[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
   THE RECENT HEALTH CARE LAW: CONSEQUENCES FOR INDIANA FAMILIES AND 
                                WORKERS

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

                             FIELD HEARING

                               before the

                        SUBCOMMITTEE ON HEALTH,
                     EMPLOYMENT, LABOR AND PENSIONS

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE

                     U.S. House of Representatives

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

              HEARING HELD IN EVANSVILLE, IN, JUNE 7, 2011

                               __________

                           Serial No. 112-27

                               __________

  Printed for the use of the Committee on Education and the Workforce


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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Thomas E. Petri, Wisconsin           George Miller, California,
Howard P. ``Buck'' McKeon,             Senior Democratic Member
    California                       Dale E. Kildee, Michigan
Judy Biggert, Illinois               Donald M. Payne, New Jersey
Todd Russell Platts, Pennsylvania    Robert E. Andrews, New Jersey
Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Virginia Foxx, North Carolina            Virginia
Bob Goodlatte, Virginia              Lynn C. Woolsey, California
Duncan Hunter, California            Ruben Hinojosa, Texas
David P. Roe, Tennessee              Carolyn McCarthy, New York
Glenn Thompson, Pennsylvania         John F. Tierney, Massachusetts
Tim Walberg, Michigan                Dennis J. Kucinich, Ohio
Scott DesJarlais, Tennessee          David Wu, Oregon
Richard L. Hanna, New York           Rush D. Holt, New Jersey
Todd Rokita, Indiana                 Susan A. Davis, California
Larry Bucshon, Indiana               Raul M. Grijalva, Arizona
Trey Gowdy, South Carolina           Timothy H. Bishop, New York
Lou Barletta, Pennsylvania           David Loebsack, Iowa
Kristi L. Noem, South Dakota         Mazie K. Hirono, Hawaii
Martha Roby, Alabama
Joseph J. Heck, Nevada
Dennis A. Ross, Florida
Mike Kelly, Pennsylvania

                      Barrett Karr, Staff Director
                 Jody Calemine, Minority Staff Director

         SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR AND PENSIONS

                   DAVID P. ROE, Tennessee, Chairman

Joe Wilson, South Carolina           Robert E. Andrews, New Jersey
Glenn Thompson, Pennsylvania           Ranking Minority Member
Tim Walberg, Michigan                Dennis J. Kucinich, Ohio
Scott DesJarlais, Tennessee          David Loebsack, Iowa
Richard L. Hanna, New York           Dale E. Kildee, Michigan
Todd Rokita, Indiana                 Ruben Hinojosa, Texas
Larry Bucshon, Indiana               Carolyn McCarthy, New York
Lou Barletta, Pennsylvania           John F. Tierney, Massachusetts
Kristi L. Noem, South Dakota         David Wu, Oregon
Martha Roby, Alabama                 Rush D. Holt, New Jersey
Joseph J. Heck, Nevada               Robert C. ``Bobby'' Scott, 
Dennis A. Ross, Florida                  Virginia


                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on June 7, 2011.....................................     1

Statement of Members:
    Andrews, Hon. Robert E., ranking minority member, 
      Subcommittee on Health, Employment, Labor and Pensions, 
      prepared statement of......................................     6
    Bucshon, Hon. Larry, a Representative in Congress from the 
      State of Indiana...........................................     5
    Roe, Hon. David P., Chairman, Subcommittee on Health, 
      Employment, Labor and Pensions.............................     1
        Prepared statement of....................................     4

Statement of Witnesses:
    Carlson, David, M.D., Evansville Surgical Associates.........    16
        Prepared statement of....................................    17
    Crosson, Robyn S., chief deputy commissioner, company 
      compliance, Indiana Department of Insurance................     8
        Prepared statement of....................................    11
    Graber, Glen S., Graber Post Buildings.......................    41
        Prepared statement of....................................    42
    Hoy, Rev. George Philip, ordained minister, United Church of 
      Christ.....................................................    34
        Prepared statement of....................................    36
    Johnson, Denis, vice president, operations, Boston Scientific    37
        Prepared statement of....................................    40
    Lang, Sherry, Womack Restaurants.............................    21
        Prepared statement of....................................    23
    Messmer, Hon. Mark, member, Indiana House of Representatives; 
      vice president, Messmer Mechanical, Inc....................    31
        Prepared statement of....................................    33
    Wilson, Elizabeth, Franklin, IN..............................    18
        Prepared statement of....................................    20

Additional Submissions:
    Mr. Andrews:
        Blankenship, Elmer, president, Indiana Alliance for 
          Retired Americans, prepared statement of...............    51
    Ms. Crosson:
        Letter, dated May 13, 2011, to Hon. Kathleen Sebelius, 
          Secretary, U.S. Department of Health and Human 
          Services, from Stephen W. Robertson, commissioner, 
          Indiana Department of Insurance........................    53
        Letter, dated April 15, 2011, to Verlon Johnson, 
          Associate Regional Administrator, Division of Medicaid 
          and Children's Health, from Michael A. Gargano, 
          secretary, Indiana Family & Social Services 
          Administration.........................................    67
        Letter, dated January 14, 2011, to Secretary Sebelius, 
          from Hon. Mitchell E. Daniels, Jr., Governor, State of 
          Indiana................................................    68
        State of Indiana Executive Order 11-01...................    70
        Letter, dated April 30, 2010, to Secretary Sebelius, from 
          Gov. Daniels...........................................    72


                      THE RECENT HEALTH CARE LAW:
                        CONSEQUENCES FOR INDIANA
                          FAMILIES AND WORKERS

                              ----------                              


                         Tuesday, June 7, 2011

                     U.S. House of Representatives

         Subcommittee on Health, Employment, Labor and Pensions

                Committee on Education and the Workforce

                             Washington, DC

                              ----------                              

    The subcommittee met, pursuant to call, at 9:00 a.m., in 
room 301, Vanderburgh County Civic Center, 1 Martin Luther 
King, Jr. Boulevard, Evansville, Indiana, Hon. Phil Roe 
[chairman of the subcommittee] presiding.
    Present: Representatives Roe and Bucshon.
    Staff Present: Casey Buboltz, Coalitions and Member 
Services Coordinator; Benjamin Hoog, Legislative Assistant; 
Brian Newell, Deputy Communications Director; Ken Serafin, 
Workforce Policy Counsel; and Megan O'Reilly, Minority General 
Counsel.
    Chairman Roe [presiding]. The committee rule 7(c), all 
committee members will be permitted to submit written 
statements to be included in the permanent hearing record.
    Without objection, the hearing record will remain open for 
14 days to allow statements, questions for the record, and 
other extraneous material referenced during the hearing to be 
submitted in the official hearing record.
    And good morning everyone and thank you all for being here. 
And I want to thank our witnesses for being with us today. We 
recognize that you all have busy schedules and we appreciate 
the opportunity to hear your thoughts and experiences on the 
very important issues of health care.
    And second, I would like to thank all you all in the 
audience in Evansville for your hospitality, for hosting the 
first field hearing of the Subcommittee on Health, Employment, 
Labor, and Pensions.
    And before we go on, I am just going to tell you a little 
bit about who I am. My name is Phil Roe. I am a physician. I 
practiced ob-gyn in Johnson City, Tennessee for 31 years and 2 
years ago was elected to the Congress. And I found out that 
when you deliver your own voters, it worked out pretty well for 
me, having delivered almost 5,000 babies. [Laughter.]
    So it worked out pretty well. And every time a junior high 
class--I am really nice to them because that is another voter 
that may be coming along.
    But I wanted to tell you a little bit about myself. I grew 
up really not that far from here near Clarksville, Tennessee, 
about a 2-hour drive, and I am very familiar with your 
Evansville Purple Aces who routinely beat my Austin Peay 
Governors in basketball, so I am very familiar with this area.
    When I looked and went to Washington, D.C., I went there. I 
am a veteran and I was mayor of our local community and still 
practiced medicine. And I saw in my patients that health care 
was getting more and more and more expensive. It was too 
expensive to come to the doctor, and it was too expensive to go 
to the hospital.
    And secondly, we had a group of people in our community, at 
least where I live in rural east Tennessee in Appalachia where 
I live, that didn't have access to affordable health coverage. 
What I meant by that is let's say you were a carpenter and you 
didn't have full-time employment, but you worked and made 
$20,000, $25,000, $30,000 in a year, and maybe your wife worked 
at a local diner. And together, you got along okay, but you 
couldn't afford $1,000 a month for health insurance coverage. 
So we had that group of people who didn't have coverage.
    And thirdly, we have a liability crisis in this country. 
When you have a liability crisis which is causing costs to go 
up with unnecessary testing and so on, that is an issue. The 
health care plan ahead of us today that we are going to talk 
about today I think did nothing to help control the costs, and 
it does nothing for liability. It does expand coverage through 
Medicaid and some other ways to do it which we will talk about, 
but it doesn't take care of the major problem which is it costs 
too much money.
    As our first field hearing, there are few topics more 
relevant to our economy and challenges facing our families and 
small businesses than health care. Each year the cost of care 
goes up, placing even greater strains on budgets already 
stretched thin by a very difficult economy. Some patients 
refuse care simply because they can't afford it. Employers 
often choose between ending coverage or hiring new workers, and 
the burden imposed on taxpayers becomes even greater as 
Government programs expand and health care services grow more 
expensive and more unsustainable.
    We know there are a number of factors forcing health care 
costs to rise such as an aging population, more advanced 
treatments, and greater use of health care services, coupled 
with fewer providers.
    However, as is often the case, too much intervention by the 
Federal Government can make an already problematic situation 
worse. Instead of allowing choice and competition to encourage 
innovation and lower costs, a Washington knows best mentality 
can often discourage processes and lead to a one-size-fits-all 
approach that simply cannot work for a country as vast and 
diverse as ours.
    That is why I, along with a strong majority of the American 
people, reject the Government takeover of health care that was 
imposed on the Nation last year. Any effort to reduce costs for 
America's workers and job creators was abandoned along the road 
of reform by Democratic leaders who favored a massive expansion 
of the Federal Government's role in health care.
    For the first time in our Nation's history, private 
individuals will be required to buy health care or pay a 
penalty, the so-called mandate. And the case will be heard 
tomorrow in the Court of Appeals in Atlanta, Georgia, the 
Eleventh Court of Appeals, on the individual mandate. It has 
been ruled on. And 26 States are enjoined in this lawsuit.
    In a few short years, businesses with more than 50 
employees will be mandated by law to provide Government-
approved health care for workers or pay a fine, regardless of 
the difficulties these businesses may be facing just to keep 
their doors open. Proponents of the law say it includes relief 
for small businesses. Well, unfortunately, that relief is not 
only limited and temporary, but according to one analysis, it 
actually penalizes certain businesses for raising wages or 
hiring new workers. Can anyone seriously argue this is a good 
thing for an economy that has been plagued with high 
unemployment for nearly 3 years? Will this help the more than 
13 million unemployed Americans who are searching for work?
    A number of the law's provisions will not take effect until 
2014, but already we are hearing from business leaders troubled 
by the uncertainty the law has created. This is unacceptable, 
especially at a time when certainty is needed to restore 
confidence and foster economic growth.
    A 2,700-page health care law, which I have read in its 
entirety--and I can probably say not that many in Congress 
have. I don't know what it says about my intelligence, but I 
read the entire 2,700 pages. And it has led to more than 6,600 
pages of new Federal rules and regulations, and that is just 
what the administration has accomplished in the first 14 months 
since the bill was signed into law. That is a difficult maze of 
bureaucratic red tape for businesses to navigate at a time when 
they should be focused on expanding their operations and 
creating new jobs.
    As a doctor and a former mayor and a lawmaker, addressing 
these challenges remains at the forefront of my efforts serving 
the people of the 1st District of Tennessee, and as the 
chairman of the House Subcommittee on Health, Employment, 
Labor, and Pensions, it is clear the status quo is failing our 
families, workers, and job creators.
    We appreciate the work of our witnesses who are helping us 
to chart a better course, one that will harness the creativity 
of the American people to lower the costs of health care for 
the Nation.
    I want to note that another Indiana colleague of mine and 
subcommittee member, Todd Rokita, could not be here because of 
a previous commitment, but I know he too is committed to 
creating affordable health care for American businesses and 
repealing the onerous mandates created by the Affordable Care 
Act.
    Three things I like about southern Indiana.
    One is Central Standard Time. You guys got it here. I like 
that.
    Number two, basketball. I love that.
    And number three, I appreciate that you elected someone as 
competent as Dr. Larry Bucshon. He has really hit the ground 
running. There was essentially no learning curve for him. I 
know when I first got there, the first thing I was interested 
in was trying to find out where the bathrooms were. I mean, 
they don't tell you any of the important things when you get 
there. But Dr. Bucshon has gotten there, hit the ground 
running, and has been a tremendous asset to our Committee on 
Education and the Workforce and on the subcommittee that I 
serve on.
    So without objection, I now yield to my friend, Dr. 
Bucshon, a fellow physician, for any opening remarks he may 
wish to make.
    [The statement of Chairman Roe follows:]

           Prepared Statement of Hon. David P. Roe, Chairman,
         Subcommittee on Health, Employment, Labor and Pensions

    Good morning everyone. First, allow me to take a moment to thank 
our witnesses for being with us today. We recognize you all have busy 
schedules, and we appreciate the opportunity to hear your thoughts and 
experiences on the very important issue of health care. Second, I would 
like to thank the people of Evansville, Indiana for their hospitality 
and for hosting the first field hearing of the Subcommittee on Health, 
Employment, Labor, and Pensions.
    As our first field hearing, there are few topics more relevant to 
our economy and the challenges facings our families and small 
businesses than health care. Each year the cost of care goes up, 
placing even greater strain on budgets already stretched thin by a 
difficult economy. Some patients refuse care simply because they cannot 
afford it. Employers often choose between ending coverage and hiring 
new workers. And the burden imposed on taxpayers becomes even greater 
as government programs expand and health care services grow more 
expensive and more unsustainable.
    We know there are a number of factors forcing health care costs to 
rise, such as an aging population, more advanced treatments, and 
greater use of health care services coupled with fewer providers. 
However, as is often the case, too much intervention by the federal 
government can make an already problematic situation worse. Instead of 
allowing choice and competition to encourage innovation and lower 
costs, a Washington-knows-best mentality can often discourage progress 
and lead to a one-size-fits-all approach that simply cannot work for a 
country as vast and diverse as ours.
    That is why I, along with a strong majority of the American people, 
rejected the government takeover of health care that was imposed on the 
nation last year. Any effort to reduce costs for America's workers and 
job creators was abandoned along the road to reform by Democrat leaders 
who favored a massive expansion of the federal government's role in 
health care.
    For the first time in our nation's history, private individuals 
will be required to buy health care or pay a penalty. In a few short 
years, businesses with more than 50 employees will be mandated by law 
to provide government-approved health care to workers or pay a fine, 
regardless of the difficulties these businesses may be facing just to 
keep their doors open. Proponents of the law say it includes relief for 
small businesses. Well, unfortunately, that relief is not only limited 
and temporary, but according to one analysis it actually penalizes 
certain businesses for raising wages or hiring new workers.
    Can anyone seriously argue this is a good thing for an economy that 
has been plagued with high unemployment for nearly three years? Will 
this help the more than 13 million unemployed Americans who are 
searching for work?
    A number of the law's provisions will not take effect until 2014, 
but already we are hearing from business leaders troubled by the 
uncertainty the law is creating. This is unacceptable, especially at a 
time when certainty is needed to restore confidence and foster economic 
growth. A 2,700 page health care law has led to more than 6,600 pages 
of new federal rules and regulations--and that is just what the 
administration has accomplished in the first 14 months since the bill 
was signed into law. That is a difficult maze of bureaucratic red-tape 
for businesses to navigate at a time when they should be focused on 
expanding their operations and creating new jobs.
    As a doctor and a lawmaker, addressing these challenges remains at 
the forefront of my efforts serving the people of the first district in 
Tennessee, and as chairman of the House Subcommittee of Health, 
Employment, Labor, and Pensions. It is clear the status quo is failing 
our families, workers, and job creators. We appreciate the work of our 
witnesses who are helping us to chart a better course, one that will 
harness the creativity of the American people to lower the cost of 
health care for the nation.
    I want to note that another Indiana colleague and subcommittee 
member, Todd Rokita, could not be here today because of a previous 
commitment, but I know he too is committed to creating affordable 
health care for American businesses and repealing the onerous mandates 
created by the Affordable Care Act.
    I will now recognize Dr. Larry Bucshon, a friend, colleague, and 
fellow physician for any remarks he wishes to make.
                                 ______
                                 
    Mr. Bucshon. Thank you, Chairman Roe, for that gracious 
introduction.
    On behalf of the people of Evansville, please allow me to 
extend a warm welcome and offer our sincere appreciation for 
convening this hearing today. I think that, Chairman Roe, you 
will discover that people in Indiana have a profound love for 
their country and a lot of good ideas about how we can move 
this Nation forward. That is ultimately a goal we all share and 
one that we are really committed to.
    These last few years have been a difficult time and promise 
for our great State because of what has happened in Washington, 
D.C. A tough economy has levied many hard choices on our 
families, workers, businesses, and State leaders. We have tried 
to meet these challenges head on through hard work and 
sacrifice. We have made progress but realize more work lies 
ahead. We must ensure the progress that has been made is not 
undone by bad policies out of Washington, D.C., which brings us 
to the reason for the hearing today.
    At a time when businesses continue to struggle, millions of 
workers remain on the hunt for a job, and families are 
experiencing greater pain at the pump, our country now faces 
the consequences of the policies that are in place in 
Washington, D.C., including last year's Government takeover of 
our health care system with passage of the Affordable Care Act.
    I was not in public office at the time when the health care 
legislation passed through the Congress. However, a strong 
majority of Americans joined the public debate in opposition to 
the Affordable Care Act, and in fact, the opposition to the 
Affordable Care Act has only increased since its passage. That 
is one of the few times that has ever happened with a policy 
that has been passed in Washington, D.C.
    Last year, I had the great privilege of traveling around 
the district listening to local business owners, family 
farmers, and others expressing their concerns about the 
direction Washington, D.C. is taking our country. It is deeply 
unfortunate that the majority of people out there voices were 
being ignored at the time by the leaders in Washington in our 
Nation's capital.
    This law includes thousands of pages of new mandates, some 
of which fall on job creators. It includes numerous tax 
increases, including a $20 billion tax on businesses that 
develop medical devices, and this is very important to Indiana 
since we have a very large medical device business in our 
State, as many as 20,000 employees. Those businesses employ, 
like I said, 20,000 or so Hoosiers, and they take a direct hit 
with a new tax based on the Affordable Care Act.
    The administration has proposed more than 6,600 pages of 
regulations over the last year in an effort to implement and 
enforce the law. At a time when our economy and workforce needs 
certainty about the future, the regulatory environment simply 
creates confusion and anxiety and our workers and families are 
paying the price. Not only is the law piling additional burdens 
on job creators, many of whom are struggling to meet their 
payroll, it is placing a greater strain on the taxpayers. 
Despite raising taxes by more than $500 billion and costing an 
estimated $1.4 trillion, the price tag for taxpayers continues 
to go up.
    Here in Indiana, new insurance mandates will drive up 
health care costs for employers and workers. Also, our Governor 
estimates the expansion of the Medicaid program may cost the 
State upwards of $3 billion a year, a cost on the backs of 
Indiana taxpayers. Speaking as a fellow Hoosier, this is a 
Government takeover our State simply cannot afford.
    It is clear we need a better approach to health care, one 
that reflects our national values of personal responsibility, a 
limited Government, an approach that encourages innovation and 
job creation. We cannot assume the best answers come from 
Washington, D.C. I am confident, with the help of our 
witnesses, we can identify real solutions that will lower the 
cost of health care and protect and create the jobs our 
Nation's workers desperately need.
    Again, I would like to thank Chairman Phil Roe for coming 
to Evansville and for his leadership as the chairman of this 
subcommittee and for holding this important hearing today to 
hear what the people of Indiana have to say.
    So with that, thank you, Chairman Roe.
    Chairman Roe. I thank the gentleman.
    And I would like to include in the record the senior 
Democratic leader on the Subcommittee on Health, Employment, 
Labor, and Pensions who could not be here, Rob Andrews. Without 
objection, I will include his statement for the record.
    [The statement of Mr. Andrews follows:]

Prepared Statement of Hon. Robert E. Andrews, Ranking Minority Member, 
         Subcommittee on Health, Employment, Labor and Pensions

    Last week's unemployment report reinforces the urgent need for the 
Congress to have a laser-like focus on jobs. Unfortunately, the 
committee has not taken up a single piece oof jobs legislation this 
year. Instead, today's hearing continues fighting the battles of thee 
past, with the fourth hearing this year attacking the Affordable Care 
Act.
    This health care reform law gives American families new protections 
against the worst abuses of the insurance industry. In the coming 
years, it will extend access to affordable, quality health care to 
those without it. And it contains critical measures to keep rising 
health care costs under control, without rationing care. Getting a 
handle on out-of-control health care costs is one of the keys to our 
long-term economic ggrowth.
    The Affordable Care Act became law over a year ago. While it takes 
multiple years to implement, it has already begun to deliver positive 
results for Indiana families, children, and small and large employers.
    Because of the Affordable Care Act, nearly 90,000 Hoosier seniors 
who hit the Medicare prescription drug donut hole paid less for their 
medications last year. Each received a $250 rebate check for a total 
savings of $22.4 million dollars. This year seniors who hit the donut 
hole are saving an average of $800.
    One million seniors in Indiana may receive free preventive services 
and an annuaal wellness visit.
    More than 80,000 small employers in Indiana may pay lower health 
care costs as a result of the law's small business tax credit.
    Nearly four million Indiana residents are now protected against 
lifetime limit caps on their coverage and 3.5 million are protected 
against restrictive annual limit caps.
    Nearly 300,000 Hoosiers are now protected against having their 
insurance company drop their health coverage when they need it the 
most.
    More than 20,000 young adults in the state may now have coverage 
through their parent's health plan.
    More than 200 employers and their employees are paying less for 
retiree health care by joining the Early Retiree Reinsurance Program.
    The law has also been good for Indiana's economy by infusing 
millions of dollars in grant money to help the state strengthen its 
health care system. Indiana has received funding to develop a health 
insurance exchange, strengthen and potentially construct new community 
health centers, support prevention and health programs and invest in 
groundbreaking biomedical research.
    Specifically, the state has received:
     More than $7 million toward the state's development of the 
health insurance exchange. The health insurance exchanges are a 
cornerstone of the Affordable Care Act that will allow consumers to 
shop for quality affordable health care of their choice.
     More than $550,000 for community and clinical prevention 
activities.
     Nearly $1 million for primary care training to expand the 
state's primary care workforce.
     More than $10 million to support 46 projects in the state 
that show potential in producing new and cost-saving therapies. These 
grants and tax credit also support good jobs and increase U.S. 
competitiveness.
    Repeal of the Affordable Care Act would repeal all of these 
protections for individuals, families, and employers. It would repeal 
economic benefits for Indiana. And it would return inordinate power 
over our health care to the health insurance companies.
    My Republican colleagues have not just proposed repeal of these 
benefits. They have an additional proposal these days: ending Medicare. 
The Republican plan will force seniors to pay more for health care 
coverage and prescription medications and jeopardize their right to 
long-term care benefits.
    Under the Republican plan to end Medicare, an Indiana senior would 
be forced to pay more than $6,000 in higher annual health care costs in 
2022 and $12,000 more by 2032, as well as an additional $9,800 in 
prescription drug costs over the next decade. For seniors and those 
with disabilities in Indiana's 8th congressional district, the 
Republican plan could increase preventive care costs by $293 million 
over the next decade. In addition, the more than 3,000 residents in 
nursing homes whose expenses are paid by Medicaid would be left without 
the care they need.
    The Republican plan will have a devastating impact not only on 
seniors but also on young people right now who will no longer be able 
to depend on Medicare or a dignified retirement.
    To cover the additional health care costs under the Republican 
plan, a 54-year-old today will need to save more than $180,000 by the 
time she retires. That is over and above what she should already be 
trying to save for a normal retirement.
    And for those who are younger, the costs are even higher. A 25-year 
old will need more than half a million dollars in additional retirement 
savings to pay for their health care under the Republican plan.
    The Affordable Care Act has now been debated for nearly three 
years. Re-litigating past fights will not move this country forward. 
The middle class has been under a decades-long squeeze. The last thing 
working families need right now is to have hard-won health care rights, 
like the guarantee of Medicare or the protections of the Affordable 
Care Act, taken from them.
    There are better ways to spend our time in Congress, such as 
working together to grow and strengthen, rather than weaken, the middle 
class. Our focus should be on creating good jobs here in America.
                                 ______
                                 
    Chairman Roe. Thank you.
    And we have two distinguished panels today, and I would 
like to recognize Dr. Bucshon to introduce our first panel. I 
yield to Mr. Bucshon.
    Mr. Bucshon. Thank you, Mr. Chairman. It is a pleasure to 
introduce our first panel.
    First of all, Robyn Crosson serves as Deputy Commissioner 
for Company Compliance Services with the Indiana Department of 
Insurance in Indianapolis. In that capacity, she reviews 
insurance policies and premiums to ensure compliance with 
Federal and State laws. She also serves on the Governor's 
Health Care Reform Team. Prior to her service in State 
government, she was an attorney in private practice.
    Dr. David Carlson is a general surgeon with Evansville 
Surgical Associates which provides state-of-the-art general 
laparoscopic, thoracic, and peripheral vascular surgery 
services to patients in the tri-State area. Dr. Carlson joined 
the practice in 1997 and is certified by the American Board of 
Surgery and a fellow of the American College of Surgeons. He 
also serves on the active staff in the Department of Surgery at 
Deaconess Hospital and St. Mary's Medical Center both here in 
Evansville. Also, I would like to say Dr. Carlson has served 
his country in the Army Reserve Medical Corps and spent 3 
months in Iraq serving his country in the recent conflict.
    Elizabeth Wilson joins us today from Franklin, Indiana. She 
currently is employed at the retail store, Elder-Beerman, as 
she saves for graduate school, and also provides voice lessons 
and is a nursery attendant for the First Presbyterian Church in 
Franklin. Ms. Wilson graduated from Butler University in 
December 2010 with a bachelor of arts degree in applied music. 
She is with us today to share her personal story about the 
impact that the Affordable Care Act has had on her and her 
family.
    Finally, Sherry Lang joins us today from Terre Haute, 
Indiana. Ms. Lang is a human resources director for Womack 
Restaurants, a member of the IHOP restaurant chain. Womack 
operates restaurants in Indiana and Ohio, employing nearly 
1,000 full-time and part-time workers in 12 IHOP restaurants. 
Ms. Lang has a master's degree in human resource development 
and serves at the executive management level at Womack 
Restaurants. Since joining Womack in 2005, she has helped to 
grow the company from 3 to 12 restaurants.
    So, welcome, panelists.
    Chairman Roe. Thank you all.
    Before we get started, I want to go over this lighting 
system that we have. It is there mainly to make sure that the 
Congressmen don't talk too long. But the way this works is you 
have 5 minutes to give your statements, and we will have 5 
minutes to question. There may be a second round of questioning 
if we don't get through. The green light will come on. The 
amber light will mean you have a minute left, and the red light 
means that you need to start wrapping up your comments. We are 
not going to cut you off in mid-sentence. You can continue your 
thought, but just try to be cognizant of the lights.
    So if you would, Ms. Crosson, you are first.

STATEMENT OF ROBYN CROSSON, CHIEF DEPUTY COMMISSIONER, COMPANY 
          COMPLIANCE, INDIANA DEPARTMENT OF INSURANCE

    Ms. Crosson. Thank you, Mr. Chairman, and thank you, 
Representative Bucshon. It is a pleasure to be here, members of 
the committee.
    My name is Robyn Crosson, and I am the Chief Deputy 
Commissioner at the Department of Insurance.
    And before I go on, I just wanted to kind of explain a 
little bit of what the Department of Insurance does. A lot of 
people didn't even know Indiana had a Department of Insurance. 
Actually all States and territories in the U.S. have 
departments of insurance or some sort of commission.
    The primary thing we do is protect consumers. We have a 
consumer services division that answers all complaints brought 
by citizens and also by providers when they have issues. We 
regulate insurance companies. We don't regulate providers. And 
we also review all of the rates and contract language. That 
puts a heavy burden on us, particularly in company compliance 
for implementing the Affordable Care Act in addition to any 
State laws and regulations that we have.
    By statutory authority, our legislature has deemed and 
ordered us to review all rates, premium costs before they are 
implemented and contracts before the State of Indiana or all 
health insurance, long-term care, Medicare, any sort of health 
pact policy. It also includes--all, in some way, shape, or form 
have been affected by the Affordable Care Act.
    We are required to make sure that the premiums are 
reasonable in relation to the benefits that are provided and we 
do have actuarial reviews that perform those functions.
    Currently in Indiana, we have approximately in each 
market--and when I say ``market,'' I mean individual market 
where you can go out and buy a policy on your own--or a small 
group market, which is companies that have less than 50 
employees, 2 to 50 in Indiana, and then the large group market 
is over 50, 51 and over. In three markets, we have 
approximately at any given time about 60 carriers that are 
actively marketing, although I will tell you that this number 
is dwindling. Currently we have experienced approximately 10 
percent of the market has withdrawn, meaning either they have 
pulled out completely and will no longer do any business in 
Indiana or they will not do business with particular segments. 
Particularly the individual market and in some cases the small 
group market are being most severely affected, or they are just 
saying we are not going to currently going to actively market. 
We are going to see if we can stay alive until 2014, and then 
if we can, we will try to come back in on the exchanges if we 
can do that.
    Particularly we are seeing this in smaller companies. The 
problem is these are smaller domestic Indiana companies. In a 
lot of cases, these are provider-owned in some cases insurance 
companies that serve niche markets within the State, have very 
good consumer services. We don't get a lot of complaints on 
them. They control their costs and they have good wellness 
programs. We have a lot of insurance companies throughout this 
State that operate that way, and really right now we are seeing 
them really rethink whether they can do business at all. So 
that is just kind of to give you a picture.
    We have a healthy domestic insurance industry here in 
Indiana, and insurance employs a lot of Hoosiers. Just to give 
you an example, the top five insurance carriers--we just did a 
quick count--employ 5,600 people, just the carrier themselves. 
We have 44,944 resident agents licensed to sell accident and 
health. These are your neighbors. These are small business 
owners. We have 4,152 resident agencies that play a large role 
in the community, and we have grave concerns about what is 
going to happen to those people.
    To give you an idea and a picture of who is impacted by 
this, the Affordable Care Act affects not only fully insured 
but also affects self-insure. You see self-insure in large 
corporations or large, usually over 100-150 people, where they 
bear all the costs and risk and just pay someone who administer 
their claims. But this affects both in most cases.
    And to give you a picture of who we are talking about, the 
full insured market--the estimate--comprises about 30 percent 
of the State. So in the individual market, that is 192,376 
people. The small group market is 288,461 people, and the large 
group market, 456,867 individuals. And then for the self-
funded, the other 70 percent that are affected by this--and I 
am not talking about Medicaid. I am not talking about 
Medicare--there are another 2.1 million Hoosiers approximately 
affected by this, not to mention employers and everything else 
in the State. These are just the people who are covered by this 
insurance.
    I have two main themes and main side effects that we are 
seeing right now actively in trying to deal with and combat. 
The first one is that premiums are going up. The second one is 
the market is in chaos. Neither one benefits employers or 
consumers.
    The first one--just what we are seeing in the department 
and as the Congressman indicated, $3.1 billion was the high 
estimate right now for what we are seeing. We are not done with 
the regulations that are coming out. There are always more that 
could be coming out, and those add oftentimes additional costs 
and burdens upon the State taxpayers, upon the companies, upon 
individuals, and upon employers. There are increased reporting 
responsibilities and we don't know what the exchanges are going 
to look like either. All these things are unknown. This is what 
we are estimating with now, $2.6 billion to $3.1 billion is 
what the Governor's current estimates are.
    Effective on September 23rd of 2010, there were a series of 
market reforms, including expanding the dependent age to age 
26, a prohibition on preexisting conditions for children under 
19, among others, removing the lifetime limits on policies, and 
limiting the annual limit and phasing out annual limits 
completely over the next 3 years or 4 years, I guess, till 
2014.
    As a result, the early estimates we saw from carriers 
before these even took effect was that premiums were going to 
go up between 2 and 4 percent. But in some cases and in plans 
especially in the small employer arena and the individual 
market where people have limited drug benefits--maybe they were 
limited to $100,000 and $50,000 and $350,000--we saw increases 
as high as 35 percent where they were requesting these rates 
and getting all reviewed. I am not saying that they were 
definitely approved. But we are requesting these because of the 
removal of the limits in drug utilization, especially in the 
market. And so removing these limits has prohibited insurance 
companies and employers from capping costs.
    There is discouragement on consumerism in the $2,000 
deductible limit.
    And then basically I just want to say the market is in 
total flux. There are so many things out there. The agents are 
not sure whether they are going to have jobs. Employers are 
cutting benefits. In general, there is not a lot of incentive 
to--there is no incentive to control costs and there is no 
ability for employers to predict what their medical costs are 
going to be, especially with the removal of a lot of these 
limits in going forward. The medical loss ratio carriers are 
laying people off, cutting their costs, reducing compensation 
across the board to try, again, to survive until 2014, which is 
frankly unknown.
    Thank you.
    [The statement of Ms. Crosson follows:]

  Prepared Statement of Robyn S. Crosson, Chief Deputy Commissioner, 
          Company Compliance, Indiana Department of Insurance

    Chairman Roe, Representative Bucshon, Members of the Committee, it 
is an honor to appear before you today to offer guidance on our 
nation's recent health care reforms.
    On March 23, 2010, President Obama signed into law the Patient 
Protection and Affordable Care Act (ACA). This legislation institutes 
numerous modifications to the regulation of private health insurance 
companies and the structure of health insurance policies.
    The Indiana Department of Insurance (IDOI) supports Indiana 
Attorney General Zoeller's effort to overturn or repeal ACA on the 
grounds that it is unconstitutional to mandate citizens to purchase 
health insurance or pay a penalty. However, this litigation is 
presently pending, and will likely remain pending for quite some time. 
In the interim, IDOI diligently prepares for the onslaught of ACA's new 
requirements. First and foremost, IDOI continually examines the law in 
an effort to minimize adverse effects to the nearly 1 million Hoosiers 
with fully insured coverage.
    As of July 1, 2010, Governor Daniels formed an interagency task 
force to analyze the various components of ACA. The task force includes 
representatives from the Governor's Office, the Indiana Family and 
Social Services Administration (FSSA),IDOI, and the Indiana State 
Department of Health and State Personnel. Indiana continually attends 
meetings with the U.S. Department of Health and Human Services (HHS), 
the National Association of Insurance Commissioners (NAIC), consumer 
representatives, industry representatives, other regulators and 
insurers. Indiana carefully reviews each newly promulgated regulation 
that implements ACA's provisions and provides policy feedback to the 
government and other interested parties regarding how the provisions 
should operate or to warn of the consequences. In addition, Indiana has 
been awarded federal grants to assist with the implementation of health 
care reform. The State has conducted a financial analysis of the ACA's 
impact to the State budget and estimates indicate Indiana will have to 
pay between $2.6 and $3.1 billion over the next ten years to support 
the ACA.
    The following is a summarized timeline of some of the more 
significant changes with a focus on the effect on Indiana families and 
workers.

High Risk Pools
    Within 90 days of ACA's March 2010 enactment, states were required 
to establish a high risk health insurance program, or instead defer to 
the federal government's Pre-existing Condition Insurance Plan (PCIP). 
On April 22, 2010, the Chief Actuary of the Centers for Medicare and 
Medicaid Services (CMS) reported that an estimated 375,000 individuals 
across the U.S. would enroll in the PCIP by the end of 2010.\1\ So far 
that has not been the case. As of March 31, 2011, the number of 
Hoosiers enrolled in PCIP was 177, and the total across all states was 
18,313.\2\
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    \1\ http://republicans.energycommerce.house.gov/Media/file/
Hearings/Oversight/040111/OImemo.pdf
    \2\ http://www.healthcare.gov/news/factsheets/pcip05062011a.html 
(posted May 6, 2011).
---------------------------------------------------------------------------
    The strict eligibility requirements are one reason for the low 
enrollment. According to PCIP's own website, ``You must have been 
without health coverage for at least the last 6 months. Please note 
that if you currently have insurance coverage that doesn't cover your 
medical condition or are enrolled in a state high risk pool, you are 
not eligible for the Pre-Existing Condition Insurance Plan.'' \3\ Since 
Indiana's high risk pool, ICHIA, does not require a waiting period, 
most Hoosiers are forced to enroll in this program instead. Although a 
small portion of costs are funded through premiums, the bulk of the 
cost is covered through assessments and taxes. Insurers are assessed 
for 25% of the costs, while Hoosier tax payers fund the remaining 75%. 
Approximately 7,000 people are enrolled in this program that incurred 
approximately $110 million in claims during the 2009 calendar year. The 
establishment of PCIP may be intended to assist the uninsured and high 
risk, but the six month requirement stunts PCIP's potential to be of 
great assistance.
---------------------------------------------------------------------------
    \3\ https://www.pcip.gov/Eligibility.html
---------------------------------------------------------------------------
Changes to Annual and Lifetime Limits
    Several of ACA's changes became effective September 23, 2010, 
including new rules controlling how health insurance companies can use 
annual and lifetime limits. ACA generally prohibits these limits, or in 
some cases restricts the amounts as part of a transitional period 
leading into 2014 when limits become fully prohibited. Limits enable 
insurers to properly estimate future costs, which facilitates 
appropriate pricing. Limits help ensure that companies remain solvent. 
Similarly, employers who are self-funded are less able to predict their 
annual medical costs because they are also subject to the annual and 
lifetime limits prohibition. Generally, health insurance costs are the 
second largest budget item for employers. Less certainty and fewer ways 
to control costs creates an incentive to discontinue offering health 
insurance. Insurance companies have reacted to this legislation by 
increasing premiums.

Mandatory Preventive Health Services Coverage and Essential Benefits
    Effective September 23, 2010 under ACA, health insurance companies 
generally must cover preventive health services as defined by the 
federal government. The justification for this change in the law is 
that more Americans will visit providers earlier to use such services, 
decreasing the chance they will incur a costly illness later, thereby 
decreasing costs to insurers and therefore decreasing premium. However, 
the practical reality is different. Having additional preventive 
services paid for by insurance has generally not been enough to 
incentivize Americans to become healthier or get checked out for health 
problems more often. Instead, the legislation has merely caused 
insurance companies to change their accounting and increase premiums to 
cover the new costs of the mandated services. In addition, beginning 
January 1, 2014, plans offered by small group and individual insurers 
must include essential health benefits package characteristics, 
including cost sharing limitations as eligible. In cases where existing 
insurance plans do not cover an essential benefit, those plans must 
adjust by adding the benefit and likely will increase the premium to 
cover its costs. At this time we do not know what these benefits are. 
This adds additional uncertainty to the market and limits our ability 
to assess the impact of ACA.

Dependent Age Increased to 26
    Effective September 23, 2010, insurers are generally required to 
continue coverage of a dependent up to the age of 26. This change was 
designed to reduce the number of younger dependents getting kicked off 
their parents' plan and foregoing coverage. While the intent was 
positive, it has led to a situation where certain employers, who 
budgeted for covering dependents for a lesser amount of time, now have 
to react to the change. Insurers and employers with self-funded 
insurance have generally reacted by increasing premiums to cover the 
extra years of cost.
    Indiana previously required dependent coverage for children up to 
age 24. For policies effective after September 23, 2010 or at renewal 
subsequent to that date, coverage must be extended to children under 
age 26. Notice to parents of dependents who were previously removed 
must be provided and children must be added at the next open enrollment 
if they aged off. Although a child may be underwritten when he or she 
is reenrolled, the child cannot be required to pay more for coverage 
than similarly situated individuals who did not lose coverage by reason 
of cessation of dependent status. Dependent coverage is extended to age 
26 for individual and group products with an exception for 
grandfathered group products. For this purpose, any difference in 
benefits or cost-sharing requirements constitutes a different benefit 
package when it falls outside a federally established threshold. Prior 
to January 1, 2014, if a young adult has the option of coverage through 
their employer, the parent's employer, if the plan is grandfathered, 
does not have to cover the young adult as a dependent on the parent's 
plan. Employers have suggested that extension of coverage will increase 
costs and have concerns about adverse selective tendencies since young 
adults can choose to stay on their parents' plans rather than take 
their employer plan, especially after January 1, 2014. This requirement 
imposes additional previously unanticipated risk upon employers who 
offer dependent coverage through their plans. Depending on the level of 
adverse selection, the result of this legislation may be that employers 
stop offering dependent coverage. Currently, there is a movement by 
employers to penalize employees whose spouses are covered as dependents 
on employer A's plan instead of receiving coverage through their own 
employer B. Usually, the penalty is an increased premium percentage or 
no employer contribution for the spouse's coverage.

Guaranteed Issue, Coverage, and Renewability
    Effective September 23, 2010, insurers can no longer exclude 
benefits or limit coverage based on a preexisting condition for an 
individual under the age of 19. For plan years following January 1, 
2014, this restriction applies to everyone. Also, beginning 2014 
insurers selling new insurance can no longer discriminate on the basis 
of health status, medical history or claims experience. Moreover, 
beginning 2014, insurers must accept everyone that applies for coverage 
during open enrollment, the limited time period during each year 
determined by insurers when someone can sign up to an insurance plan. 
For plan years beginning January 1, 2014, all non-grandfathered, fully-
insured plans must renew coverage or continue it in force at the option 
of the insured.
    Currently, and within statutory limits, Indiana insurance carriers 
are permitted to exclude coverage temporarily for preexisting 
conditions. This enables carriers to insure for fortuitous rather than 
planned or known medical costs. ACA prohibits this practice for 
children under 19 currently and for all others in 2014. Indiana's small 
group market has had guaranteed issue for several years and will not be 
significantly affected by this, but the individual market will 
experience significant increases. Some carriers have suggested 
increases in the 50% range. We are currently evaluating the inclusion 
of the high risk pool members into the individual market and the 
increase associated with such inclusion. One of the consequences 
experienced in Indiana as a result of this legislation was that 
carriers stopped writing child-only policies. Carriers claimed that the 
law led to adverse selection, a fiscal situation that arises when a 
given pool of insured individuals is skewed, in that there is not an 
economically stable proportion of sick to healthy individuals in the 
pool, because healthy individuals leave, causing premiums to rapidly 
escalate for those remaining sick people. In an effort to curb this 
practice the government tried to limit plan-switching by restricting 
the time to switch, or the time in which to enroll, to only open 
enrollment periods, thereby preventing young individuals from waiting 
until they got sick to enroll. Indiana drafted Bulletin 181, requiring 
carriers wishing to sell child-only policies to do the following: 1. 
Hold an open enrollment period that must last at least 30 continuous 
days; 2. Designate that enrollment period; 3. Notify IDOI no later than 
December 1, 2010 of when the open enrollment period will occur so that 
IDOI may post on its website; 4. Post the open enrollment period on the 
insurer's website; and 5. Effect coverage within a reasonable period of 
time from enrollment. Despite IDOI's efforts, IDOI is aware of only one 
company offering child-only policies in Indiana. Generally, children 
under 19 are left with the option of CHIP, PCIP and ICHIA to the extent 
they qualify. IDOI is currently exploring options to continue to 
encourage carriers to re-enter the market. However, the consequence of 
the law thus far is that consumer choice has narrowed and premiums have 
increased.

Grandfathering
    ACA allows for plans in effect on March 23, 2010 to be considered 
grandfathered. This affects the application of some of the September 
23, 2010 market reforms. For example, the following do not apply to 
grandfathered health plans: mandated coverage for preventative 
services, mandated patient protections (i.e., OBGYN referral 
prohibition, in-network pediatrician considered child's primary care 
provider (PCP) and emergency services costs are the same for in-network 
vs. out-of-network), guaranteed availability and renewability of 
coverage, mandated cost-sharing limits, no discrimination based on 
health status and mandated coverage for clinical trials. Additionally, 
grandfathered plans will not be subject to the 2014 pricing 
restrictions. This means that the actuarial review process for 
insurance premiums at renewal will be split between grandfathered and 
non-grandfathered plans. In addition to increased and tiered actuarial 
duties, it has been suggested that IDOI will be the first arbiter of 
the grandfathering determination. This means increased reporting for 
carriers and additional rate and form review responsibilities for 
Compliance. Several insurers have reacted by requiring employers to 
provide coverage that is consistent with the new ACA reforms, rather 
than allowing employers to choose. Instead of increasing employer 
choices, which the law touted, employers' options are constrained.

International Statistical Classification of Diseases and Related Health 
        Problems (ICD-10)
    ICD-10 provides codes to classify diseases and a wide variety of 
signs, symptoms, abnormal findings, complaints, social circumstances 
and external causes of injury or disease. Under ICD-10, every health 
condition can be assigned to a unique category and given a code. On 
August 21, 2008, HHS proposed new code sets to be used for reporting 
diagnoses and procedures on health care transactions. Under the 
proposal, the ICD-9-CM code sets would be replaced with the ICD-10 code 
sets, effective October 1, 2013.
    Although this may lead to improved health data tracking and 
positive healthcare outcomes, it carries a significant price tag for 
insurers. ICD-10 is sufficiently detailed to describe complex medical 
procedures, which becomes increasingly important when assessing and 
tracking the quality of medical processes and outcomes. The goal of 
such tracking is to improve patient outcome and quality of care. IDOI 
recognized this significant conversion cost in a letter submitted to 
the National Association of Insurance Commissioners (NAIC). This is the 
organization that was tasked by HHS with defining the medical loss 
ratio rebate calculation. In that letter, IDOI stated in pertinent 
part: ``Such conversion costs, although significant, will be short-
lived and therefore, affect the medical loss ratio calculation for a 
brief period, but leave lasting quality improvement potential. Given 
the benefits to patient care, ICD-10 conversion costs should be 
included as a health care improvement cost and included in the claims 
numerator.'' The final model adopted by the NAIC did not allow the 
inclusion of ICD-10 costs in the medical loss ratio (MLR) numerator as 
part of Quality Improvement Costs. Therefore, carriers must bear the 
cost of this conversion as part of their 15-20% administrative costs. 
Smaller carriers will likely be more significantly affected, since 
larger carriers can spread the cost over multiple companies.

Changes to the External Review Process
    As of 2010, states must have internal and external review 
standards. The federal law requires strict compliance with certain 
provisions published in an HHS regulation, 42 USC Sec.  300gg-19(b), 
that largely comported with the NAIC Model Act on External Review. 
Indiana's own external review statutes are highly analogous to the 
federal requirements, but it was determined through correspondence that 
Indiana was not in exact compliance. The State was able to get Senate 
Bill 461 passed and successfully amend Indiana's external review laws 
to be in compliance with the federal requirements. However, even with 
these changes, HHS has not yet confirmed that Indiana is in compliance. 
This is leading to uncertainty in the insurance market because insurers 
cannot determine their own compliance with Indiana Code. Sadly, this 
type of back and forth with HHS has been typical of the health care 
reform process thus far; chaotic, frenetic and rushed implementations. 
All of these issues combine together to create an uncertain insurance 
market, causing insurers to hesitate before participating or continuing 
to participate in Indiana's insurance market, reducing consumer choice 
of insurance.

Other Changes with Lesser or Unclear Impact
     September 23, 2010: plans that provide for emergency 
services cannot require prior authorization. Any cost-sharing 
requirement for emergency services provided out of network cannot 
exceed cost sharing requirements for in network emergency services.
     Beginning in 2014, insurers may not discriminate against 
providers operating within the scope of their practice.
     Annual HSA contributions are limited and there are 
deductible limits on small employer plans that may limit participation 
in popular high deductible health plans.
     States must track trends in increasing premiums and report 
this information to HHS. Such tracking and reporting may be funded 
initially in the form of grants, but long term the costs will be passed 
to the states.
     Waiting periods cannot be greater than 90 days.
     Carriers requesting a rate increase greater than 10% must 
file with both the state regulator as well as the federal government. 
Some insurers in certain states may be subject to a dual review process 
unless a state has an adequate review process. IDOI has requested that 
HHS recognize that it has an effective rate review process to avoid 
this dual review.
    ACA provisions related to insurance increase the coverage 
requirements, mandate previously uncovered costs of individuals and 
dramatically increase reporting and administrative requirements. All 
result in increased costs that will likely be passed to consumers in 
the form of premium increases.

Exchanges
    ACA mandates that over the course of the next few years, states 
must implement a health care exchange or the federal government will 
create one for each state. On January 14, 2011, Governor Daniels issued 
an Executive Order directing FSSA to work with IDOI and other 
applicable state agencies to conditionally establish and operate a 
health benefit Exchange, as a not-for-profit entity. The Order provides 
that a State-based exchange protects Hoosiers from undue federal 
regulation, maintains the existing free market and ensures that 
Hoosiers retain coverage choices. The Executive Order stops short of 
committing to the Exchange, as there is little guidance at this point 
in time from the federal government regarding how the Exchange should 
operate. Nor do we have any information on how the federal Exchange 
will operate. The Order does allow the State to move forward in its 
planning and allows the State to prepare for the Exchange should we 
decide that it is in Hoosiers' best interests to commit. Indiana has 
received a federal exchange planning grant and a Level 1 establishment 
grant. We are using those funds to study the Exchange, which includes 
an information technology gap assessment, a study of the uninsured in 
Indiana and potential users of the Exchange, Exchange design options, 
and actuarial modeling. Our more recent funding will be used to 
identify the high and detailed level requirements, the information 
technology needs and design of an Exchange, and to identify the 
operating costs of an Exchange. In addition, on September 15, 2010, 
Indiana released The Affordable Care Act Stakeholder Questionnaire and 
collected responses through September 30. 478 responses were received 
and 409 responses were used in the analysis. All respondents indicated 
they were concerned about the cost of the legislation to their 
respective industries and businesses, and 80% indicated they were 
concerned about the health care system's ability to cope with the pent-
up demand. Additionally, there was very little stakeholder support for 
a federally administered Exchange. Insurers preferred a State 
administered Exchange and businesses preferred a not-for-profit 
administered Exchange. The State released a questionnaire on Exchange 
design issues in March 2011where 2,600 responses were received. The 
survey mainly covered technical issues and market regulations, however, 
the write-in comments received from all respondents showed 
dissatisfaction with the Exchange. Respondents desired the guarantee of 
greater transparency and personal responsibility in the health care 
market place and they felt the ACA did not provide for these needs. In 
terms of design and Exchange goals, over half of the respondents 
supported making the Exchange a competitive environment for insurers--
ensuring that the Exchange drives quality improvement and cost 
containment--and creating an Exchange that increases the portability 
and continuity of health care coverage. Finally, 95 employers responded 
to the question of whether they would continue to offer health 
insurance, of which 66% said they would maintain coverage, 3% would 
drop coverage, and 31% were undecided.

Medical Loss Ratio Limitations and Rebates
    Under the law, no later than January 1, 2011, insurers of group 
health plans must report to the United States Department of Health and 
Human Services (HHS) regarding medical loss ratios (MLR) and must offer 
a premium rebate to participants if the loss ratio is below 85%. The 
federal government is redesigning MLR, a longstanding equation for 
determining whether an insurance company is properly paying out a 
sufficient amount in claims in relation to its revenue from premiums. 
Generally, a loss ratio is the amount of claims paid divided by premium 
collected, although the equation is significantly more complex under 
the law and considers several other criteria. What the law is saying 
here, essentially, is that certain insurers have to pay out 85% of 
their revenue from selling insurance. If the insurers do not end up 
paying out that much, then at the end of the year, they have to issue 
rebates, which are like refunds, to insured individuals. Furthermore, 
there are several situations where insurers operating in various states 
enjoy significantly different MLR thresholds, or use a different 
calculus in determining MLR. Indiana has historically followed the MLR 
model published by the National Association of Insurance Commissioners 
that established a baseline MLR of 55% with higher amounts for certain 
insurance. With this new law, insurers have to plan to pay more in 
claims either to initially meet the threshold or pay a rebate for not 
meeting it. Consequently, insurance companies are busy recalculating 
profit margins and using this new law to justify increasing premiums. 
ACA requires that individual and small group insurers have an annual 
medical loss ratio of 80% and 85% for large group insurers. The annual 
medical loss ratio involves a more complicated calculation than the 
traditional lifetime loss ratios utilized for the purposes of rate 
review. The simplest example of the annual medical loss ratio for the 
purposes of rebate calculation is the equation below:

Claims + Health Quality Expenses / Premium - Taxes (except for taxes on 
                    investment income/capital gains)

    Although it has not been indicated through regulation, it appears 
that the intention is to place the burden for reviewing the rebate 
calculation on IDOI, similar to the rebate calculation for Medicare 
supplemental products that IDOI's actuary currently reviews. This new 
responsibility is in addition to the increased rate filing requirements 
for small and large group products. Currently, IDOI is reviewing 
whether applying the 80%/85% will disrupt the market if applied to all 
insurers in 2011. In particular, smaller domestic insurance companies 
may be at an increased risk for insolvency and insurers that offer high 
deductible/HSA plans may have difficulty meeting this as well, which 
could affect the consumer-driven product market. Thus far, nearly 10% 
of the insurers operating in Indiana's individual market have 
withdrawn, and many others are threatening withdrawal in the near 
future. The private market's reaction to even these early requirements 
is ominous. 2014 is steadfastly approaching. Consumer choice is 
dwindling. Health insurance premiums are rising. In an effort to 
promote consumer choice and protect the insurance market, Indiana has 
applied for a waiver from the federal MLR requirements. This way 
Indiana can continue to apply its own criteria when reviewing rates for 
compliance, as IDOI and other regulators have the best knowledge of the 
market and will do what is best for Hoosiers. Obtaining the waiver will 
allow IDOI to have more autonomous control over its insurance market so 
that it can continue pursuing its top priority of protecting Hoosiers' 
interests and health care options in the face of ACA's churning sea of 
legislative amendments and its resulting economic fallout.
                                 ______
                                 
    Chairman Roe. Thank you.
    Dr. Carlson?

 STATEMENT OF DAVID CARLSON, M.D., GENERAL SURGEON, EVANSVILLE 
                      SURGICAL ASSOCIATES

    Dr. Carlson. Mr. Chairman, Representative Bucshon, thank 
you very much for the opportunity to testify before the 
Subcommittee on Health, Employment, Labor, and Pensions.
    I am President of Evansville Surgical Associates and have 
been practicing general surgery in Evansville for over 30 
years.
    I am not a health care policy expert, and I am definitely 
not an expert on this law. I am a health care provider. My 
limited time this morning permits me to comment on only a few 
aspects of this bill. My comments are derived from personal 
experience, from discussions with many of my colleagues over 
the last year since passage of the Affordable Care Act, from 
attempts at reading and trying to understand portions of this 
bill, and unlike Representative Roe, I have not read the entire 
bill. And I have also studied commentaries made by experts on 
all sides of the political spectrum.
    I think very few of us would find fault with the intent of 
the new health care law, which is to provide health care 
coverage for those Americans presently uninsured and, among 
other things, to prohibit insurance companies from canceling 
policies without due cause, and to eliminate preexisting 
conditions as a basis for exclusion from insurance coverage, 
while at the same time reducing health care costs.
    This bill is very complex and it is full of many new 
regulations, huge new bureaucratic entities, and what I think 
are many disincentives to small businesses to begin or continue 
providing health care for their employees. Despite the 
predictions by the administration that health care costs will 
be controlled and reduced, no one who has practiced medicine in 
the era of Medicare, which is heading toward insolvency, and 
Medicaid, which is straining the budgets of most States, should 
and can seriously believe that this massive new Government 
program can possibly control the cost of health care without 
rationing care or adding significant new taxes to the American 
public.
    The point has already been made that the expansion of 
Medicaid is estimated to cost $3 billion to $4 billion over the 
next decade for the State of Indiana. Indiana is one of the few 
States in relatively stable financial condition, but it simply 
cannot afford this price tag without a significant increase in 
taxes or reduction in services, which will obviously affect 
every Hoosier worker and employer in a negative way.
    Indiana has been a leader in medical tort reform, and 
malpractice rates for physicians in this State are considered 
reasonable by most. The health care law is completely silent on 
medical liability tort reform. Logical and reasonable 
nationwide tort reform is certain to help lower medical costs. 
Unless protected by real tort reform, Indiana physicians and 
physicians throughout the country will have no choice but to 
continue protecting themselves from medical liability by 
ordering unnecessary tests, thereby fueling skyrocketing health 
care costs.
    The employer mandate requires most small businesses to 
provide insurance to their employees or pay penalties or both. 
My surgical practice, which is a small business, has about 70 
full-time employees and we provide them with excellent 
comprehensive health care insurance. Under the law, most of our 
employees would be eligible for Government subsidies for the 
purchase of health insurance because their household income is 
less than $88,000 for a family of four, which is 400 percent of 
the Federal poverty line. My company, therefore, faces a 
penalty equal to the lesser of $3,000 per subsidized employee, 
those eligible for the subsidy, which would total about 
$200,000 or $2,000 per employee if we don't offer health care 
insurance. So basically whichever we choose, this law is going 
to cost my company an additional $120,000 a year if we continue 
to provide our current health care insurance to our employees. 
Many small businesses, when faced with this type situation, are 
simply going to drop employee coverage, absorb the penalty, and 
let the Government provide Medicaid-style health care for their 
employees.
    Finally, let me say a few words about access to health 
care. I cannot speak for all physicians. Evansville Surgical 
Associates accepts all patients regardless of insurance or lack 
thereof because of the nature of the services we provide, which 
is often acute care and emergency surgery. I know from 
discussions with my primary care colleagues that a sudden 
increase in the number of Medicaid patients seeking medical 
attention simply would overwhelm them and the system. There are 
not enough physicians to see these patients and most practices 
cannot survive on Medicaid reimbursement. As presently 
designed, this new law, while providing health coverage, does 
not offer a tenable solution to the problem of access to the 
health care system.
    This concludes my remarks. Again, let me express my 
appreciation for the privilege of testifying before the 
committee.
    [The statement of Dr. Carlson follows:]

    Prepared Statement of David Carlson, M.D., Evansville Surgical 
                               Associates

    Thank you for the opportunity to testify before the Sub Committee 
on Health, Employment, Labor, and Pensions.
    I am President of Evansville Surgical Associates and have been 
practicing general surgery in Evansville for over 30 years. My group 
includes 17 surgeons and we employ over 70 individuals. We are by 
definition a small business.
    I am not a healthcare policy expert and I definitely am not an 
expert on this law. I am a healthcare provider. My limited time this 
morning permits me to comment on only a few aspects of this bill. My 
comments are derived from personal experience, from discussions with 
many of my colleagues over the last year since passage of the Patient 
Protection and Affordable Care Act, from attempts at reading and trying 
to understand portions of this bill, and from commentaries made by 
experts on all sides of the political spectrum.
    Very few of us would find fault with the intent of the new 
healthcare law, which is to provide health care coverage for those 
Americans presently uninsured and, among other things, to prohibit 
insurance companies from canceling policies without due cause, and to 
eliminate pre-existing conditions as a basis for exclusion from 
insurance coverage, while at the same time reducing healthcare costs.
    This bill is very complex and full of new regulations, huge new 
bureaucratic entities, and many disincentives to small businesses to 
begin or continue providing health care for their employees. Despite 
the predictions by the administration that healthcare costs will be 
controlled and reduced, no one who has practiced medicine in the era of 
Medicare, which is heading toward insolvency in the future, and 
Medicaid, which is straining the budgets of most states, can seriously 
believe that this massive new government program can possibly control 
the cost of healthcare without rationing care or adding significant new 
taxes to the American public.
    The expansion of Medicaid will cover one in four Hoosiers, and is 
estimated to cost the state between $3.1 billion to $3.9 billion over 
the next decade, according to an actuarial analysis by Milliman, Inc. 
of Indianapolis. Indiana is one of the few states in stable financial 
condition, but it simply can't afford this price tag without a 
significant increase in state taxes or a reduction in state provided 
services, which will affect every Hoosier worker and employer in a 
negative way.
    Indiana has been a leader in medical tort reform and malpractice 
rates for physicians are considered reasonable by most. The new 
healthcare law is completely silent on medical liability tort reform. 
Logical and reasonable nationwide tort reform is certain to help lower 
medical costs. Unless protected by real tort reform, Indiana physicians 
will have no choice but to continue protecting themselves from medical 
liability by ordering unnecessary tests, thereby fueling skyrocketing 
healthcare costs.
    The Employer Mandate requires most small businesses to provide 
insurance to their employees, or pay penalties, or both. My surgical 
practice, which in essence is a small business, has about 70 full-time 
employees and we provide them with excellent comprehensive healthcare 
insurance. Under the new law, most of our employees would be eligible 
for government subsidies for the purchase of health insurance because 
their household income is less than $88,000 for a family of four, which 
is 400% of the federal poverty line. My company therefore faces a 
penalty equal to the lesser of $3000 per subsidized employee, which 
totals $210,000, or $2000 per employee, which totals $120,000. So this 
law would cost Evansville Surgical Associates an additional $120,000 
per year to continue providing our current health coverage to our 
employees. Many small businesses, when faced with this situation, will 
simply drop employee coverage, absorb the financial penalty, and let 
the government provide Medicaid style health care for their employees.
    Finally, let me say a few words about access to health care. I 
cannot speak for all physicians. Evansville Surgical Associates accepts 
all patients regardless of insurance or lack thereof because of the 
nature of the services we provide, which is often acute care and 
emergency surgery. I know from discussions with my primary care 
colleagues that a sudden increase in the number of Medicaid patients 
seeking medical attention simply would overwhelm them and the system. 
There are not enough physicians to see these patients and most 
practices could not survive on Medicaid reimbursement. As presently 
designed, this new law, while providing health coverage, does not offer 
a tenable solution to the problem of access to the health care system.
    This concludes my remarks. Again let me express my appreciation for 
the privilege of testifying before this Committee.
                                 ______
                                 
    Chairman Roe. Thank you, Dr. Carlson.
    Ms. Wilson?

          STATEMENT OF ELIZABETH WILSON, FRANKLIN, IN

    Ms. Wilson. Chairman Roe, Representative Bucshon, and 
members of the subcommittee, thank you so much for the 
opportunity to testify today on this important topic. I am 
honored to appear before you.
    I would also like to thank Ranking Member Andrews and Young 
Invincibles for helping to give me the opportunity to share my 
story.
    My name is Elizabeth Wilson and I live in Franklin, 
Indiana, just south of Indianapolis. I am a prime example of 
how the Affordable Care Act has benefitted young people and 
their families in Indiana. Starting the year I turned 21, my 
health deteriorated for reasons that are still not completely 
clear. Coping with this sickness forced me to leave school for 
what should have been my senior year of college at Butler 
University. In the past 3 years, I have had four surgeries, a 
lot of tests and procedures, and I have had two 
hospitalizations for complications from chronic pancreatitis.
    On my 23rd birthday, while I was in the hospital for acute 
pancreatitis, I aged out of my mother's insurance. Luckily, my 
family had access to COBRA and my mother was allowed to 
maintain coverage for me for a brief period at my family's 
expense. As you might expect, the high premium put a heavy 
financial burden on my family and me. Without the Federal 
dependent coverage extension and considering the long string of 
health challenges I faced over the past few years, I could have 
seen dire financial and health outcomes.
    I could not have continued to pay the mounting health care 
bills to the hospital, my primary care physician, or the 
various specialists that I had seen for the past few years if I 
were not able to reenroll on my mother's health plan in January 
of 2011 because of the Affordable Care Act. Now that young 
adults can stay on their parents' insurance until the age of 
26, I have good coverage to help pay for ongoing doctors' 
visits and medical issues that I face. I can't tell you how 
good it feels to be insured when, for a while, I thought that I 
wouldn't be at this point, saving for grad school while 
working, and trying to put my best foot forward and deal with 
my ongoing condition.
    I wish I could tell you that my health problems were 
resolved, but unfortunately they are not. I finally did get a 
diagnosis of sorts this past year. It is a condition called 
undifferentiated connective tissue disease. It is an autoimmune 
disorder and that means I will probably be dependent on drugs, 
doctors' visits, testing, and therapies for the rest of my life 
to manage my symptoms and obtain a quality of life that all 
young Americans hope for. Well, a diagnosis of undifferentiated 
connective tissue disease doesn't necessarily give a patient a 
lot of guidelines to expect from what will happen. My doctors 
in my case are concerned that my symptoms signal the start of a 
more serious disease like Lupus, and so I do have to have 
ongoing testing to confirm that I do not have Lupus or that I 
do, which is difficult to do with that disease.
    Luckily, I do know that any insurance that I have can't put 
a lifetime cap on what they will cover for my condition and 
can't kick me off just for being sick, even if my condition 
worsens. So this knowledge brings me some peace of mind.
    My litany of health problems also means that I will have 
the dreaded preexisting condition, but just after I age off my 
mom's plan, discrimination based on preexisting conditions will 
be prohibited and insurance companies won't be able to 
discriminate against me anymore for something beyond my 
control. It is difficult enough to start out as a recent 
graduate and try to make it these days. To do that with the 
extra burden of severe health problems, plus the full financial 
burden of treating them, is just too much.
    I am certainly not alone in my struggles with health care 
or coverage. In fact, both my younger brother and my best 
friend went without coverage for more than a year. My best 
friend had some routine health screens that came back abnormal 
during that time and was unable to seek out specialist care to 
deal with them. And my family friend is now in a nursing home 
because she could not afford the newer drugs for multiple 
sclerosis which potentially could have slowed the progress of 
her condition. She is less than 45. She had to leave her two 
young children in the care of an 18-year-old relative.
    Over the next few years, reform will help to address much 
of the circumstances for these problems, along with expanded 
affordable insurance options and access to preventive care. 
Those are the consequences of the recent health care law for 
Indiana workers and families.
    I am now 24 years old, and I have finally graduated from 
college. After spending another year out of school to deal with 
my medical problems, I will be starting at grad school within 
the next academic year. Fingers crossed. I have to get accepted 
first. My health care problems have caused me to start 2 years 
later than I had originally planned, but thanks to the health 
care I have received and will continue to receive because of 
the Affordable Care Act, I will at least have the opportunity 
to start at all.
    I have learned that we are all vulnerable to unexpected 
illness and injury regardless of our age. And my story could 
have ended more tragically for both me and for my family. That 
more tragic tale was prevented by the recent health care law.
    [The statement of Ms. Wilson follows:]

          Prepared Statement of Elizabeth Wilson, Franklin, IN

    Chairman Roe, Ranking Member Andrews, and members of the 
subcommittee. Thank you for the opportunity to testify today on this 
important topic. I am honored to appear before you today. I would also 
like to thank Young Invincibles for helping to give me the opportunity 
to share my story.
    My name is Elizabeth Wilson, and I live in Franklin, Indiana. I am 
a prime example of how the Affordable Care Act has benefited young 
people and their families in Indiana. Since the year I turned 21, my 
health deteriorated for no known reason. Coping with this sickness 
forced me to leave school for what should have been my senior year of 
college at Butler University.
    On my 23rd birthday, while I was in the hospital for acute 
pancreatitis, I aged out of my mother's insurance. Luckily, my family 
had access to COBRA, and my mother was allowed to maintain coverage for 
me for a brief period, at my family's expense. As you might expect, the 
high premium put a heavy financial burden on my family and me. Without 
the federal dependent coverage extension, and considering the long 
string of health challenges that I've faced over the past few years, I 
could have seen dire financial and health outcomes.
    I could not have continued to pay the mounting healthcare bills to 
the hospital, my primary care physician, or the various specialists 
that I had been seeing for the past few years if I were not able to 
reenroll in my mother's health plan in January 2011 because of the 
Affordable Care Act. Now that young adults can stay on their parent's 
insurance until the age of 26, I have good coverage to help pay for the 
ongoing doctors' visits and medical issues that I face. I can't tell 
you how good it feels to be insured, saving for grad school, and trying 
to put my best foot forward and deal with my condition.
    I wish that I could tell you that my health problems were solved, 
but unfortunately, they're not. I finally got a diagnosis this past 
year, with a condition called Undifferentiated Connective Tissue 
Disease. It is an autoimmune disorder, and that means I will be 
dependent upon on drugs, doctors' visits, testing, and therapies for 
the rest of my life to manage my symptoms and obtain a quality of life 
that all young Americans hope for. What is more worrisome is my 
doctors' concern that my condition is caused by the early stages of a 
more serious disease like Lupus or rheumatoid arthritis. Luckily, I 
know that any insurance that I have can't put a lifetime cap on what 
they will cover for my condition. They also can't kick me off just for 
being sick, even if my condition worsens. This knowledge brings me some 
peace of mind.
    My litany of health problems also means that I'll have the dreaded 
``pre-existing condition.'' But just after I age off my mom's plan, 
discrimination based on pre-existing conditions will be prohibited, and 
insurance companies won't be able to discriminate against me anymore 
for something that I can't control. It's difficult enough to start out 
as a recent graduate and try to make it these days. To do that with the 
extra burden of severe health problems, plus the full financial burden 
of treating them, is just too much.
    I'm certainly not alone in my struggles with health care or 
coverage. In fact, both my younger brother and my best friend went 
without coverage for more than a year, and a family friend is now in a 
nursing home because she had no access drugs that could have slowed the 
progress of her multiple sclerosis, forcing her leaving her two 
children with an 18-year old relative. Over the next few years, reform 
will help address all of that, with expanded affordable insurance 
options, and access to preventive care: those are the consequences of 
the recent health care law for Indiana workers and families.
    I am now 24 years old. I have finally graduated from college. After 
spending another year out of school to deal with my medical problems, I 
will be starting at graduate school within the next academic year. 
Because of my health problems, I will be starting two years later than 
I'd originally planned. But thanks to the health care I have received 
and will continue to receive because of the Affordable Care Act, I will 
at least have the opportunity to start at all.
    We are all vulnerable to unexpected illness or injury, regardless 
of our age. My story is far too common a reality that could have ended 
in a more tragic tale. That tale was prevented by the recent health 
care law.
                                 ______
                                 
    Chairman Roe. Thank you, Ms. Wilson.
    Ms. Lang?

            STATEMENT OF SHERRY LANG, H.R. DIRECTOR,
                       WOMACK RESTAURANTS

    Ms. Lang. My name is Sherry Lang, and I am the Director of 
Human Resources for Womack Restaurants. We are a 12-unit IHOP 
franchisee based in Indiana with restaurants in Ohio. I am here 
today to represent my company and the restaurant industry and 
small business.
    I have a master's degree in human resource development and 
over 17 years' experience in corporate HR. I spent the last 12 
years at the executive level, and so I have been involved in 
all areas of business management.
    I started with Womack Restaurants in 2005 and helped grow 
this company from 3 IHOP restaurants to the current 12. We 
currently have an expansion plan in place to build an 
additional 13 IHOP's.
    I guess I am here today to share my experience and my 
understanding of how this health care law will affect our 
company and similar companies in Indiana.
    The restaurant business is unique. It is really built on a 
small business model and profit margins are commonly only 5 to 
7 percent. We are the most labor-intensive of any industry. We 
rank dead last in revenue per employee at $58,000. If you 
compare this to the next closest industries, hotels are about 
$107,000 in revenue per employee, retail at $170,000, banks at 
$443,000, and oil refineries whose revenue is about $4 million 
per employee. Again, restaurants are $58,000.
    The cost to employers of this health care law is 
completely, 100 percent dependent on how many employees you 
have, regardless of your revenue and regardless of your ability 
to pay. We conservatively estimate with our company the cost of 
buying health care insurance will be over 50 percent more than 
our company's earnings. And our company is very profitable.
    It is a one-size-fits-all law for employers and this 
industry doesn't fit. Though some restaurant companies 
currently offer coverage now, most of those are mini-med plans. 
They are very limited coverage plans and they are designed 
specifically for employers like retail and restaurants. Even 
those plans will not qualify to meet the definitions of 
mandates in 2014.
    The only viable alternative for our industry is to pay the 
$2,000 per employee penalty, and that is not tax deductible. 
That means, first, we have to earn that $2,000, and then we 
have to pay taxes on it. And so the true cost of that is about 
$2,800 per employee.
    A quick study of public restaurant companies shows that 
many didn't earn enough in 2010 to pay the penalties, and they 
simply will not survive. These penalties equal 60 percent of 
our earnings, and gain, by restaurant industry standards, we 
are a very profitable company.
    Restaurants are also facing many, many challenges. We have 
rising commodity prices, State and local taxes, unemployment 
taxes, energy prices, and so on. And yet, restaurants--we 
cannot raise prices in this economy. Our only alternative is to 
cut costs. Cutting costs means cutting staff, reducing hours, 
making a lot more people part-time. It is going to be trimming 
services that are provided by other small business that are 
directly supported by the restaurant industry such as food 
suppliers and equipment suppliers.
    In addition, we have considered stopping our new restaurant 
development and may even forfeit the agreement we are already 
invested in. And that agreement was about $360,000. This future 
development would equal about $22 million in construction and 
development spending, and at least 260 full-time jobs. I would 
also like to point out that the restaurant equipment industry 
is one of the uniquely American manufacturing industries, and 
it has already been devastated in this economy.
    The restaurant industry has such an important role in this 
economy. We employ 12.7 million people. Restaurants are often a 
first opportunity for young or unskilled workers and a place 
where they can actually turn that part-time job into a career. 
50 percent of the managers in our company were promoted from 
within and started out with us as hourly staff. My first job 
was in a restaurant. The owner of my company started in a 
restaurant. It is also a unique industry in that it offers a 
lot of second chances for people starting over. It is an 
opportunity for those reentering society after incarceration. 
It is a second job for those digging out of a financial hole. 
We need this industry, but it cannot support this health care 
mandate and continue to thrive.
    Furthermore, our lenders, as required by regulators, 
require us to maintain certain levels of profitability via our 
loan covenants. Our mortgages, our leases, our franchise 
agreements--these things are often 15 to 20 years long. We have 
major obligations that we cannot walk away from in 2014. Profit 
equals development. If there is little or no profit, there will 
be no development.
    On a related note, I am really seriously concerned that we 
are not going to be able to continue offering the health care 
plan that we offer now to our management and our office staff, 
based on the changes in who we must provide coverage for, as 
well as the compensation rules.
    In summary, the goal of providing health insurance to 
everyone is noble and good. In theory, we support it, but this 
industry cannot afford to pay this bill. It comes down to basic 
math. At $58,000 in revenue per employee, $3,000 of that is 
profit. The cost of health care per employee is about $10,000. 
That leaves a $7,000 debt. Our only option is to pay the 
penalties. But even that, simply paying the penalties is going 
to be devastating for most of us in this industry.
    Thank you.
    [The statement of Ms. Lang follows:]

         Prepared Statement of Sherry Lang, Womack Restaurants

    My name is Sherry Lang. I am the Director of Human Resources for 
Womack Restaurants, a 12 unit IHOP Franchisee in Indiana and Ohio. I am 
here today to represent my company, the restaurant industry and small 
businesses. I have a Master's degree in Human Resource Development and 
over 17 years' experience. I have spent the last the last 12 years at 
the executive management level where I have been involved in all areas 
of business and business decisions. I started with Womack Restaurants 
in 2005 and have helped grow this company from 3 restaurants to the 
current 12 restaurants. We have an expansion plan to build 13 more 
IHOPS. I am here to share my experience and understanding of how the 
new healthcare law will affect our company and impact our future 
expansion.
    The restaurant business is built on a small business model, with 
profit margins commonly of only 5 to 7%. We are the most labor 
intensive of any industry, ranking dead last in revenue per employee at 
$58,000 per employee.\1\ Compare this to the next closest industries, 
Hotels, at $107,000 per employee, Retail at $170,000, Banks at 
$443,000, and Oil Refineries at over $4 million per employee. The cost 
to employers of new healthcare law is completely dependent on the 
number of employees, regardless of ability to pay. We conservatively 
estimate the cost of purchasing health insurance to be over 50% greater 
than our company's earnings. And our company is very profitable by 
industry standards.
---------------------------------------------------------------------------
    \1\ CNN/Money's Fortune 500 Report, 2009
---------------------------------------------------------------------------
    The law is one-size-fits-all for employers, and our industry 
doesn't fit. Though some restaurant companies offer coverage now, many 
are ``mini-med'' plans which are limited coverage plans for employers 
like retail and restaurants. Many will not meet the mandates by 2014. 
The only viable alternative for our industry is to pay the $2000 per 
employee penalty, which is not tax deductible. We have to earn that 
$2000 dollars first and then pay taxes on it, bringing the actual cost 
of the penalty to about $2800 for each employee. A quick study of 
public restaurant companies shows that many did not earn enough in 2010 
to pay the penalties and will not survive. For my company, these 
penalties amount to 60% of our earnings, and again, our company is very 
profitable by industry standards.
    Restaurants are already facing many challenges, rising commodity 
prices, rising state and local taxes and unemployment taxes, rising 
energy prices and so on. Restaurants are unable to raise prices in this 
economy. Our only alternative is to cut costs. Cutting costs means 
cutting staff and reducing hours worked, putting more employees into 
part time status, and trimming services provided by other small 
businesses that are supported directly by this industry such as food 
suppliers and equipment suppliers.
    Additionally, we will be forced to cease new restaurant development 
and may forfeit the development agreement we invested in. That 
agreement cost $360,000. This future development would amount to 
$22,000,000 in construction and development spending, and at least 260 
full time restaurant jobs. I would like to also point out that the 
restaurant equipment industry is a uniquely American manufacturing 
industry. That industry has already been devastated by the economy.
    The restaurant industry serves an important role in our economy, 
employing 12.7 million people.\2\ It is a source of 1st opportunities 
for young or unskilled workers who can turn a part-time job into a 
career. 50% of our Managers were promoted from hourly staff. My first 
job was in a restaurant. The owner of my Company started in restaurants 
as well. It's an industry of 2nd chances for people starting over: re-
entering society after incarceration, or a 2nd job for those digging 
out of a financial hole. We need this industry but it cannot support 
this healthcare mandate and continue to thrive.
---------------------------------------------------------------------------
    \2\ National Restaurant Association
---------------------------------------------------------------------------
    Furthermore, our lenders, as required by regulators, require us to 
maintain certainly levels of profitability via loan covenants. Our 
mortgages, leases, and franchise agreements are commonly 15 to 20 years 
long. We have major obligations that we cannot walk away from in 2014. 
Profits equal development and if there is little to no profit, there 
will be no development and growth.
    On a related note, I have serious concerns that we will not be able 
to continue to offer the coverage we currently offer to my management 
and office staff, based on changes in who we must provide coverage for 
as well as the compensation rules.
    In summary, the goal of providing health insurance to everyone is 
noble and good, in theory we support it, but the restaurant industry 
can't afford to pay the bill. In comes down to basic mathematics. At 
58k in revenue per employee, we average $3000 in profit. The estimated 
cost of healthcare will be $10,000 leaving a $7000 per employee gap. 
Our only option is to pay the penalties. Simply paying the penalties 
will be devastating for most of us in this industry.
                                 ______
                                 
    Chairman Roe. I thank all of the panelists.
    I am going to start with making a statement, and then I 
will ask some questions.
    First, Ms. Wilson to you, you cannot write a 2,700-page 
bill and not have some good things in there. I personally liked 
the 26-year-old--it is going to cost money and you understand 
that all the testing you have required costs a lot of money and 
somebody has to pay for that. So that is going to run the costs 
up. But that part of the bill I actually like. I like it.
    I had three kids. When they got out of college, none of 
them had health insurance coverage. I had to buy them an 
individual policy on the individual market, which is not tax 
deductible.
    And one of the things we could do very simply--the year I 
ran for Congress to make my health insurance cheaper was to 
treat me like a large corporation. I got no tax break. I had to 
go out on the individual market and buy that insurance which 
made it much more. If I had worked for a big company, it would 
have been tax deductible and made it much cheaper for me. So 
that part I like.
    A couple or three things that were mentioned by the panel 
that we need to discuss work on--there was no question about 
preexisting conditions. I dealt with it in my patients who had 
breast cancer, which I saw most frequently, and other problems. 
Rescission by the insurance companies. That is a situation that 
needs to be dealt with. So there is no question there are some 
good things in here.
    The problem with this is is anytime you have a massive, 
almost incomprehensible bill--and I have this. If any of you 
all would like to have it--I have a four-page summary--we will 
be glad to email it to any of you. It is a little simpler 
language. You can see when these things come into play. And I 
will be glad to make those available. We get your email. We 
will make sure the staff emails this to you.
    When we start looking at costs, let me give you a little 
history lesson. We will start with Medicare. The Congressional 
Budget Office first said this bill was budget neutral. Well, 
how they got to budget neutrality was taking $500 billion out 
of an underfunded Medicare program. Right now it is 
underfunded, and right now under current estimates in 11 years, 
it is broke. I mean, in 13 years it is broke, 2024. So we took 
$500 billion out of that. We took money out of a class act. We 
use student loans to pay for this. We use taxes on business to 
pay for this bill.
    If you go back and look at Medicare when it came into play 
in 1965 and started in 1966, it was a $3 billion program. The 
Government estimators--there was no Congressional Budget 
Office--estimated this would be a $15 billion program in 25 
years. The actual number was over $100 billion. They missed it 
by seven times.
    Our experience in the State of Tennessee. We started with a 
program called TennCare to help control health care costs, 
exactly the things we were talking about in 1993: access and 
affordability. That is what we are talking about. That is what 
you were talking about, Ms. Wilson, is access you would lose if 
you didn't have your health insurance coverage. We reformed 
Medicaid in our State. It was a $2.6 billion program. In 2004, 
10 budget years later, it was an $8.5 billion program. It took 
up every new dollar that the State of Tennessee took in.
    And what we were finding was less and less and less 
physicians were accepting it. And why is that? Dr. Carlson 
mentioned this.
    In our State--I don't know about Indiana, but in our State 
TennCare or Medicaid there pays about 60 percent of the cost of 
actually providing the care. Medicare pays about 90 percent of 
the costs. So how are those costs made up? Well, they are 
shifted to the private insurers. I mean, the hospitals have to 
pay their personnel and buy the new equipment that we use. So 
that cost-shifting also forced the costs up, not only this bill 
did with its requirements.
    And also remember that you as a person no longer get to 
pick which insurance. The Government will decide what an 
essential benefits package is, not you as an individual. And 
when that happens, then the costs will go up when someone else 
other than you decides.
    Health care decisions in my opinion should be made between 
physicians and their patients, not insurance companies and 
certainly not the Federal Government.
    And there are a lot of onerous things we may not have time 
to go into about the current bill.
    I want to know from the standpoint--and something that you 
all ought to read is some testimony we had in front of the 
Lockton Group about a month or so ago. I mean, we are business, 
and the restaurant/entertainment business--this particular bill 
is devastating for your business. Could you go into that, Ms. 
Lang, in a little more detail?
    Ms. Lang. Well, you know, one of the common things in the 
restaurant industry--and this plays into a little bit--is that 
turnover averages about 125 percent in casual dining. We are 
very good. We are about 84 percent. But if you think about 
that, 84 out of every 100 employees turns over within a 1-year 
time. That is just one other piece beside the fact that at a 
very profitable level a company in this industry averages about 
$3,000 in profit. So we either have a $7,000 gap if we are 
going to provide coverage. Well, that is impossible. Now we are 
out of business. Or we give up two-thirds of our profit. The 
penalty is $2,000. We are averaging $3,000 in profit. Nobody is 
going to stay in this industry and continue to develop 
restaurants. Why would you? They are literally going to take 
two-thirds of our profit.
    The administrative burden of the constant turnover and how 
would we do that. I mean, it would simply be impossible. We 
would not offer coverage. It is not an option.
    And many restaurants, especially large restaurant groups 
that have numerous restaurants, have separate groups of 
employees. And so for our professional staff, our managers and 
our administrative staff, we offer coverage, full-blown health 
package, 401(k), you know, the whole deal. We will probably 
have to eliminate that coverage. So I think the default, the 
accidental impact of this is that they are going to take away 
coverage for people that already have it.
    Chairman Roe. Let me just finish and I will yield to Mr. 
Bucshon.
    In this HR report, one of the things that also is brought 
out is that in the exchange, this Federal exchange that is yet 
to be determined--by the way, we are spending $14 billion--that 
is with a B--to set up these exchanges around the country, not 
to provide care for patients or if I write a prescription to 
care for that patient to get a prescription, but set up some 
more bureaucracy. Let's say you drop your coverage. And we 
provided health insurance coverage for our employees since 1968 
in our practice. If they go into the exchange, the subsidy the 
Government gives them won't be as much as the subsidy I am 
paying right now for them.
    And secondly, that subsidy--what they have to pay extra is 
not tax deductible to them. So their coverage is actually going 
to go up if they are forced into the exchange, and you are 
going to be forced to drop coverage because you can't afford 
it. And therefore, it forces the cost even higher. I think that 
is the unintended consequences that nobody figured out before 
they passed this bill.
    Ms. Lang. Absolutely. I think the unintended consequences 
is that and that you are going to have all these people in the 
exchange. They will probably have lesser coverage. A lot of it 
is going to be politically defined rather than defined by 
people who know and understand health care.
    Chairman Roe. Dr. Bucshon?
    Mr. Bucshon. Ms. Crosson, I want to ask you the first 
question. In regards to the exchanges, what are some of the 
issues and concerns about establishing the exchanges and how 
the State of Indiana is going to be able to manage the 
exchange? And do you have any idea from what you are seeing now 
how many more people may be on the exchanges higher than the 
estimate that the Federal Government has said will go onto the 
exchange? In my view, that is going to be a serious problem for 
the State.
    Ms. Crosson. Thank you. That is a very good question.
    The first answer--I end up saying this a lot whenever I 
talk about health care reform--is I don't know, which is very 
frustrating. The biggest concern I have is you don't know. We 
don't know essential benefits. We don't know what it is going 
to look like, and when we ask, when we are trying to compare 
whether and decide whether to run a State exchange or whether 
the Federal Government would, one thing you would want to know 
is what I am comparing. What is the Federal Government version 
going to look like versus the State? The Federal Government 
tells us we don't know. We will be flexible. Then I get a phone 
call and they said--it is going to be unique to each State is 
what you need. And then I get a phone call from someone in the 
Budget Office for HHS referring to the Federal exchange meaning 
across multi-State, meaning one-size-fits-all. So I don't know 
the answer.
    I do know that they are estimating about 500,000 new 
Medicaid participants. The challenges and concerns are why as a 
small business would you go to into and offer insurance at all, 
especially if you have a narrow profit margin. Who is going to 
pay for it? How is it going to be sustainable? We are spending 
billions of dollars to set these up, but they have to be 
sustainable if you set it up on the State being at least a year 
of setting up. So somebody will have to pay for the 
administration, the reviews, the reporting requirements, the 
technology, and we don't know what any of that is going to look 
like.
    And finally, we don't know who is going to be around to 
participate on what insurance carriers. What about our small 
dental carriers? That is going to be--we heard for the 
essential benefits. So are vision carriers going to be able to 
participate on the exchange? Are they just going to go out of 
business because of major health insurance is going to take 
over that as part of their coverage? Are they going to partner 
up?
    Those are just a few. The big one is we just don't know. We 
don't have the regs. We don't have the information.
    Mr. Bucshon. So overall, with all the new mandates on the 
insurance industry, in aggregate do you think these mandates 
are going to raise the cost of insurance in the State of 
Indiana?
    Ms. Crosson. Absolutely. Our insurers have been telling us 
in the individual market a minimum of 50 percent by 2014. We 
are hearing estimates ranging from 50 to 90 percent, and that 
is in the individual market. This is where your family or you--
you purchase for your child. And then in the small group, at 
least 10 to 30. And again, we still don't have all the regs 
out. We have only got 6,600 pages.
    Mr. Bucshon. Chairman Roe?
    Chairman Roe. One of the things--we are going to have a 
second round if it is okay--of questions and just briefly. And 
let talk a little bit or ask again a little, Ms. Crosson, about 
the individual mandate, how you see that affecting costs in the 
State. Then I will give you a personal example of how I think 
it would affect me.
    Ms. Crosson. The individual mandate--I had the privilege to 
speak with the Governor about it and talk with his task force 
about it and really the average citizen. And the best way I can 
explain it is this. Even if it is upheld, which Indiana is part 
of the 26-State litigation and the Governor's office in the 
State of Indiana and the Department of Insurance is--but even 
if it is upheld, it is ineffective. It is a great thing to get 
more people into the pool. It spreads the risk and that is a 
fundamental, basic concept of insurance.
    But here is the problem. It is fear money. You have a 
choice between paying--especially for 19- to 25-year-olds, 
their premiums are going to go for maybe $100-$120 a month to 
probably $400 to $500 because they had only paid a third of the 
price of the highest charge. So now you are faced with $400-
something a month when you were paying $128, or you wait until 
you get sick, you purchase coverage when you need it, and then 
you pay a $95 penalty that is prorated by the number of months 
you are covered. You are 19 to 25. What are your priorities and 
you are healthy? It is nothing. And you have a choice. $400-
something is rent or a tuition payment or, or. And that is what 
you are looking at.
    And even though the costs go up year after year, and when 
you are prorating and you just go in when you need it, as far 
as premium costs, what is going to happen is you don't have 
those young folks you want in to spread the risk who are 
healthy and don't need to utilize the services as often. If you 
are healthy, people are going to choose to stay out anyway 
until they really need it, and that is going to drive costs to 
skyrocket.
    Chairman Roe. Here is another issue that many people are 
not aware of is that since 1986, there is a law that is called 
MTALA. For instance, if I am on call at the emergency room, it 
is illegal for me not to see someone regardless of whether they 
are legally in this country or whether they can pay or not. If 
I am a doctor in the emergency room and somebody needs care, I 
am going to see you. So that is the law of the land now.
    And what has happened in Massachusetts where they have an 
individual mandate and where they have no preexisting 
conditions and no deniability--and you are exactly right. What 
has happened there is--we thought that the emergency room 
visits would go down because everybody had a primary care 
doctor. That is not what happened. What happened was the 
Massachusetts care actually pays about what Medicaid or less 
does, so less doctors are seen. The emergency room visits have 
not gone down. I just read an article in either JAMA or the New 
England Journal of Medicine the other day about that.
    And secondly, people wait until they get sick, and then 
they can't be denied. So they buy the insurance coverage. 
Harvard Pilgrim Health Care Plan had that experience, and their 
experience was about six times per month cost for those people 
because they waited until they got sick, couldn't be denied, 
bought the insurance, when they got well, dropped it and paid 
the penalty because it is a lot less.
    Now, I mean, I wouldn't do that. I would go ahead and buy 
the insurance because I think you ought to be covered. But that 
is happening right now in Massachusetts. Indeed, they hold 
costs down.
    But again, back to the first premise that we have had. Have 
costs been held down? And the answer is no. They have the 
highest insurance costs in America.
    Dr. Carlson, one of the things that I am concerned about--
and I wanted to hear your take on it--is the biggest concern I 
have when I would have a Medicare patient or a TennCare 
patient, was finding a primary care doctor for them. And I 
would operate on them, and then I would go try to find someone. 
I am extremely worried about this in access because if you 
can't get access to the physicians, the quality of your care 
goes down.
    Have you noticed that here where Medicare patients are 
having a harder time finding a primary care doctor?
    Dr. Carlson. We have noticed that. A number of primary care 
physicians are not accepting any new patients and some who are 
accepting patients will definitely limit the number of Medicare 
patients they see. So our office is tasked many times with 
trying to assist the patient in finding a primary care 
physician, and it is tough. We have a list of physicians, and 
there are not many that we rely on to take these patients.
    So access is a problem, and the reason is--several reasons. 
One is just the number of patients the individual doctor can 
see, and number two is the rate of reimbursement. You have to 
run your practice. You have to make a profit to pay your 
employees, and you can't do that if you see a great deal of 
Medicare or Medicaid patients. It is very difficult to do that.
    Chairman Roe. Dr. Bucshon?
    Mr. Bucshon. Yes. Dr. Carlson, I also wanted to comment on 
how defensive medicine--how you see it affecting the overall 
cost of the health care system. There is some debate on that in 
Washington, D.C., and some say that that is not actually a 
significant percentage of the health care cost. But can you 
comment on your experience?
    Dr. Carlson. I don't know exactly what the figures are, but 
it definitely contributes to health care costs. I will just 
give you an example. We cover the trauma programs in 
Evansville. We see lots of patients come to the emergency room 
with trauma, some major trauma, some minor trauma, but once a 
patient is designated a trauma patient, regardless of how minor 
the injury seems to be on a quick examination, virtually all 
those patients get CT scans of the head, the neck, the chest, 
the abdomen, and the pelvis, thousands of dollars worth of 
tests. They are not medically necessary many times, but you 
certainly don't want to be caught missing something. And so 
everybody gets this. That is just one example of the cost that 
is unnecessary but physicians order it. They don't want to get 
trapped.
    Chairman Roe. Will the gentleman yield?
    Mr. Bucshon. I will yield.
    Chairman Roe. I use the example of when I was in residency, 
we didn't make much money. I mean, I made $280 a month, 
probably about what you made. Both of us may have been 
overpaid, but anyway that is about how much money I made. And I 
remember I moonlighted in some of the emergency rooms. If you 
would go to the emergency room and a patient would come in and 
they had some right lower quadrant pain, you would press--press 
on them, you would get a blood count, which is $15-$20, 
whatever it was then. And you would say I don't think have--
your temperature is 99, white count is 10,000, probably not 
anything. You are probably okay. Once you go home, if it gets 
worse, why don't you come back and we will take a peak at you. 
And if you vomit, you know, just come on back if the symptoms 
get worse. That is how we did it 30 years ago.
    Today--you are absolutely right--you are going to glow in 
the dark when you leave the emergency room. [Laughter.]
    And the reason you are is because that has now become the 
standard of care, unfortunately. It is not the standard of 
care.
    And so those are the kinds of things I think that suddenly 
add to the cost that is out there that you can't calculate what 
it is, but I know it and you know it. You can examine a 
patient's abdomen. I can guarantee you a skilled surgeon as you 
are and not needing a lot of the testing that is done, but you 
may get that test to protect yourself in case the 1 in 1,000, 1 
in 100, whatever it may be, because if you do, you just get 
your pen out and start writing zeroes and commas and the check.
    So it does add to the cost and doesn't add to the quality. 
And I think that is one of the things we have to address and we 
are not addressing it Washington. And quite frankly, I don't 
know what we wouldn't mess it up in Washington. It may best be 
left to the State level where you can do that.
    I think I finished my questioning of this panel. I really 
appreciate your being here and taking your time to come and 
prepare your testimony. It has been very helpful, and I think 
we need to do more of this around the country and less of it in 
Washington. Thanks very much for being here.
    We now would like to have our second panel come in.
    Thank you all. [Applause.]
    Thank you all for your attention, and I would like to take 
this opportunity to welcome our second panel. Dr. Bucshon, I 
will now yield to you for introduction of our second 
distinguished panel.
    Mr. Bucshon. Thank you, Chairman Roe.
    Again, it is a pleasure to introduce this panel, and thank 
you all for coming and being willing to testify.
    First is Representative Mark Messmer who serves the people 
of the 63rd district in the Indiana House of Representatives. 
Mr. Messmer is also a mechanical engineer and co-owns Messmer 
Mechanical, a plumbing and heating contracting business founded 
by his mother and father. Messmer Mechanical is based in 
Jasper, Indiana, and has 47 employees.
    The Reverend George Philip Hoy formerly represented the 
77th district in the Indiana House of Representatives. He is a 
resident of Evansville and a retired ordained minister of the 
United Church of Christ. He is now serving as the interim 
pastor of Zion United Church of Christ in Henderson, Kentucky. 
He serves as the religious co-chair of Tri-State Jobs with 
Justice and chaplain of the Central Labor Council and is 
testifying today on their behalf.
    Denis Johnson serves as the Vice President of Operations 
for Boston Scientific's Spencer, Indiana plant. Boston 
Scientific has about 15,000 employees in the United States and 
about 1,000 of those employees are located in Spencer, Indiana, 
which is in the 8th congressional district, where they produce 
2.2 million less invasive medical devices every year.
    Mr. Glen Graber is the President of Graber Post Buildings 
in Odon, Indiana which manufactures and distributes materials 
for post frame structure and metal roofing projects. Graber 
Post employs approximately 210 workers.
    Thank you all for being here.
    Chairman Roe. Thank you all, and let me explain the lights 
again for you all that weren't here. It is 5 minutes per 
testimony, and the red light will go on at the end of the 5 
minutes. The amber light in the middle means you have 1 more 
minute to complete your testimony. If you are in the middle of 
a thought, please go ahead and finish it. We are not going to 
cut the sound off.
    So with that, Mr. Messmer, you may begin.

       STATEMENT OF HON. MARK MESSMER, INDIANA HOUSE OF 
              REPRESENTATIVES; MESSMER MECHANICAL

    Mr. Messmer. Hello, my name is Mark Messmer, and I am the 
Vice President and co-owner of Messmer Mechanical. We are a 
family-owned contracting business with 47 employees. There are 
32 of those that are members of the Local 136 plumbers and 
pipefitters. 12 are full-time non-union employees, and 3 part-
time employees.
    We pay 100 percent of the health insurance costs for our 
employees. The union members' insurance costs our company $5.95 
per hour. If the nonunion employees need family coverage, they 
pay the difference between the cost of the employee coverage 
and the family plan.
    Our health insurance premiums have paced well beyond the 
rate of inflation for a long time. In 2009, our rates went up 
28 percent; in 2010, another 26 percent; and in 2011, after 
implementation of the Patient Protection and Affordable Care 
Act, otherwise known as Obamacare, they went up a whopping 44 
percent. So much for affordable.
    Rising medical insurance costs have made it impossible for 
us to provide any raises during the 2009-2010 recession, and it 
made it extremely difficult to reinvest in our business.
    We have exhausted all the easy fixes to our rising medical 
insurance costs. We raised the deductible in 2009 from $500 to 
$1,000 per person, and in 2011, we had to raise the maximum out 
of pocket from $3,000 to $4,000 per individual and $8,000 per 
family. The employees that are buying family plans in 2011 were 
allowed to raise their deductible to $3,500 per person or 
$10,500 per family just to hold their costs to the 14 percent 
increase. These changes are only shifting the cost of medical 
procedures to the patient, not cost containment.
    We bid out our insurance every year to various insurance 
carriers around the area, and a 44 percent rate increase was 
the lowest we could get. Our rate increases are not due to 
history of our group. I confirmed from our agent that the major 
factor driving our rates through the roof is the impact of 
Obamacare on the medical insurance industry, and our small 
group pool--he said about half of the underwriters have dropped 
out of providing coverage in Indiana. Less competition means 
higher rates.
    The temporary small business tax credit is very 
counterproductive to the very idea of growing your business. 
Businesses that grow will be penalized for that success. How 
stupid is that? When the institutional attitude of Congress is 
one that looks to punish businesses for being successful, our 
American economy and our individual liberty are in great 
danger.
    I see nothing in Obamacare that will help in lowering the 
cost of providing insurance for my employees. We were told that 
cost containment was the goal of the new law. The problem with 
our current system is I pay in premiums to an insurance carrier 
who pays for procedures to doctors and hospitals to services 
provided to a third party person. It is a vicious cycle with 
the end consumer of the service having no connection to the 
cost. They have no skin in the game. The system is forcing me 
to the point of dumping my coverage and just saying the heck 
with it. Let the Government take it over, but we are all in 
trouble when that happens.
    Looking ahead, I see nothing but more trouble ahead for 
businesses of all sizes. The taxing on private insurers, which 
is going to happen in 2014, will only be passed on through to 
the small businesses who purchase those plans like myself. The 
$100 billion they are projected to generate will punish the 
small businesses that Congress was supposedly protecting with 
the small business tax credit. What a joke. Congress tells you 
they are going to help you with one hand and nail you with the 
other.
    Plus, the requirement for those over 50 employees to insure 
part-time workers, jobs creation is going to be almost 
impossible. We are at 47 employees now. Do you think we are 
going to let our company grow to 50 without repercussions? When 
insurance is required for part-time employees, I will have to 
fire my part-time workers. I cannot afford to keep them. It 
will be almost impossible for an entrepreneur to get a new 
business started.
    The individual and company penalties for not providing or 
buying insurance are obviously set artificially low now to 
encourage me as a business owner to drop my coverage. When I 
compare a $2,000 fine versus the $10,000 to $15,000 that these 
plans are headed toward, it will be much easier just to pay the 
fine. It is blatantly obvious to me that as soon as the 
Government sees the millions of new uninsured people that these 
low fines are encouraging, those fines will escalate 
dramatically. They will come down like a hammer on small and 
large employers alike and be another crushing blow to jobs 
creation in this country.
    Where in any of this debate has there been an attempt to 
promote programs like HSA's that put the consumer directly into 
the decision-making process of their health care dollars? Why 
was there no attempt to implement malpractice reform like the 
State of Indiana has adopted? Why not change the rules that 
would allow me to buy insurance across State lines to bring 
more competition and more carriers into our markets?
    If cost containment was the goal, then why was everything 
that has been implemented under Obamacare destined to raise the 
overall health care cost and, in turn, my insurance costs?
    If Obamacare is so great, why has the Health and Human 
Services Secretary written 1,372 waivers so far? Putting it 
bluntly, that is a bunch of crap. If it is good enough for me 
and my business, it is good enough for you and it is good 
enough for every other employer in this country.
    Thank you.
    [The statement of Mr. Messmer follows:]

   Prepared Statement of Hon. Mark Messmer, Member, Indiana House of 
       Representatives; Vice President, Messmer Mechanical, Inc.

    Hello, my name is Mark Messmer. I would like to thank Congressman 
Bucshon for inviting me to be here today. I am Vice President and co-
owner of Messmer Mechanical, Inc in Jasper, IN. We are a family owned 
plumbing and heating contracting business that was founded by my father 
and mother, Gerald and Linda Messmer, in 1970. We are long time members 
of the National Federation of Independent Businesses. We have 47 
employees. There are 32 that are union members of Local 136 plumbers 
and pipefitters, 12 full time nonunion and 3 part time employees. Of 
our union employees 9 are building trade journeyman, 18 are residential 
journeyman and 5 are apprentices.
    We pay 100% of the health insurance costs for our employees. The 
union members' insurance costs our company $5.95 per hour. The building 
trade members have that insurance fee paid to the local 136 medical 
insurance fund. The residential journeyman and apprentices receive that 
amount in cash, which they can use to go out and buy a private 
insurance plan on their own, or buy the same insurance that we provide 
to the nonunion employees. If our nonunion employees need family 
coverage, they pay the difference between the cost of the employee 
coverage and the cost of the family plan.
    Our health insurance premiums have historically increased well 
beyond the rate of inflation, which is typical for most small employers 
trying to provide insurance for their employees. In 2009 alone our 
rates went up 28%, in 2010 another 26%, and in 2011, after the 
implementation of the Patient Protection and Affordable Care Act, they 
went up a whopping 44%. The new law ignores the rising cost of health 
insurance. In fact, the mandates, coverage requirements and taxes 
exacerbate the affordability problem. The out of control cost of our 
employee medical insurance is quickly becoming a prohibitive expense 
for our small business and other small businesses throughout the 
country.
    The recession we are still dealing with has compounded the problem. 
During 2009 and 2010 when our company struggled to break even due to 
the recession's impact on the construction industry, it became very 
difficult to justify continuing to cover medical insurance benefits for 
our employees. Rising medical insurance costs made it impossible to 
provide any raises during that time frame, and made it extremely 
difficult to reinvest in our business.
    We have exhausted all the ``easy'' fixes to our rising medical 
insurance. We raised the deductible from $500 to $1,000 in 2009 to hold 
the increase at 28%. In 2011 we had to raise the maximum out of pocket 
from $3,000 to $4,000 per individual and $8,000 per family to hold the 
increase to 44%. The employees that were buying family plans were 
allowed to raise their deductible to $3,500 per person and $10,500 per 
family to limit the increase in those plans to 14%. These changes are 
only shifting the cost of the medical procedures to our employees, not 
cost containment. Further cost shifting is inevitable if the law is 
enacted as written, increasing costs for individuals, employers and the 
federal government.
    We bid out our insurance every year and did again this year and the 
44% increase was the lowest rate we could get. We have been with SIHO 
for 4 years and were with Anthem for 3-4 years before that. I confirmed 
with our insurance agent that our rate increases were not due to the 
medical history of our group. We have a relatively young pool and have 
had almost no change in the amount of claims in our group for several 
years and have no high risk cases in our group. I also confirmed from 
our agent that the one major factor driving our rates through the roof 
is the impact of the new law on the medical insurance industry. He 
confirmed over the last year that the rate increase is largely due to 
raising the dependant coverage age to 26, no pre-existing condition 
exclusions for children, no lifetime benefit limits, no rescissions, 
and no cost sharing for preventative services have all impacted our 
rates. He also said one of the biggest causes for the increased costs 
is the fact that about half of the underwriters have dropped out of 
providing medical insurance in Indiana, and with less competition means 
higher prices. While these early provisions are popular, they all have 
only one impact on costs and that is to drive them higher.
    The supposed small business tax credit is very counterproductive to 
the very idea of growing your business. The tax credit is temporary and 
so targeted that very few small businesses will be able to take 
advantage of it. Businesses that are successful and should be 
encouraged to continue to provide coverage are penalized for that 
success because they are ineligible for the credit. The same can be 
said of the insurance companies that are successful. Instead of being 
looked at as good businesses that provided great customer satisfaction, 
they have been demonized and targeted.
    I see nothing in the new law that will help in lowering my cost of 
providing or health insurance to my employees, only policy that will 
move the costs upward in the wrong direction. We were told that cost 
containment was the goal of the new law. The whole idea of public buy-
in on $10 prescription co-pays and $25 office co-pays have no 
connection with what those things actually cost. The problem with our 
current system is that I pay a premium to an insurance carrier, who 
pays hospitals and doctors for services used by a third person. It is a 
vicious cycle with the end consumer of the service having NO connection 
to the cost. The consumer of the service has no skin in the game. As 
the consumer is further removed from the interaction, as mandated by 
the new law, they are encouraged to utilize more medical services. The 
cost pressures in the current system will force me to the point of 
dumping my coverage instead of promoting flexibility and encouraging me 
to keep coverage. I fear that day for all of us.
    Looking ahead I see nothing but more trouble for businesses of all 
size. The taxing on private insurers in 2014 will only be passed 
through to all purchasers of insurance. Those purchasers are me, the 
small business owner. This is an $8 billion tax in 2014, growing to 
over $14 billion in 2018. The $100 billion it is proposed to 
``generate'' over the next ten years will be born on the backs of the 
small business owner and vastly outweigh any savings from the small 
business tax credit. Advocates for the law tell you they are helping 
you in one hand but this tax will nail you with the other. This small 
business health insurance tax, or HIT, will once again punish the 2 
million small business owners and their employees, effecting 26 million 
people covered under these plans. Additional coverage mandates, removal 
of all annual and lifetime limits, guaranteed issue and renewal, and 
restrictions in underwriting factors will continue to drive up my 
costs. The requirement for employers with over 50 employees to insure 
part time and seasonal workers provides strong disincentives toward job 
creation. When insurance is required for part time employees, I will be 
unable hire another part time worker. It will be almost impossible for 
an entrepreneur to start a new business and hire.
    The fines and penalties on individuals and companies for not buying 
or providing government-approved insurance are set so artificially low 
that the incentives encourage me as a business owner to drop coverage. 
When I compare a $2,000 fine verse the $10,000-$15,000 that these 
policies are headed toward, it won't take much longer for me to be 
forced to pay the fine. The low individual penalty along with the 
elimination of pre-existing condition exclusions encourages individuals 
to wait until they get sick to buy a policy. It is blatantly obvious to 
me that as soon as the government sees millions of new uninsured people 
in this country that the low penalties are encouraging, those penalties 
will escalate dramatically, by five or ten fold. The new law cannot be 
paid for as shown by the current projections. The inevitable increase 
in the penalty and fine costs will come down like a hammer on small and 
large employers alike, kill job creation, and be another crushing blow 
to our individual freedom and liberty.
    Where in any of this debate has there been any attempt to promote 
affordable options like HSA's that put the consumer directly into the 
decision making mode of how their health care dollars get spent? Why 
was there no attempt to implement malpractice reform like the State of 
Indiana has adopted? Why not change rules that would allow me to buy 
health insurance across state lines to bring more competition and more 
carriers into our markets? By removing lifetime limits from insurance 
policies, do you not think that hospitals will be encouraged to charge 
more for services they provide and raise overall costs? I think that 
seems obvious. If cost containment is the goal, then why was everything 
that was implemented in the law destined to raise overall costs, and 
thereby, my insurance costs?
    I would like to thank you once again for the invitation to be here 
today and would be happy to answer any of your questions.
                                 ______
                                 
    Chairman Roe. Thank you, Mr. Messmer.
    Rev. Hoy?

           STATEMENT OF REV. GEORGE PHILIP HOY, RET.,
                    UNITED CHURCH OF CHRIST

    Rev. Hoy. My name is George Philip Hoy. I have been an 
ordained minister in the United Church of Christ for more than 
50 years. I am now retired and serving as interim pastor of 
Zion United Church of Christ in Henderson, Kentucky. However, I 
am a lifelong Indiana resident and have lived in my current 
home in downtown Evansville for 29 years.
    I am also Religion Co-Chair of Tri-State Jobs with Justice 
and Chaplain of the Central Labor Council. I have also been an 
elected official. I served on the Vanderburgh County Council 
for 12 years and in the Indiana House of Representatives for 4 
years.
    I speak in support of the Affordable Health Care Act. Why? 
I am a firm believer in a single payer health care system. The 
legislation that is now law offers numerous benefits to the 
State of Indiana and its citizens.
    There are 28 definable benefits achieved in 2010, 19 
definable benefits in 2011. From personal and professional 
experience, I wish to address a few of those benefits.
    During the past few years, I have had open heart surgery 
and my wife has been treated for breast cancer. Yet, we count 
ourselves among the more fortunate citizens of the United 
States. If not for Medicare and the insurance we have through 
my denomination's pension board, we would be facing bankruptcy.
    Last Sunday, Paul, a member of our church who is now 
undergoing chemotherapy, said he couldn't wait until his last 
chemotherapy session in December. After his final treatment, he 
will have to file for bankruptcy. His medical debt, as of 
Sunday, was $300,000. He has a job but no health insurance. 
When he asked the hospital for help, he was offered a 10 
percent discount.
    The Affordable Health Care Act has a number of provisions 
for the less fortunate. It gives immediate access to affordable 
health care for uninsured individuals with preexisting 
conditions. We have 17, soon to be 19 grandchildren. Four of 
our grandchildren have preexisting health conditions. I am 
grateful that our grandchildren will be assured of coverage 
because of the Health Care Act.
    Extending dependent coverage is also important to our 
family. One of our grandsons, an honors college graduate, is 
still awaiting an opening as a school teacher. He is single, 
living at home, and working as a substitute teacher. Thank God, 
he is covered by his parents' insurance due to the provisions 
of the Health Care Act.
    Closing the so-called ``donut hole'' for those on Medicare 
is another important provision of this act. Fortunately, my 
denomination offers my wife and me the excellent prescription 
coverage. However, I have watched less fortunate retirees 
forced to visit food pantries because they could not afford 
both groceries and medicine. Or worse, I have seen cases of 
people cutting back on needed medicines without consulting 
their physicians because they couldn't pay their bills.
    Mandating the coverage of preventive screenings and 
immunizations is, in popular parlance, a ``no-brainer.'' Just 
think about the cost and, more importantly, the prevention of 
suffering that flu shots alone ensure.
    In Indiana, the increased funding for community health 
centers will nearly double the number of patients seen over the 
next 5 years. For those whose main interest is in dollars and 
cents, these increased health services can only contribute to a 
stronger economy in the form of a healthier workforce.
    The act provides for more doctors where people need them, 
especially in low population rural areas. It provides funding 
for the National Health Service Corps for scholarships and loan 
repayments for doctors, nurses, and other health care 
providers. In Indiana, this will help the 8 percent of our 
population who live in an underserved area of our State.
    Some 84,400 small businesses can be helped by the new small 
business tax credit that will make it easier to provide 
coverage to their workers.
    The act will give consumers some protections from negative 
policies of the insurance industry. Lifetime limits will not be 
placed on the coverage individuals receive. Insurance companies 
will no longer be able to drop people from coverage when they 
get sick. An appeals process will be required. Patient's choice 
of physicians will be protected.
    In my opinion as a Christian pastor, adequate health care 
in the richest country in the world is a human right and a 
moral necessity. The Affordable Health Care Act moves us closer 
to achieving something very important as it relates to a term 
not used often enough in our political discussions. That term 
is ``the common good.''
    The nations of what is called the developed world have all 
embraced national health care plans. The time is way past for 
us to catch up with them. The Affordable Health Care Act is not 
perfect, but it is a good giant step forward.
    Tweaking the Affordable Health Care Act to make it better 
is one thing. Repealing it would be an unconscionable act by an 
unfeeling legislature. Repealing it in my estimation would be 
immoral.
    Thank you for holding this hearing and thank you for 
allowing me this opportunity to testify.
    [The statement of Rev. Hoy follows:]

    Prepared Statement of Rev. George Philip Hoy, Ordained Minister,
                        United Church of Christ

    My name is George Philip Hoy. I have been an ordained minister in 
the United Church of Christ for more than 50 years. I am now retired 
and serving as Interim Pastor of Zion United Church of Christ in 
Henderson, KY. However, I am a lifelong Indiana resident and have lived 
at my current home in downtown Evansville for 29 years.
    I am Religion Co-Chair of Tri-State Jobs With Justice and Chaplain 
of the Central Labor Council. I also have been an elected official. I 
served on the Vanderburgh County Council for 12 years and in the 
Indiana House of Representatives for four years.
    I speak in support of the Affordable Health Care Act. While I am a 
firm believer in a single payer health care system, the legislation 
that is now law offers numerous benefits to the State of Indiana and 
its citizens.
    There are 28 definable benefits achieved in 2010 and 19 definable 
benefits in 2011. From personal and professional experience I wish to 
address a few of those benefits.
    During the past few years, I have had open heart surgery, and my 
wife has been treated for breast cancer. Yet we count ourselves among 
the more fortunate citizens of the United States. If not for Medicare 
and the insurance we have through my denomination's pension board, we 
would be facing bankruptcy.
    On Sunday, Paul, a member of our church who is now undergoing 
chemotherapy, said he couldn't wait until his last chemotherapy session 
in December. He added that immediately after his final treatment he 
will file for bankruptcy. He has a job but no health insurance. His 
medical debt, as of Sunday, was $300,000. When he asked the hospital 
for help, he was offered a 10 percent discount.
    The Affordable Health Care Act has a number of provisions for the 
less fortunate. It gives immediate access to affordable health care for 
uninsured individuals with pre-existing conditions. It also eliminates 
pre-existing conditions that exclude covering children. We have 17, 
soon to be 19 grandchildren. Four of our grandchildren have pre-
existing health conditions. I am grateful that our grandchildren will 
be assured of coverage because of the Affordable Health Care Act.
    Extending Dependent Coverage is also important to our family. One 
of our grandsons, an honors college graduate and one of the four 
grandchildren with a pre-existing health condition, is still awaiting 
an opening as a school teacher. He is single, living at home, and 
working as a substitute teacher. Thank God he is covered by his 
parents' insurance due to the provisions of the Affordable Health Care 
Act. We also have several nieces and nephews who benefit from the 
extended coverage for young adults.
    Closing the so-called ``donut hole'' for those on Medicare is 
another important provision of the Affordable Health Care Act. 
Fortunately, my denomination offers my wife and me excellent 
prescription coverage. However, I have watched less fortunate retirees 
forced to visit food pantries because they could not afford both 
groceries and medicine. Or worse, I have seen cases of people cutting 
back on needed medicines without consulting their physicians because 
they couldn't pay their bills. Now, in addition to the $250 payment 
they received and the new provisions of the law, they will not have to 
choose between buying groceries, paying utility bills, and paying for 
the medicines that they need.
    Mandating the coverage of preventive screenings and immunizations 
is, in popular parlance, a ``no-brainer.'' Just think about the cost 
and, more importantly, the prevention of suffering that flu shots alone 
ensure.
    In Indiana, the increased funding for Community Health Centers will 
nearly double the number of patients seen over the next five years. For 
those whose main interest is in dollars and cents, these increased 
health services can only contribute to a stronger economy in the form 
of a healthier workforce.
    The Act provides for more doctors where people need them, 
especially in low population rural areas. It provides funding for the 
National Health Service Corps for scholarships and loan repayments for 
doctors, nurses, and other health care providers. In Indiana this will 
help the eight percent of our population who live in an underserved 
area of our state.
    Some 84,400 small businesses can be helped by the new small 
business tax credit that will make it easier to provide coverage to 
their workers.
    The Act will give consumers some protections from negative policies 
of the insurance industry. Lifetime limits will not be placed on the 
coverage individuals receive. Insurance companies will no longer be 
able to drop people from coverage when they get sick. As mentioned 
before, children with pre-existing conditions cannot be excluded. An 
appeals process will be required. Patient's choice of physicians will 
be protected.
    Some 28 reforms took place in 2010 and another 19 reforms are 
taking place this year. In subsequent years other reforms and benefits 
will accrue. It will take some time to live into all of the benefits.
    In my opinion as a Christian pastor, adequate health care in the 
richest country in the world is a human right and a moral necessity. 
The Affordable Health Care Act moves us closer to achieving something 
very important as it relates to a term not used often enough in our 
political discussions. That term is ``the common good.''
    The nations of what is called the developed world have all embraced 
national health plans. The time is way past for us to catch up with 
them. The Affordable Health Care Act is not perfect, but it is a good 
giant step forward.
    Tweaking the Affordable Health Care Act to make it better is one 
thing. Repealing it would be an unconscionable act by an unfeeling 
legislature. Repealing it would be immoral.
    Thank you for holding this hearing and thank you for allowing me 
this opportunity to testify.
                                 ______
                                 
    Chairman Roe. Thank you, Rev. Hoy.
    Mr. Johnson?

   STATEMENT OF DENIS JOHNSON, VICE PRESIDENT OF OPERATIONS, 
                       BOSTON SCIENTIFIC

    Mr. Johnson. Chairman Roe, Dr. Bucshon, thank you very much 
for inviting me today to testify on the impact of the Patient 
Protection and Affordable Care Act on Indiana's medical device 
industry.
    My name is Denis Johnson and I am the Vice President of 
Operations at Boston Scientific manufacturing facility in 
Spencer, Indiana.
    Boston Scientific is one of the world's largest medical 
device companies dedicated to less-invasive medicine. Our 
company's mission is to improve the quality of patient care and 
the productivity of health care delivery through the 
development and advocacy of less-invasive medical devices and 
procedures. We accomplish this by continually refining our 
existing products and developing new technologies that are 
designed to reduce risk, trauma, cost, and procedure time.
    Boston Scientific has 15,000 employees in the U.S. and 
invests $1 billion each year in research and development to 
develop new products.
    In Spencer, we have over 1,000 employees who produce 2.2 
million less-invasive medical devices every year. Their average 
salary and benefits package is significantly higher than the 
State average. Nearly half of our employees live right in Owen 
County, so our impact on this rural part of the State is 
significant and growing. We are good community partners as 
well. Boston Scientific contributes nearly $150,000 a year to 
local charities and hundreds of volunteer hours for worthy 
causes such as Christmas for Kids, Hoosiers Outrun Cancer, 
local schools, and various other health-related events. Because 
of our significant impact in America's heartland, Spencer was 
highlighted in a recent ad campaign that showed the impact and 
opportunity companies like ours have for our workers, their 
families, and the community.
    The medical device industry is a uniquely American success 
story, both for patients and for our economy. The United States 
is the world leader in manufacturing lifesaving and life-
enhancing treatments for patients. At the same time, the 
medical technology industry has become an important engine for 
economic growth, especially in Indiana.
    Our industry employs more than 400,000 workers nationwide. 
In Indiana alone, there are nearly 20,000 Hoosiers working at 
more than 300 FDA-registered medical device manufacturers, with 
an annual payroll of $1.1 billion. The industry has grown by 
nearly 30 percent in recent years and provides high-quality 
jobs that pay 40 percent more than the average wage in Indiana.
    Nationwide, the industry is fueled by small businesses and 
entrepreneurs providing high-quality jobs: 62 percent of the 
firms have less than 20 employees and only 2 percent more than 
500. Additionally, the medical device industry is a net 
exporter, totaling more than $33 billion annually and has 
consistently enjoyed a favorable balance of trade. With the 
aging of U.S. and foreign populations and the accelerating pace 
of biomedical discovery, the growth potential for this industry 
is strong.
    Boston Scientific strongly supported health care reforms 
that improve quality by advancing the cause of the evidence-
based medicine as part of the debate on the Affordable Care 
Act. We strongly advocated for the creation of a comparative 
effectiveness research institute to help clinicians and 
patients better understand the benefits of alternative 
treatments. This research could pave the way for more 
personalized medicine and better care by learning what works 
best for different populations.
    We advocated for the reforms to encourage greater 
coordination among health providers and called for greater 
emphasis on individual patient responsibility, prevention and 
wellness. We also highlighted the potential of remote 
monitoring technologies to improve care by better tracking and 
managing patients with costly chronic diseases.
    While we are very proud of the progress we have made in 
improving patient care and see immense future opportunities to 
provide jobs and contribute to long-term economic growth in the 
United States, we are very concerned about the burden of the 
medical device tax on the industry. The new health law imposes 
a 2.3 percent excise tax on most types of medical devices. The 
excise tax is based on revenue, not profit, and begins in 2013. 
This harmful new tax is expected to collectively increase 
Federal taxes on medical device companies by $20 billion 
through 2019 and will cost Boston Scientific alone more than 
$100 million a year in additional taxes. Such a severe increase 
in tax liability will undoubtedly force us to cut critical R&D 
funding and inhibit job creation and retention.
    Contrary to the stated goals of the President's reform 
efforts, the medical device tax will actually increase health 
care costs and undermine another of the White House's important 
objectives: promoting innovation. The U.S. Congress should 
embrace the value of the medical technology industry to our 
economy and our health care system by repealing this onerous 
tax. It will stifle innovation, destroy jobs, and thwart 
patient access to breakthrough technologies that have saved and 
enhanced millions of lives.
    The medical device tax should be repealed for three 
important reasons.
    First, this tax will stifle innovation and cost thousands 
of high-paying jobs. It will dramatically increase the 
effective tax rate for medical technology companies, severely 
reducing financial resources that should be used for R&D, 
clinical trials, and investments in manufacturing. This impact 
will be especially hard on smaller companies.
    Second, this new tax will increase health care costs, not 
contain them, as much of the 2.3 percent increase will be 
passed on to consumers either directly or indirectly.
    Third, there is no device industry windfall for the health 
care reform. Unlike other industries that may benefit from 
expanded coverage, that has not been seen in Massachusetts 
where health care reform law became law and the basis for the 
new Federal law. There was no device windfall.
    Conclusion. The bottom line is the regressive tax would 
undermine America's and Indiana's global leadership position in 
product innovation, clinical research, and patient care. In 
this challenging economic environment, this tax will most 
assuredly hinder the development of the next generation of 
breakthrough treatments.
    Again, thank you for inviting me to testify on the 
Affordable Care Act impact on the medical device industry. I 
look forward to answering your questions.
    [The statement of Mr. Johnson follows:]

    Prepared Statement of Denis Johnson, Vice President, Operations,
                           Boston Scientific

    Thank you for inviting me to testify today on the impact of the 
Patient Protection and Affordable Care Act (PPACA) on Indiana's medical 
device industry.
    Boston Scientific is one of the world's largest medical device 
companies dedicated to less-invasive medicine. The company's mission is 
to improve the quality of patient care and the productivity of health 
care delivery through the development and advocacy of less-invasive 
medical devices and procedures. We accomplish this by continually 
refining our existing products and developing new technologies that are 
designed to reduce risk, trauma, cost, and procedure time. Boston 
Scientific has 15,000 employees in the U.S. and invests $1 billion each 
year in research and development.
    In Spencer we have nearly 1,000 employees who produce 2.2 million 
less-invasive medical devices every year. Their average salary and 
benefits package is significantly higher than the state average. Nearly 
half of our employees live right in Owen County, so our impact on this 
rural part of the state is significant, and growing. We are good 
community partners as well. Boston Scientific contributes nearly 
$150,000 a year to local charities and hundreds of volunteer hours for 
worthy causes such as Christmas for Kids, Hoosiers Outrun Cancer, local 
schools and various other health related events. Because of our 
significant impact in America's heartland, Spencer was highlighted in a 
recent ad campaign that showed the impact and opportunity companies 
like ours have for our workers, their families and our community.
The US and Indiana Medical Technology Industry
    The medical device industry is a uniquely American success story--
both for patients and for our economy. The United States is the world 
leader in manufacturing life-saving and life-enhancing treatments for 
patients. At the same time, the medical technology industry has become 
an important engine for economic growth, especially in Indiana.
    Our industry employs more than 400,000 workers nationwide. In 
Indiana alone, there are nearly 20,000 Hoosiers working at more than 
300 FDA registered medical device manufacturers, with an annual payroll 
of $1.1 billion. The industry has grown by nearly 30% in recent years 
and provides high-quality jobs that pay 40 percent more than the 
average wage in Indiana.
    Nationwide, the industry is fueled by small businesses and 
entrepreneurs providing high-quality jobs: 62% of firms have less than 
20 employees and only 2% have more than 500. Additionally, the medical 
device industry is a net exporter, totaling more than $33B annually, 
and has consistently enjoyed a favorable balance of trade. With the 
aging of US and foreign populations and the accelerating pace of 
biomedical discovery, the growth potential for this industry strong.

Impact of the Patient Protection and Affordable Care Act (PPACA) on 
        Indiana's Medical Device Industry
    Boston Scientific strongly supported health care reforms that 
improve quality by advancing the cause of evidence-based medicine. As 
part of the debate on PPACA, we help clinicians and patients better 
understand the benefits of alternative treatments. This research can 
pave for the way for more personalized medicine and better care by 
learning what works best for different populations.
    We advocated for reforms to encourage greater coordination among 
health providers and called for greater emphasis on individual patient 
responsibility, prevention and wellness. We also highlighted the 
potential of remote monitoring technologies to improve care by better 
tracking and managing patients with costly chronic diseases.

Medical Device Tax Will Impede Innovation and Patient Access to Medical 
        Technology
    While we are very proud of the progress we have made in improving 
patient care and see immense future opportunities to provide jobs and 
contribute to long-term economic growth in the United States, we are 
very concerned about the burden of the medical device tax on the 
industry. The new health law imposed a 2.3% excise tax on most types of 
medical devices. The excise tax is based on revenue, not profit, and 
begins in 2013. This harmful new tax is expected to collectively 
increase federal taxes on medical device companies by $20 billion 
through 2019, and will cost Boston Scientific alone more than $100M a 
year in additional taxes. Such a severe increase in tax liability will 
undoubtedly force us to cut critical R&D funding and inhibit job 
creation and retention.
    Contrary to the stated goals of the president's reform efforts, the 
medical device tax will actually increase health care costs and 
undermine another of the White House's important objectives--promoting 
innovation. The US Congress should embrace the value of the medical 
technology industry to our economy and to our health care system by 
repealing this onerous tax. It will inevitably stifle innovation, 
destroy jobs, and thwart patient access to breakthrough technologies 
that have saved and enhanced millions of lives.

The Medical Device Tax Should be Repealed for Three Important Reasons:
    First, this tax will stifle innovation and cost thousands of high-
paying jobs. It will dramatically increase the effective tax rate for 
medical technology companies--severely reducing financial resources 
that should be used for R&D, clinical trials and investments in 
manufacturing. The impact will be especially hard on smaller companies 
whose innovations are not immediately profitable.
    Second, this new tax will increase health care costs, not contain 
them, as much of the 2.3% increase will be passed on to consumers 
either directly or indirectly.
    Third, there is no device industry ``windfall'' from healthcare 
reform. Unlike other industries that may benefit from expanded 
coverage, a majority of device-intensive medical procedures are 
performed on patients that are older and already have private insurance 
or Medicare coverage. In Massachusetts, which passed a healthcare 
reform law which became the basis for the new federal law, there has 
been no device ``windfall'' despite the addition of 400,000 covered 
lives. The lack of a windfall is Conclusion The bottom line is this 
regressive tax would undermine America's, and Indiana's global 
leadership position in product innovation, clinical research and 
patient care. In this challenging economic environment, this tax will 
most assuredly hinder the development of the next generation of 
breakthrough treatments. Again, thank you for inviting me to testify on 
the impact of PPACA on the medical device industry. I look forward to 
answering your questions.
                                 ______
                                 
    Chairman Roe. Thank you, Mr. Johnson.
    Mr. Graber?

              STATEMENT OF GLEN GRABER, PRESIDENT,
                     GRABER POST BUILDINGS

    Mr. Graber. Hi. My name is Glen Graber and thanks for 
inviting us to come up.
    I started the company in 1973 with three men in the Odon, 
Indiana area. We build post frame buildings which you used to 
call them pole barns because they use round posts for them. But 
anyway, we manufacture wood roof trusses up to a 100-foot clear 
span and roll form our own metal and build buildings all over 
four or five States and have wholesale customers in provinces 
in Canada and probably about 25 States in the U.S.
    But our company has 210 employees. We have 180 employees in 
Odon, Indiana, and then the other 30 are over in Versailles, 
Missouri at a sister company.
    But we started doing health care, I think, in '01, 
somewhere thereabouts, and it cost about 50 cents an hour back 
then. Now I think we're up to about $2.25 an hour thereabouts, 
just under $1 million for a year's worth of health care for 
everybody. And it just keeps increasing.
    I didn't tell you about my education. I went to school 8 
years in grade school, and my dad taught me most of what I 
know. He taught me to work. He made me work and he almost made 
me like it. [Laughter.]
    Anyway, this health care thing. It's just going to keep 
going up and keep getting more expensive. I think our health 
care went up about 30 percent last year or I guess you would 
say this year. I think they quoted a year ahead. But I can't 
see it doing anything but just keep going up.
    And most of the technical things that they all talked 
about, there is really no reason for me to reiterate on that. 
But we just can't afford it. There is just no way. I can see it 
doubling in the next 2 or 3 years for Graber Post. Right now, 
it is about 1 percent of our total gross sales is what it is 
costing us. But profit margins just keep getting smaller and 
smaller also in the industry.
    We just got to get more business people in Washington, D.C. 
and let a few of the lawyers go home. [Applause.]
    This country is worth saving and we got to work on it.
    Thank you for having me.
    [The statement of Mr. Graber follows:]

      Prepared Statement of Glen S. Graber, Graber Post Buildings

    My name is Glen Graber and I am the President of Graber Post 
Building and Martin Metals. I started Graber Post in 1973 as a 3-man 
Amish building crew that built post frame buildings. In 1987, I 
invested in a computerized roll former, which allowed Graber Post to 
purchase truckloads of steel coils and then roll our own steel siding 
panels according to its customers' specification. Over the past few 
years, our company has grown and we've added a new $1 million state of 
the art facility in 2007 to house the company's office, showroom and 
Hardware store.
    We employ a total of 210 employees and currently offer a group 
health insurance plan to every employee. When we began offering health 
care to our employees in 2001, our total cost was $.50 per hour per 
employee, based on 2000 hours of work. Currently, our cost per hour per 
employee is $2.25; a $1.75 per hour per employee increase over a ten 
year period including a 30% increase from 2010 to 2011. Our current 
total cost is $945,000, and if the increase from this last year is any 
indication, I believe it will only continue to rise.
    The rising cost of medical care and health insurance is impacting 
the livelihood of many Americans. The inability to pay for necessary 
medical care not longer affects only the uninsured, but is increasingly 
becoming a problem for those with health insurance. Over the past 
several years, the premiums that we have paid have more than doubled, 
as I previously indicated. As an employer, the more my costs for 
insurance goes up, the less money is available to invest in the 
company--expanding a customer base, upgrading technology or even 
increasing wages. The recent healthcare law has forced us to re-
evaluate our plan benefits and shift some of the healthcare costs to 
the employees by raising deductibles and co-pays in order to sustain 
our healthcare plan.
    The new mandated changes to health insurance--no lifetime benefit 
limits and restricted annual limits, no cost sharing for specific 
preventive services, no pre-existing condition exclusions for children, 
dependents covered through age 26--are good for employees. As an 
employer, I have to wonder how much premiums will be affected by the 
mandated increase of plan benefits. The average annual premium increase 
is currently about 10% to 12%. However, our company is experiencing 
increases well above that average. Our company is working with our 
insurance agent to come up with creative ideas that allow us to keep 
our current plan design and to control the costs passed onto the 
employees. We want to be engaged in promoting the health of our 
employees and their dependents while at the same time protecting our 
bottom line.
                                 ______
                                 
    Chairman Roe. Mr. Graber, a couple of comments. One, it was 
the burley tobacco patch that convinced me chemistry wasn't 
that hard. That is where I grew up. It was in a tobacco patch 
in Tennessee. It convinced me if I studied chemistry, I 
wouldn't have to raise tobacco.
    And secondly, we have 15 doctors in the Congress and about 
240 lawyers, and we finally have them outnumbered. [Laughter.]
    You all have opened a tremendous number of questions and 
issues with your testimony. Let me go back. It is an extremely 
complicated--the American health care system started out as a 
mom and pop business for one doctor, and it expanded. I can 
think back to my medical career. In 1970, when I graduated from 
the University of Tennessee College of Medicine, we had five 
antihypertensives, five high blood pressure medicines. There 
probably are 50 or 100 now.
    Mr. Johnson, I have used much of the Boston Scientific new 
technology to help make things better for my patients. I don't 
want to see that stop. Our cancer survival rates are going up 
and up and up.
    And I remember at St. Jude's Children's Hospital, when I 
was medical student there, 80 percent of the children died. 
Today 80 percent of the children live. We have seen incredible 
advances. We do not want to see that stop.
    The challenge how do we make this more affordable. That is 
what I think I heard this panel talking about was how do we 
expand access.
    I am going to tell you a story of a person that Dr. Bucshon 
and I had a conversation with a week ago tomorrow. And this 
particular person said that he sort of understood consumer-
driven health care where the consumers were responsible for the 
first dollar of coverage. He sort of got that. He said he had a 
rash on his back and he went to his dermatologist and they gave 
him some medicine. His co-pay was $10. And he was out on the 
campaign trail and he forgot his medicine and his prescription 
card. So he had to go buy it and it was $400. And he said, 
well, you know, I am not itching that bad. [Laughter.]
    So he made a consumer decision based on that. But he said, 
you know, you can't make consumer-driven choices in health care 
because my daughter was 3 months old and she got meningitis and 
had to go into the hospital. And he was absolutely right. You 
can't make a consumer-driven choice when your family has that 
kind of issue.
    That person was the President of the United States. That is 
who we had the conversation with last Wednesday morning, and 
that is exactly what he said.
    And to hold the cost down--after this is over, I want to 
meet with some of you all because I have some ideas. Let me 
give you an example of how some companies--a health savings 
account. I have one. This is a debit card right here. I had to 
go to the hospital and get some biopsies myself. And one of my 
friends I went to medical school was doing the surgery. I 
didn't call the insurance company. My doctor said I needed to 
have it done. That was a doctor-patient decision. He said, 
Phil, you need to have this done.
    I went down to the outpatient clinic and I said, look, I 
don't want your most expensive thing. You are going to get your 
money in a millisecond. So they gave me a 35 percent discount. 
Rev. Hoy, if we can't get a 50 percent discount for that 
person, I will be shocked. They gave me a 35 percent discount. 
They then said now 45 percent is what they will give you for a 
cash customer. I go in. I get my biopsy. I go home. I have had 
it done.
    John Deere corporation uses a health savings account, 
consumer-driven health care. They have had no or minimal health 
care premium increase in 5 years.
    We also have to do disease management. 75 percent of all 
the money we spend on health care today is chronic disease 
management. It is high blood pressure, diabetes, smoking 
cessation. In this country, unfortunately, obesity has become a 
real problem and type 2 diabetes.
    One company, AFG, which is a company at home--Holston 
Munitions--everything that boils up, just about, in a war we 
make it in east Tennessee. And they have a program there of 
wellness. For instance, if you come in and you have high blood 
pressure, diabetes, hypertension, smoking, you are a train 
wreck waiting to happen. They pay you to correct those things. 
They pay for good incentives, not bad ones, not pay you to be 
sick, pay you to be well. And they have had a minimum health 
increase in 5 years. We could do that for the country without 
this incredibly complicated system that we have devised.
    And, Rev. Hoy, you bring up some good issues. There are 
people out there who are uninsured. Those folks are tough. And 
what I would recommend we do for someone like him is a high 
risk pool that the taxpayers subsidize in the State. So he 
could have insurance affordable like anyone else. I think that 
is a group that have these preexisting conditions that maybe 
are uninsurable. You absolutely can do that.
    So I want to hear Mr. Messmer again. I think you made some 
great points in your business of 47 people about why you are 
not going to go to 50. Why would that be?
    Mr. Messmer. Well, the price of mandated part-time 
coverage--in the summer, we like to employ a lot of the college 
kids or people who are retired who want part-time work. And at 
50, the mandated provisions that are going to kick in--to me 
that is going to be an impediment to growing my business past 
50. At that point, we are going to mandate additional coverages 
and mandate more provisions on those companies. And so anybody 
who is at that growth point in their business, we are going to 
say at 49 you are a good company and we are going to give you 
some breaks on the 50 or 51. And all of a sudden, you are just 
going to expose your company millions of dollars more cost. So 
it is going to be prohibitive for any company to want to make 
that growth step.
    Chairman Roe. Dr. Bucshon?
    Mr. Bucshon. Thank you, Chairman Roe.
    Mr. Johnson, a lot of attention has been focused on this 
medical device tax and it is onerous for Indiana's, like you 
said, 20,000 employees. How is your company going to handle 
that tax? What do you think that is going to mean for the 
consumers of health care?
    Mr. Johnson. It is causing consternation within the company 
and it is under consideration currently. Having recently walked 
into Indiana University Hospital up in Indianapolis and seen an 
improved device kit used, my theory is that it will stifle 
innovation because some of that money will have to come from 
R&D.
    When we talk about preexisting conditions, we talk about 
the standard of care and we talk about procedures that 
everybody wants access to, many of which weren't available 5, 
10, 20 years ago. And I think it is real important for our kids 
and for our families that we continue to develop those 
technologies so there will be better treatment for them in the 
future.
    Mr. Bucshon. The other question is in regards to regulation 
in our country. I mean, the FDA is, obviously, important to 
you. Where does Boston Scientific stand on FDA reform and 
streamlining the approval process?
    Mr. Johnson. Well, innovation is critical and we see many 
companies starting to focus their development and launching new 
products 2, 3, or more years ahead of U.S. in Europe and other 
countries. And so procedures and treatments are available 
overseas that are not available right now because of the 
timeline it takes to get a product approved.
    Mr. Bucshon. And I want to comment on that as far as 
regulation goes. The FDA is one of the organizations right now 
that is in my view stifling innovation, and it is true that 
around the world, based on what the European Union and others 
are doing, people are getting ahead of us here in the United 
States because of what the Federal Government is doing to 
businesses like yours and small businesses around this country. 
So we are taking a serious look at reform in Washington, D.C. 
as it regards regulation, and that is not only through the FDA, 
but that is through all the other regulatory agencies which we 
really haven't touched on too much today about what is 
happening right now with job creation in our country.
    But I do have serious concerns going forward. Since I was a 
heart surgeon and being in medicine, I understand that if we 
want to stay at least equal with or ahead of other countries, 
as far as research and development goes and innovation, this 
type of taxing on American employers and American businesses 
has to stop because other countries are getting ahead of us.
    So thank you for your testimony. I yield back.
    Chairman Roe. Just to tag team right quickly, a friend of 
mine is a hospital administrator on regulations. OSHA came in 
to examine where a handicap rail was in the handicap bathroom. 
So they said, no, it is in the wrong place. It needs to be up 
here. So he moves it and puts up there. The TOSHA, the 
Tennessee State Occupational Safety Administration, came in and 
said that rail is in the wrong place. It needs to be down here. 
I told him there is a simple solution. Just put bracket and 
when TOSHA comes, put it one place, when OSHA comes, put it in 
another. [Laughter.]
    The problem with that is it is expensive. It costs. It is 
funny. Who pays for that? We do when we go to the hospital. It 
is very frustrating to see these kinds of regulations that one 
agency does just the opposite of another, and they both think 
they are following the rules.
    We had Secretary Sebelius, as you all are, in front of our 
committee the other day. She is the Secretary of Health and 
Human Services which oversees Medicare and Medicaid. And I 
asked Secretary Sebelius, how many people do you think the 
Affordable Care Act is going to increase coverage to? And she 
around 30 million people.
    I said, well, we have 2,700 pages. You have read it and I 
have read it. Let me explain how I can do almost all of that in 
two paragraphs. And she said, how is that? And I said, well, 
your own actuary at the Centers for Medicaid and Medicare 
Services said we are going to expand Medicaid by 24.7 million 
people. If you do that, that is almost 25 million of them. 
About 6 million, as you heard me say a minute ago--I like the 
26 and under provision of the plan. Those two things cover 
almost 30 million people. 10 million people that are uninsured 
in this country are illegally in the country. We have 15 
million people who are eligible who haven't signed up currently 
for Medicaid. So you have programs available already.
    And, Mr. Messmer, in your comment, one of the things that 
disturbed me--for a low-income worker, the most important thing 
is to make more money, to have a higher income. If you are 
required, when that requirement comes to buy insurance, as 
their salary goes up, their subsidy goes down. It is exactly 
the opposite of what you should be doing because they can't 
afford it now.
    So I think we got to step back and take a look at the 
single biggest issue in America today is to get our people back 
to work. If you have a job, a lot of these problems go away. My 
father worked in a factory making shoe heels. He was a union 
member and worked in a factory and lost his job to Mexico when 
I was in the Army in Korea near the DMZ in 1973 and 1974. I 
know something about that. And that is by far and away the most 
important thing because if you have got money and a job, you 
can afford to buy some things.
    So I mention that simply out of frustration because they 
have made this bill--well-intended. I don't mean that the 
intention is bad--incredibly expensive and complex.
    And we have invited the President to meet with the 
physicians, the Doctors Caucus.
    And another frustration I have, there were nine of us M.D.s 
just practicing doctors out there with decades of experience. 
Not one of us was asked a thing about this Affordable Care Act. 
Not one about this. Now, why would you have that expertise 
available to you and never ask a question to them? Dr. Roe, 
what do you think about this? And I would have had some 
suggestions through the 20 years' experience almost I have had 
with TennCare and certainly with taking care of patients and so 
forth, just as you have, Mr. Messmer, and you, Mr. Graber, in 
your business that you have.
    So if I sound frustrated, I am. And it is something I hope 
that works, but I hope that we can overturn it and start over. 
And how do you make it more affordable? How do you do that? 
Well, you allow your business to get in business with him and 
share those costs. You put thousands of small businesses 
together. You go and partner up with some folks in Tennessee 
and maybe instead of 47 people you are insuring, you got 47,000 
you are insuring. Why we don't do that is beyond me. Why we 
don't go across State lines and allow your businesses to get 
together.
    We have two hospital systems in my district. Mountain 
States Health Alliance with all their hospitals have 9,000 
employees. Welmont has 6,000. They can't get together and have 
15,000 people as one group. They are not allowed to by law now. 
And so unless we start doing some smart business things, as you 
point out, Mr. Graber, get some people up there like myself 
that have run a small business for 30 years or helped run one 
for 30 years, we can help lower these costs.
    Before we have our final closing comments, I want to yield 
to Dr. Bucshon for any further questions.
    Mr. Bucshon. Thank you, Chairman Roe.
    Mr. Graber, first of all, you are the American dream. That 
is why this country is the greatest country on earth. And it is 
commendable what you have done with your business. I hope that 
we don't get in your way in Washington, D.C. That is as a first 
comment.
    What actions do you think you are going to have to take in 
your business as far as your employees go as it relates to the 
Affordable Care Act? What are you talking about with your board 
and with the other members that run your company?
    Mr. Graber. Well, the big thing is I am the same as 
everybody else here. We have no clue what the real total bottom 
line rules are going to be. It is just a big confusion mess. We 
don't know if it is going to double in the next 2 years--the 
cost. At some point, it is not going to be affordable, but I 
don't know what the penalties are. I heard different penalty 
figures here if you don't comply. But we have never laid 
anybody off at our company. We work full-time even if it is in 
the wintertime. We cut back hours, but we work a lot of 
overtime in the summer. And we have been able to provide this 
health care and take care of our employees. They are the best 
asset we have.
    Mr. Bucshon. Thank you, Chairman Roe. I don't have any 
further comments as far as questions go.
    Chairman Roe. Let me finish up and just give you a couple 
of examples, Mr. Graber. We started our practice with four 
doctors and 12 employees. We have been very blessed and we were 
able to grow that. I think we have 84 doctors now and 350 
employees. And we have provided health insurance since 1968, 
retirement benefits, and we want to continue to do that.
    We have about 300 people who get insurance through our 
practice right now. And it is about $6,000 per insured person. 
If one person goes to the exchange, we can drop all of our 
employees into the exchange and pay a $2,000 fine. And you 
multiply $2,000, or even with the taxes $2,800, times 300, you 
get a number. It is $600,000-$700,000. if you take the $4,000 
we save and multiply it times 300, you get $1.2 million we 
could put to our bottom line. I have talked to a business in 
west Tennessee that said we are happy with our insurance as it 
is. We like the way our insurance is. If we have this essential 
benefits package, it will cost our business $40 million. If 
they drop them to the exchange, it will save that business $40 
million. And as the testimony we had the other day from Lockton 
Group, is that we are not going to be the first to drop our 
health insurance in the exchange. We are not going to be third 
either because it is going to put you at a disadvantage as a 
company. So that is why people are looking at this because they 
can see--and especially the restaurant industry and the 
entertainment industry. They have such thin margins that they 
have to.
    I want to say one other thing about Medicare. You have 
heard a lot about it in the last couple weeks. If you haven't 
been on Twitter--that is a joke. [Laughter.]
    I am old enough not to know how to Twitter, so I keep out 
of trouble. [Laughter.]
    If you look at Medicare, Rev. Hoy, right now my mother is 
88 years old and lives on a Social Security check. We live in 
the same house we lived in for 50 years and a small pension and 
what I help her with. She pays the same essentially that Warren 
Buffet does who is a billionaire. So I think there is a little 
imbalance there.
    If you look at what has been recommended, one of the things 
that has been recommended in Congress is if you are 55 years 
and older, nothing changes in your health care. If you are 54 
and younger, you will be offered exactly the same health 
insurance plan that a Congressman has, exactly what I would 
have until last year when I turned 65. I have Medicare Part A 
now myself. I would have rather stayed on what I had, but I 
can't. I am on Medicare. So at 54, you have that.
    You are offered premium support, and what does that mean? 
That means when you turn 65, that your premium will be 
negotiated by the Federal Government just like they do now for 
the 12 or so plans that I have an option to pick from, that Dr. 
Bucshon has an option to pick from. They negotiate with the 
insurance companies the best price, spreading this risk over 
lots of people. The voucher is where we send you a piece of 
paper and you go have to do that. This is not a voucher system.
    Also, a higher income senior like myself will have to pay 
more for their insurance when they are 65 because they will be 
indexed because of your amount of money that you make. If you 
are a lower-income senior or like your friend who has a 
preexisting condition, they will pay less. And I think this is 
a way that you can balance it as opposed to the way Medicare is 
today, which my mother, who has a $1,100 Social Security check 
per month, plus a small pension, plus what I give her, pays the 
same as Warren Buffet. We can fix that.
    And the reason we are even talking about it is because, as 
every business person has said here, the current system is 
unsustainable as it is. Not making a decision is not a choice. 
We have to do that. We have to do that to save these programs 
for future generations.
    The Hoy family is much more prolific than the Roe family. I 
only have two grandchildren, but I want to make sure that my 
grandchildren have the opportunity to have the same kind of 
life that I had.
    The witnesses have been terrific. You all are amazing to 
sit out there for 2 hours and listen to politicians talk. I 
thank you for that, and we will be around afterwards if you 
would like to talk. I will make sure that any of this 
information that I have--you are certainly welcome to it.
    This has been very helpful to me and I want to continue to 
go. I live in northeast Tennessee in Johnson City, which is up 
in the mountains of east Tennessee. Maybe many of you know 
where the Bristol Motor Speedway is. That is where my home is. 
A very similar area, agricultural area, rural area, biggest 
town in my district, 60,000 people. So we are not in a big 
urban area in other words. But we rely on small businesses like 
Mr. Graber's and like Mr. Messmer's, and we rely on big 
companies like Mr. Johnson's to provide the technology I used 
in the operating room. I think we can do better.
    The other thing that I want to bring up before we leave, 
which is very disturbing to me--and actually this is an article 
in the New England Journal of Medicine. I know probably most of 
you all don't go to sleep reading that. I still do. But it is 
an article about a plan that is current law right now I want 
explain to you all before we leave here. It is very important 
because I will be testifying next Tuesday in front of the 
Energy and Commerce Committee about this. We have 125 
cosponsors, including Democrats right now.
    The Independent Payment Advisory Board is a 
bureaucratically appointed board by the administration. And I 
don't care if it is a Republican or a Democrat. I don't want 
either one of them doing it. And I've never understood for the 
life of me why health care is a Republican or a Democratic 
issue. I have never seen a Republican or Democrat heart attack 
in my life, and I have never operated on a Republican or a 
Democrat cancer. They are just cancers and just heart attacks. 
I guarantee you Dr. Bucshon has never done a bypass operation 
on a Republican or a Democrat. We may have delivered a few 
Republican babies in my area. I will say that. [Laughter.]
    Where I am going with this is IPAB is a 15-person board 
that will make decisions for Medicare based on strictly costs. 
We are spending $550 billion this year on Medicare. If we spent 
$600 billion--the Congress has given up its, I think, 
constitutional authority to decide how those dollars are spent. 
That bill says you have to cut that spending. The CMS, the 
Centers for Medicaid and Medicare Services, says you have to 
cut that spending.
    Well, here is the news flash. $500 billion less in Medicare 
and we are adding, me being one of them, 3 million new seniors 
per year when the boomers hit. So we are going to have in the 
next 10 years 35 million more people seeking care. And that is 
one of the ways the President wants to hold it down. And what 
you will have is if you have more services chasing fewer 
dollars, you are going to create weights. And if you do that, 
you create quality issues and you create cost issues. And this 
is on the back of our senior citizens.
    I am going to do the best I can. I know some of you all out 
there are on Medicare. I am going to go down swinging for you 
to get rid of this. And this is Republicans and Democrats.
    And to let you know that this was not in the House version 
of the bill. When it didn't pass, it got stuck in the Senate 
version of the bill. And I have a letter right here in my 
package signed by some really conservative people, Barney 
Frank, Henry Waxman, and others who oppose this also. 
[Laughter.]
    And Congressman Neal actually penned this back last year.
    So this is going to come up. And if you would do me a 
favor, if you don't want your care rationed--and I am not going 
to use the term ``death panels'' and all that. It is just going 
to be rationing of care. You are going to have more services 
chasing fewer dollars. And I believe that Congress--that is me 
that is beholding to you who elect me--ought to be the one to 
make those decisions, not a bunch of bureaucrats, half of whom 
can't be health care people that are going to be making those 
decisions.
    So I am very passionate about that because I can see that 
as a way to ration care for our senior citizens. And that is on 
the books now. Follow the bill that I have out there, and I am 
going to try to remove that if I possibly can.
    So these two panels have been absolutely fantastic. I have 
had a wonderful time here in Indianapolis, and I want to do 
this more and get among you all.
    Mr. Bucshon. Evansville.
    Chairman Roe. Evansville. Sorry. [Laughter.]
    I was thinking about Butler in the final four. I got to see 
them play. I watched them play in Indianapolis. I was there.
    But thank you all, the panel. You were terrific. Thank you 
for the audience. You all have been terrific. And we will hang 
around. Dr. Bucshon and I will hang around if you have got 
questions.
    Do you have any closing comments?
    Mr. Bucshon. I am just going to make a few comments and say 
thank you, Mr. Chairman, for coming to Evansville because Phil 
Roe, when it comes to health care issues is a really hard act 
to follow. He understands the issues very in-depth. He 
practiced himself for over 30 years. He embodies the same thing 
that I think all of us try to do in health care, that the 
bottom line is it is about the patient. And everything that we 
do and try to do in Congress is about taking care of people, 
making sure that American citizens have access to quality 
medical care for all Americans at a cost that we can all afford 
going forward.
    In my view, the Affordable Care Act doesn't make that 
happen. It is big Government really I think at its worst. It 
places mandates on individuals to buy health insurance which I 
think is unconstitutional. It expands the Medicaid program in 
the States which is an unfunded mandate which will cause all of 
Hoosiers' taxes to go up. It creates a subsidized exchange 
which no one knows how to set up, and ultimately the default is 
that the Department of Health and Human Services in Washington, 
D.C. will tell us in Indiana how to establish our exchanges. We 
don't want that. We want to maintain our individuality here as 
a State and not have a one-size-fits-all exchange program.
    The other thing is I think from what you have heard today 
from small business and large business owners is that 
ultimately in my view most people are eventually going to be 
forced onto a Government health care program in the future 
based on the Affordable Care Act.
    Businesses, large and small, as you heard today, have a 
very difficult time complying with the law because, first of 
all, the law is very complicated, and you don't necessarily 
know what you have to do.
    Secondly, it is just onerous on employers, and it is much 
cheaper in the long run for people just to jettison their 
private health insurance for their employees, and that will 
force people onto exchanges or Medicaid.
    In my estimation, the Affordable Care Act underestimates 
the number of people that that will happen to. And I think when 
we see the bottom line results, we are going to see that the 
Federal Government's budget as it relates to subsidizing health 
exchanges and Medicaid is going to go through the roof in a 
time right now when we are already in a critical budgetary 
crisis in Washington, D.C. because of what Washington, D.C. has 
been doing with our money really for decades.
    And Chairman Roe and myself are there right now also trying 
to deal with the larger issue of what do we do----
    [Audio Disruption.]
    Mr. Bucshon [continuing]. Price that all of us can afford.
    So, again, Chairman Roe, thank you for coming to 
Evansville. You have become a great friend. I know you know 
this inside and out and are a wealth of information.
    I look forward to meeting with the President, with you, and 
the Doctors Caucus. We have extended that invitation and 
President Obama told Chairman Roe and myself directly last 
Wednesday face to face that he would do that and talk about 
these issues and I take him at his word. So I look forward to 
that, and I look forward to moving forward again with a goal of 
providing quality health care at a reasonable cost for all 
Americans and that is what my concern is.
    Thank you.
    Chairman Roe. Thank you.
    Before we close the hearing out, I serve on the Veterans 
Affairs Committee, and being a veteran, if you are a veteran 
out there, I want you to just hold your hand up so I can thank 
you personally for your service to our Nation. [Applause.]
    If I can ever be of any service to you. I know Dr. Bucshon 
feels the same way. We would not be a free Nation without these 
veterans sitting in this room. We have got a lot of young 
people. I have been to Afghanistan. I am going back in the near 
future and hopefully Dr. Bucshon will be going with us to visit 
and put boots on the ground. These are brave young men and 
women. They make me proud.
    And I had one of the greatest compliments I have ever had 
in my life, and it probably won't be what you think it is, but 
it was a young man that I met the other day that I delivered 
and then got to nominate him to the Naval Academy. That was a 
true honor to do that. He served his first year there, and I 
look at these great young men and women that are serving our 
Nation now. I just thank you so much for the service to our 
country.
    We will keep this record open for 14 days for comments.
    [An additional submission of Mr. Andrews follows:]

          Prepared Statement of Elmer Blankenship, President,
                 Indiana Alliance for Retired Americans

    My name is Elmer Blankenship, President of the Indiana Alliance for 
Retired Americans. Our members wish to thank Chairman Phil Roe and 
Ranking Member Robert Andrews for the opportunity to send a statement 
on this important concern for Hoosiers. Thanks also to Indiana's 8th 
District Congressman Larry Bucshon for securing space for the hearing.
    The Affordable Care Act became law last year and already millions 
of Americans are benefitting from its provisions. Seniors are saving 
money on prescription drugs and receiving free preventive care through 
Medicare. Insurance companies are no longer allowed to discriminate 
against children and others who are sick. Small businesses are 
receiving billions of dollars in tax credits to provide health care for 
their employees.
    The Affordable Care Law reduces our nation's debt by eliminating 
waste, fraud and abuse in the health care system, reducing the growth 
of health care costs, and preventing excessive profit-taking by private 
insurers. According to the Congressional Budget Office, this will 
reduce the deficit by over $200 billion over the next ten years and by 
more than a trillion dollars in the decade after that.
    There are important consequences for Indiana families and workers. 
The Affordable Care Law affects families, workers and seniors in the 
8th District of Indiana which includes Evansville. This year the 
Affordable Care Law provides a 50% discount for prescription drugs for 
Medicare beneficiaries who enter the Medicare Part D ``donut hole'' and 
lose coverage for their drug expenses. The discount increases each year 
until 2020, when the donut hole is eliminated. There are 10,000 
Medicare beneficiaries in the 8th District who are expected to save 
money and be better able to afford needed prescriptions with the 
elimination of the donut hole. Medicare is also improved for the 
117,000 beneficiaries in the 8th District by providing free preventive 
and wellness care, improving primary and coordinated care, and 
enhancing nursing home care. The new law strengthens the Medicare trust 
fund, extending its solvency from 2017 to 2029.
    Insurance companies' can no longer deny coverage to children with 
pre-existing conditions and will be banned from discriminating against 
adults with pre-existing conditions in 2014 under the Affordable Care 
Law. There are 117,000 to 297,000 residents in the 8th district with 
pre-existing conditions like diabetes, heart disease, or cancer, 
including 8,000 to 36,000 children. The 19,000 to 48,000 individuals in 
the district who currently lack insurance coverage will be able to 
purchase individual policies under the new law.
    Affordable Care Law allows young adults to remain on their parents' 
insurance policies up to age 26. In Rep. Bucshon's district, 2,300 
young adults have or are expected to take advantage of this benefit.
    The ban on annual and lifetime limits. The health reform law 
prohibits insurance companies from imposing annual and lifetime limits 
on health insurance coverage. This provision protects the rights of 
416,000 individuals in the district who receive coverage from their 
employer or through the market for private insurance.
    More Americans will be covered. When fully implemented; the health 
reform laws will extend coverage to 94% of all Americans. If this level 
of coverage is reached in the district, 46,000 residents who currently 
do not have health insurance will receive coverage.
    The Affordable Care Law protects individuals from soaring insurance 
costs by requiring reviews of proposed rate increases and limiting the 
amount insurance companies can spend on administrative expenses, 
profits, and other overhead.
    Hoosiers living in Indiana's 8th District and millions of other 
Americans are benefitting from the Affordable Care Law. It needs to be 
protected, supported and expanded.
            Respectively submitted,
                                         Elmer Blankenship.

    This information is based upon the following sources: the U.S. 
Census (data on insurance coverage rates and types of coverage, small 
businesses, early retirees, income, and district populations); the 
Centers for Medicare and Medicaid Services (data on Medicare enrollment 
and the Part D donut hole); the Department of Health and Human Services 
(data on uncompensated care, Early Retiree Reinsurance Program 
participation, and preexisting conditions); and the Congressional 
Budget Office (data on health insurance coverage and deficit reduction 
under the Affordable Care Act).
                                 ______
                                 
    [Additional submissions of Ms. Crosson follow:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Chairman Roe. Being no further business, the committee 
stands adjourned.
    [Whereupon, at 10:53 a.m., the subcommittee was adjourned.]

                                 
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