understand your concern about at some point down the road
States may pay more under this option which is not in the bill.
It's not law. It's an option.
The question I have for the governors, the question I have
for the AMA, Doctor, and I know you have great experience with
children, and the question I also have for anyone else, but Dr.
Gruber spoke to this, Dr. Gruber, you said on Page 5 of your
testimony, ``Dropping the Medicaid expansion and enrolling
individuals in the exchange would in my view be a mistake.''
I ask all of you what about kids in this bill, in this bill
and in the Finance Committee bill?
Mr. Scheppach. The Finance Committee bill, I think, takes
them up, I think, to like 150 percent for women and children
and leaves them essentially in Medicaid so that they get the
wrap-around and robust benefit packages.
A bigger issue in Medicaid is what do you do with childless
adults, I think, and parents. I suspect parents, it's better to
keep in the same program with children because evidence
indicates that they then go see the doctor.
A bigger question about childless adults of whether they
should stay in Medicaid or whether they should go into an
exchange or a gateway. I think the big issue there is we're
fine if they stay in Medicaid, but I think in this bill, the
individual had the option to go out of Medicaid and go into the
gateway.
If they bring the wrap-around benefit with them into the
exchange, that's just administratively more difficult. It's not
so streamlined and it's probably more expensive. It's probably
better, excuse me, to leave those populations in Medicaid,
maybe not allow that option.
If there are healthier components of that that want to go
into the exchange, you may want to offer them to it, but it may
be that they give up the wrap-around package.
Senator Casey. Dr. Gruber.
Mr. Gruber. Yes, I think I would strongly advocate--I don't
know whether the right number is a 150 percent of poverty or a
125 percent of poverty, what it is, but I would strongly
advocate that the lowest-income people, both existing eligible
populations and newly-eligible populations, like childless
adults, I strongly advocate they stay in Medicaid and be made
eligible for Medicaid and I say that for three reasons.
First of all, Medicaid is a more cost-effective option for
these low-income populations than is private health insurance,
largely because Medicaid pays providers less, but nonetheless
it's a more cost-effective option.
Second of all, I think the evidence suggests the erosion of
employer-sponsored insurance will be smaller if the option is
Medicaid which people of employer-sponsored insurance is sort
of averse to versus a private exchange which they may find more
attractive and be willing to leave their employer-sponsored
insurance for.
I think if people below poverty are put in an exchange that
will increase erosion of employer-sponsored insurance and,
finally, the main advantage of the exchange is to be able to
shop across options and that relies on financial incentives.
These low-income people, we can't put financial incentives
for them. They can't afford to pay a differential for a more
expensive plan. So we lose the main advantage of an exchange.
If there's no real financial advantage to shop, why put them in
an exchange? Why not just put them in Medicaid?
Senator Casey. Dr. Rosman, I know that on the next panel,
we'll have Dr. Palfrey from the American Academy of
Pediatrics--as among others, I should say, that will be on that
panel.
Just in terms of the AMA, how do you answer the question,
the strategy to make sure that this healthcare reform
legislation leaves no kid worse off and especially poor kids
and kids with special needs?
Dr. Rosman. Thank you. We absolutely agree that we don't
want to leave any children worse off and in fact hope that we
can improve their situation.
We believe that maintaining a safety net is very important
as we go forward with these insurance options. We need to
maintain that safety net, maintain access to preventive care,
maintain a safety net for families and children that may not be
eligible or able to effectively utilize an insurance exchange
or purchase into those pools, and so we absolutely support
greater equity within Medicaid, a uniform standard at poverty
level at least for coverage, and I will leave it at that.
Thank you.
Senator Casey. OK. I know I'm out of time, I think I'm out
of time, but I'd say this with respect, I think the AMA should
raise its voice on this. We need to hear what you just said
more than just in response to a question.
Thank you.
Senator Dodd. Gerry, go ahead.
Dr. Flowers. May I respond?
Mr. Shea. Thank you. Senator, I know your question was
about Medicaid and we strongly support the strengthening of
Medicaid along the lines that's being discussed, but I just
wanted to make the point that the increase of the uninsured has
come largely among the working population and the biggest
increase among the uninsured has been among children of people
who are working and so one of the reasons that we strongly
support the idea that all employers are to participate and
offer is that that is just the most direct way to get children
covered in terms of turning back this tide.
I just think that just has to be in the mix.
Dr. Flowers. If I could----
Senator Dodd. Doctor.
Dr. Flowers [continuing]. Comment--thank you--that the
fastest growing population of uninsured is that 300 to 500
percent of Federal poverty level who can't afford private
insurance but don't fall into the safety net categories and
Medicaid, while I understand is valuable to pediatricians, in
our State of Maryland which is one of the wealthiest States,
we're ranked 47th in the country for quality under Medicaid.
I see that as, there's a quote we often use, a program for
the poor, a poor program, and when you look at a national
health system based on single-payer financing, the key words to
that are everybody in, nobody out. Nobody's left out. From the
time that you're born until the time you die, you have access
to healthcare, no cracks to fall through, no gaps, and it's
fiscally responsible because if we were to take all of our
healthcare dollars right now and put them toward healthcare
with a very low administrative cost and bargain with
pharmaceutical companies, we can actually provide very high-
quality care to every person in this country.
I think that rather than tinkering around again, if we
could really just go ahead and create a national health system,
we would solve all of these problems.
Thank you.
Senator Casey. Mr. Chairman, I know I'm out of time, but I
do want to say, Mr. Rivera, it's not a question, but I know
your workforce--we're going to be talking about workforce
tonight, later tonight. Your workforce, your members have done
great work in training, providing the ground troops for the
healthcare delivery system.
We appreciate the work that you've done and your members.
Mr. Rivera. Thank you so much.
Mr. Scheppach. Senator, can I just add one on the fiscal
realities?
Earlier this week I announced, based on a survey of States,
what the shortfalls are over the next 3 years. It's over a $180
billion and States are now recommending from their own tax base
about $26 billion to raise taxes to close gaps and this is
after the $135 billion that was in the Recovery package and I
suspect that they're going to have to raise them more than that
and so when you begin to implement this particular program from
the State perspective, they will have just closed 3 years of
gaps of over 10 percent, primarily now because they have been
cutting so much on the spending side over the last 2 years and
it's primarily going to come on the tax side.
You just need to understand that if, in fact, you're going
to only cover this for 5 years and phase it out, it's going to
be a huge burden for States.
Senator Casey. No, and I appreciate that. Look, the States
have a very difficult problem, but when I hear around
Washington there's no money for this, there's no money for
that, somehow the last Administration figured out a way to give
a couple hundred billion dollars, I don't know the exact
number, I'll get it, but a couple hundred billion dollars to
the top 1 percent. Somehow they found it. OK?
There are plenty of resources out there when you can find a
couple hundred billion over 8 years for not the top 2 percent
or 5 percent but 1 percent.
I hope the governors would, when they're making suggestions
to policymakers in Washington, they say how about that tax plan
you had for 8 years for a pretty wealthy group of people?
Thank you.
Senator Dodd. Thank you, Senator.
Senator Merkley.
Statement of Senator Merkley
Senator Merkley. Thank you very much, Mr. Chair.
Because we have another panel coming, I'm going to try to
hold myself to just two questions here.
Sometimes I feel like we lose common sense along the way
and I'll give you an example of what I'm talking about.
The numbers that Steve Burd shared with us were that four
chronic conditions comprise 74 percent of healthcare costs,
those being heart disease, cancer, diabetes, and obesity, and
indeed my brother-in-law was in town this week. He's an
occupational therapist, has worked the last 20 years with
medical facilities throughout Sioux Falls.
He said, ``Jeff, I recently was walking around the hospital
and I went to the Heart Center and then to the Pulmonary Center
and then I went''--because he deals with occupational therapy--
``to the Amputation Center.'' He said, ``Everywhere I went in
the hospital, I saw obesity and diabetes--no matter what part
of the hospital I was in.'' These are just a couple of the
common sense things I'm talking about.
Right now, the tobacco industry is test marketing tobacco
candy in Portland, OR, they are intended to hook a whole new
generation on tobacco. Well, that's a huge factor for cancer
which is one of those four conditions costing 74 percent of
healthcare costs.
A lot of practitioners have talked about the value of
breast feeding, getting children off to a good start, that it
provides immunity, provides nutrients that are very relevant to
the development of the brain, and provides bonding. Yet we
haven't done basic workforce efforts, some States have, but we
haven't at the national level, to help facilitate breast
feeding for moms who go back to work.
These are just a couple of examples. I just wonder if
anyone would like to comment on that.
I know we're involved in the financial models, but what
about the common sense side of some of the things we could do
to take on these four chronic conditions?
Mr. Williams. I think one of the things that we have to do
and what we're working on is early identification and
prevention. For example, for children we're seeing diabetes
that's occurring, used to be referred to as adult-onset which
it's no longer referred to, but what we're beginning to do is
we're paying pediatricians to take the extra time to provide
nutritional counseling and to be able to bring in a dietician
to work with the family in a culturally appropriate way because
a dietician has to really understand the culture of the family
to really help them and so I think there's a whole generation
of what we call ``value-based benefit design'' that looks at
the circumstances of the individual and says you're a diabetic,
you need a certain medication, beta blockers, and so in your
case, instead of charging you the standard co-pay, we're going
to reduce the co-pay and maybe we'll pay you to take the
medication because it's that important to help you deal with
your particular issues.
I think there's a whole set of technology and a whole set
of mind shift around really changing how we think about
prevention and wellness much earlier in the process because the
people he saw in the hospital are the tip of the iceberg of
what's coming as youth and children are really on the same
trajectory and so I think those are things that I think we have
an opportunity to do and help those people with basic health
literacy so they understand their role in treating their
condition in terms of being compliant with their medication and
really following their doctor's orders.
Senator Merkley. Yes, sir.
Mr. Shea. Senator, there are other countries that address
this issue through basic public health programs. They're very
cost-effective. You don't see the child obesity problem in a
number of European countries with public health, good public
health systems because there is a concerted effort. It's not up
to employers. It's not up to local school systems.
There is a concerted effort as a nation to say this is a
bad idea. We're going to teach moms when they're in their early
child-
bearing years about this and make that a value for the family.
So you're talking about this, and I would just say there
are only baby steps being proposed in some of the legislation
coming forward--in the context of our system--to get at some of
these issues, but they're very important to look at.
I would point out in Senate Finance where they have looked
at the re-admissions issue and they have said we will pay extra
for staff to follow up on hospital stays in order to cut down
on the re-admissions rate.
This is a simple problem to solve, but it doesn't get
solved if you simply hand the patient a piece of paper or the
patient's relative a piece of paper, even with a good talk, as
they go out the door and say good luck, don't forget to call
your primary care physician.
We know that doesn't happen. It doesn't happen at least for
a lot of populations. It is not expensive. In fact, you save
money if you have teams and the research on this is very clear.
You have teams that follow up people and identify these kind of
problems. You do medication management for many of these
disease situations.
We know how to solve these problems. We have to change the
structures of our payment so that we're paying for quality
treatment processes and teamwork processes as opposed to just
individual practitioners, this silo, that silo, the other silo.
We know how to do it, and I think at least the initial steps
are found in some of the legislation. I would encourage you to
just push that as far as you can.
Ms. Praeger. Is this on now?
Senator Dodd. Why don't you introduce yourself, too, for
the record, so we know who's talking?
Ms. Praeger. I'm Sandy Praeger, the Insurance Commissioner
in Kansas but representing also the National Association of
Insurance Commissioners.
One issue that hasn't been talked about today, and it's
been touched on and I know it's something that Senator Roberts,
if he were here, would probably mention, and that's the current
payment structure for physicians really encourages--well, first
of all, they come out of med school with $140,000 in debt.
They're encouraged while they're in med school to pursue
specialty care where they're going to be able to make more
money and the payment structure today, the fee-for-service
medicine, encourages volume services rather than value
services.
We want to be able to have primary care physicians
encouraged to take the time to do the counseling, to do the
diet counseling, and the current payment mechanism just doesn't
allow for that to happen. That's part of the reform that needs
to be included.
Senator Merkley. I think there are a couple other folks who
want to chime in here.
Mr. Rivera. I just wanted to say before in the exchange
with Senator McCain, I wanted to reiterate that Dr. Baicker and
myself are part of a group that one of your former colleagues,
Senator Frist, participated in with the Robert Wood Johnson
Foundation for 2 years. We did a study all across the country
about what were the behaviors that absence of medical care that
influenced the care of people in the United States and we would
love to submit that report to you.
Senator Dodd. Please do.
Mr. Rivera. Because clearly we have not done a good job of
circulating it and basically that report has very concrete
recommendations about changing and creating a new national
culture of health and in the schools and in the jobs, in the
communities, basically in almost every--in the workplace, in
almost every practice--place in our society, and I believe if
we don't do that, we are not going to get to the bottom of it.
Senator Merkley. Mr. Johnson, did you want to chime in?
Mr. Johnson. Yes, sir. Just that we are very mindful at the
U.S. Chamber of wellness and prevention programs, including
trying to provide tool kits to our small and mid-sized
companies in terms of how to construct wellness programs on a
voluntary basis.
I have always been curious as to why all these bills
pending in the Congress or about to be introduced haven't
included funding for a public education campaign frankly along
the lines that John F. Kennedy had in terms of educating people
on the importance of physical fitness, et cetera.
It may sound a little anachronistic or old-fashioned, but
that's what wellness and prevention is all about and Senator
Harkin has his bill with tax credits we support, but again, and
the other speakers have commented on this, but let's get back
to basics and reminding people about the importance of certain
fundamentals of keeping themselves healthy and that has not
been part of these--well, maybe it's in there and I have missed
it, but it has not been part of the various bills Congress
seems to be looking at.
Senator Merkley. Well, I'll just wrap up by saying that I
appreciate you pointing these things out. The fact that a
dietician can be as important as a heart surgeon, that a social
worker working to prevent a re-admission, a second heart
attack, might be as important as the medical care inside the
hospital. I thank you all for your insights and comments. I
appreciate that.
Senator Dodd. Thank you, Senator, very much.
Just a couple of observations. You've all been very, very
patient and very valuable with your comments, as well, and
Dennis, we'd like to get--that's a good report. Here I'm asking
for your reports.
I was going to recommend, maybe you've looked at it, all of
you have looked at it, but I was very impressed with an article
written by Dr. Gawande in The New Yorker. I'm not here to
promote a magazine, but, I found it very insightful. In fact, a
group of us went down and met with the President of the United
States to talk about healthcare back--what was that, Jeff--a
week or so ago, I think, and I brought up the article.
Before I could, the President had already read it. The
article, goes to the issue of cost and if you haven't read it,
you should, but the point is it looked at one of the poorest
counties in the United States, Hildalgo County in Texas,
particularly McAllen, TX, and the cost per patient there was
about $16,000 a year, as I recall, in the article, and they
compared that with the costs in El Paso, TX, where there was
not a substantial difference in poverty levels and then
compared that with northern Minnesota where the Mayo Clinic is,
which is about a third of the cost.
The assumption you might draw immediately, well, of course,
if you have a very poor area, obviously the costs will be more
and given the poorest county in the country, that's the reason
the costs are more. That was not the reason for why the costs
were higher. It was the number of tests, exams, all these other
things that were being conducted in Hildalgo County that drove
up that cost, more so than it did in El Paso. Anyway, it was an
interesting article.
Leading experts have talked about a third of the savings
could occur just by reducing the number of unnecessary tests,
exams and the like that are being performed driving costs up.
Obviously there are a lot of ways to save money and I think
Mr. Burd's comments, are tremendously exciting. I know at our
luncheon today people were very impressed with the idea of what
one company in Connecticut, Pitney-Bowes, did with Mr. Critelli
there as the CEO--did something very, very similar in driving
down costs.
I wanted to raise the question because Senator McCain
raised the issue of how do you pay for all of this and that's a
very legitimate question. Obviously we need to get these
numbers and Senator Alexander raised the cost of 150 percent on
Medicaid--what the costs would be.
I mentioned at the outset of my remarks that we're talking
about statistics that indicate we could be seeing as much as 30
or 34 percent of GDP be healthcare costs by the year 2040. We
know it's about 17 percent today.
We know, from a recent report, that 60 percent or so of
bankruptcies are related to healthcare problems that have
afflicted people. We know that over 80 percent of growth, and
again I listened to Ron Williams talk about this but roughly
the numbers of increased costs in healthcare have gone up that
much in 10 years.
The question I wanted to sort of ask all of you as sort of
a parting question, what if we do nothing? If these numbers are
right and we don't do anything and so while the costs of
investing in these things and getting this right and bending
that curve are not cheap, but my fear is that we'll end up so
bogged down in all of this that we end up doing nothing once
again and I wanted to raise if there's anyone here who thinks
that doing nothing is a better alternative than trying to come
up with something here that would allow us to bend that curve.
I'll begin with you.
Dr. Flowers. I don't want to say that doing nothing is the
wrong thing but doing the wrong thing is the wrong thing
because you're talking about regulating health insurance
companies to make them act like social insurers which is going
to add costs. You're talking about creating an insurance
exchange. That's going to add costs.
We're operating under this belief that people want a choice
of health insurance but people don't know how to choose health
insurance. They don't know what their healthcare needs are
because they change.
We have studies from the Congressional Budget Office, from
the GAO, and in multiple studies at the State level, by the
Lewin Group and also Mathematica, showing that creating a
health system based on single-payer financing saves money and
it's the only one that saves money.
Senator Dodd. Mr. Williams.
Mr. Williams. I think it's clear that doing nothing is
unacceptable, that we have to find a way to get and keep
everyone covered.
I think at the same time, we need to sharpen our focus so
that we are really focusing on the things that make the most
important progress and in terms of having a much more inclusive
system.
I think the individual market represents a huge opportunity
to bring everyone into that market without the need for health
status. I think that the small group breaks into two
components, the smaller into small group. There is a huge
opportunity to address the fundamental fact that small
employers don't offer insurance.
In the larger end, it really is much more about rating
volatility, meaning those companies between 10 and 50. Eighty
percent of them offer insurance. Their big concern is they see
a lot of volatility in the rates. I think the SHOP Act gives us
a pretty solid foundation to be able to address that.
I think in terms of bending the curve, I think there are a
lot of things to do. Every suggestion, every idea ultimately
has to be implemented. It turns into real work in terms of how
we really incent and align physicians to really focus on long-
term outcomes.
I think we've got some great models, and I commend this
committee and other committees who are focused on it. I think
doing nothing is not an acceptable idea, but I think we have to
recognize this is a big lift and if we sharpen our focus on the
things that make a big difference, we can get a lot done.
Senator Dodd. Dennis, you want to comment on this at all?
Mr. Rivera. Yes. Well, first of all, it's clear that--and
by the way, we had a group which participated, the American
Medical Association, Pharma, the AHIP, and the American
Hospital Association, and we clearly in those meetings that we
have been having--the question was can we become more efficient
in the way that we deliver care, and the reality is that we all
have an agreement that we could become more effective and
that's where it is.
If we spend 17.5 percent of the Gross Domestic Product in
this country and are 40th in terms of outcome in the world, and
we are spending 6-7 percent more than Japan or Germany, so in
that context, we believe that we could find a great chunk of
those savings inside the healthcare system by basically
becoming more efficient and challenging all of us who are asked
as providers to basically become more efficient and I think
that's an important issue.
I think that same article that you talked about, the places
that had the better outcome were the places that it was
cheaper. So in that sense, it wasn't necessarily the places
that was higher that were having better outcomes. They got
better outcomes in the places that it was cheaper.
Senator Dodd. You know, I was going to mention, by the way,
I had met last week with the head of Starbucks and the head of
Costco who have had rather interesting healthcare programs and
to pick up on something Senator Merkley was bringing up, the
issue of marketing these ideas and getting people aware of, I
was stunned to learn how few--what a small percentage of people
actually take advantage of the annual medical exams that are
offered by--the number I think nationally is very low,
something like 5 or 6 percent of people who have that kind of
coverage actually take advantage of the medical exam.
Is that a reflection of the failure to market these ideas
and promote these ideas? I mean, here they're existing within a
policy and yet for some reason people are not taking advantage
of it. What's the reason for that? Does anyone have an answer
to that question? Dr. Gruber, do you have an answer to that
question?
Mr. Gruber. Well, I think there's many things we know that
have to be sold. They always say that life insurance is a push,
not a pull. You've got to sell life insurance. I think you've
got to sell wellness. I think financial--you've got to both
have a carrot and a stick, whether you're selling it, but also
giving people financial incentives to take advantage of it.
But I come back to your original question--which is the key
question--which is the cost of doing nothing.
Senator Dodd. Yes.
Mr. Gruber. I think it's very important to recognize that
the cost of covering every single American with health
insurance is less than 1 year's growth in our national health
bill. These are problems of two totally different magnitudes.
The problem of cost control just dwarfs the problem of
coverage in terms of its magnitude. For those who would say we
can't spend less than 1 year's growth to cover people until we
rein in this entire system, I just think that's inappropriate
and in fact I think it's the wrong way to think about it.
The right way to think about it is by covering everyone
we'll move closer to that day when we can rein in costs and
we've seen that in Massachusetts where once we covered everyone
with health insurance, then we got much more serious about cost
control and passed a much more serious cost control bill in our
State.
I think to say that we have to hold coverage hostage to
cost control is to say we're going to hold this small piece
hostage to this enormous piece. That's the wrong way to think
about it and I think we have to get costs under control but
doing coverage first is just a blip on that radar.
Senator Dodd. Yes. Yes, Mr. Shea.
Mr. Shea. Senator, to your question on the physicals, we
know that people don't take advantage of a lot of the
opportunities they have to understand their health status and
then to act on that health status.
We also know that integrated health systems do a good job
in many cases, not all cases but do a good job about dealing
with that, and we now are developing models that don't require
you to be part of an HMO or a Kaiser but talk about bundled
payments and the example I gave before about follow-up care for
admissions, the medical home notion.
These are all ideas that we need to not simply have a
physician, but that you get a physician and you go see the
physician and it's up to you to go back to see the physician
but it's a more holistic--somebody used the phrase earlier, but
on the general question, we see, that is our unions who bargain
benefits, see every day the effects of high health costs.
We're bleeding the system to death financially is what's
going on. We're losing healthcare. We're also losing good jobs
as a result. I mean, we're just lowering the living standards
of people because of our political lack of will to tackle this.
I think the reasons to do it are evident and they're
overwhelming based on our experience, and let me just last, I
know you're going to be working on your legislation quite a
bit, but--and as I said at the beginning, if I had my druthers,
you'd be doing a different piece of legislation.
Other people on this panel have said similar kinds of
things, but I think what you've done is a very good strong
start. You've put a number of pieces together. You've built on
what is working out there in many cases and you've said let's
take the next step forward. That's the way we're going to get
this done.
I wish it could be different, but that's the way we're
going to get this done. I would just urge you to move ahead
along the lines that you've done and strengthen what you do and
simply don't take the criticisms too hard. You have a Medical
Advisory Council.
People in that public health world have been saying for
years we need experts to say here's the basic benefits that
people have. Here's the protocols that people need to do. This
isn't government control, as some people are now trying to
criticize you for. These are just sensible sort of approaches.
I think you put a lot of things in there that are good.
We'd urge you to continue. I have spoken to some of the things
that we think should be added to your package, but I would
really thank you for the immense good start that you've made.
Senator Dodd. Thank you. Mary, and then I'll go to you.
Ms. Andrus. I wanted to go back to your question about
whether or not doing nothing was an option, and I just wanted
to point out from the perspective of people with disabilities
and the way the current system works, it's not uncommon at all
that they have to impoverish themselves and get into Medicaid
to get the kind of care that they actually need.
With the proposals we're talking about in the Kennedy
legislation and the Finance product, as well, those kinds of
changes can really make a difference to how those lives are
lived in terms of being able to be in a work setting, be in
their homes, be in their own communities.
From our perspective, moving forward, making change,
opening those doors, is really key to the future for a large
number of people where doing nothing will either freeze them or
pull them down, one or the other.
Senator Dodd. Yes, Mr. Dennis.
Mr. Dennis. For over 20 years, we've seen that the cost of
health insurance has been the single most important problem
among small employers, for over 20 years. We can't go much
longer and still have it happen.
Meanwhile, while this problem has been going on, of course,
fewer and fewer and fewer employers, particularly small
employers, are establishing health insurance plans. We think
it's essentially people who are coming in to the market, new
employers that are postponing it longer and longer and longer,
more so than people dropping it.
In any event, this can't go on forever.
Senator Dodd. Yes. Well, let me just say that we need you,
as well. This is a very complex issue. I don't know of another
issue that we've grappled with as complex as this and one that
deserves our undivided attention and the Majority Leader and
others are determined that we go forward.
We really need--having heard all of you, basically I don't
hear any dissenting voices that the status quo is acceptable.
Our job here then is not to let that become the outcome. We
need to get this right and so we need your involvement and your
participation if we're going to do this and I know Senator Enzi
is determined to do it, Senator Kennedy is certainly and in his
place I'm going to do everything I can, as well, to keep this
together.
We'll leave here. We begin again at 6:30 for another 2 or 3
hours tonight as just people sitting around a table, as
colleagues to talk through this and where we are and how we can
move this forward and again into next week as we begin and then
a process of moving forward.
My experience is unless you have something on the table, it
just becomes a lot of talk and we need to get beyond the
talking stage of this.
I really appreciate it. You've been here for 3 hours.
That's a long time to be sitting here and a large panel where
you all didn't get to participate as much as you might like in
that time. I'm very grateful to all of you.
I want to say to my colleagues, as well, I want to say to
Bob Casey who's taken a tremendous interest in children's
issues and I'm very grateful to him. I have worked on those
issues for a long time. I saw a study the other day by the way
on obesity, since that's one of the four areas we've
identified, and I don't know whether, Dr. Rosman, you've seen
this or you, Doctor, as well, but there's some correlation
between--I wrote the legislation with Lamar Alexander on
premature births in the last Congress and now there's some
study that's indicating that actually, there is a relationship
between premature births and obesity. There may be a direct
correlation. I would just point out to my colleague that may be
something worthwhile to look at here, as well, because maternal
care is something I hope we're really going to get engaged in
this process because again the point that you've made, Doctor
and others, that Bob Casey made and Jeff Merkley made, that
idea of being involved at the earliest stages. I appreciate,
Mr. Williams, your comments about those issues, as well, coming
from a private carrier, how important that is, as well.
I don't know if my two colleagues have any closing comments
you want to make or any additional questions.
If not, we'll leave the record open. This has been
tremendously valuable and I want you to know that, and in
Senator Kennedy's name, I thank you.
The committee stands adjourned.
[Whereupon, at 6:09 p.m., the hearing was adjourned.]