[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
PPACA AND PENNSYLVANIA: ONE YEAR OF BROKEN PROMISES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON HEALTH
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
MARCH 23, 2011
__________
Serial No. 112-25
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
JOE BARTON, Texas HENRY A. WAXMAN, California
Chairman Emeritus Ranking Member
CLIFF STEARNS, Florida JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania EDOLPHUS TOWNS, New York
MARY BONO MACK, California FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska MICHAEL F. DOYLE, Pennsylvania
MIKE ROGERS, Michigan ANNA G. ESHOO, California
SUE WILKINS MYRICK, North Carolina ELIOT L. ENGEL, New York
Vice Chair GENE GREEN, Texas
JOHN SULLIVAN, Oklahoma DIANA DeGETTE, Colorado
TIM MURPHY, Pennsylvania LOIS CAPPS, California
MICHAEL C. BURGESS, Texas JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California JAY INSLEE, Washington
CHARLES F. BASS, New Hampshire TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana ANTHONY D. WEINER, New York
ROBERT E. LATTA, Ohio JIM MATHESON, Utah
CATHY McMORRIS RODGERS, Washington G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi JOHN BARROW, Georgia
LEONARD LANCE, New Jersey DORIS O. MATSUI, California
BILL CASSIDY, Louisiana DONNA M. CHRISTENSEN, Virgin
BRETT GUTHRIE, Kentucky Islands
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia
_____
Subcommittee on Health
JOSEPH R. PITTS, Pennsylvania
Chairman
MICHAEL C. BURGESS, Texas FRANK PALLONE, Jr., New Jersey
Chairman Emeritus Ranking Member
ED WHITFIELD, Kentucky JOHN D. DINGELL, Michigan
JOHN SHIMKUS, Illinois EDOLPHUS TOWNS, New York
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina LOIS CAPPS, California
TIM MURPHY, Pennsylvania JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee CHARLES A. GONZALEZ, Texas
PHIL GINGREY, Georgia TAMMY BALDWIN, Wisconsin
ROBERT E. LATTA, Ohio MIKE ROSS, Arkansas
CATHY McMORRIS RODGERS, Washington ANTHONY D. WEINER, New York
LEONARD LANCE, New Jersey HENRY A. WAXMAN, California (ex
BILL CASSIDY, Louisiana officio)
BRETT GUTHRIE, Kentucky
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)
(ii)
C O N T E N T S
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Page
Hon. Joseph R. Pitts, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 1
Prepared statement........................................... 2
Hon. Glenn Thompson, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 4
Witnesses
Gary Alexander, Secretary, Pennsylvania Department of Public
Welfare........................................................ 4
Prepared statement........................................... 7
Michael Consedine, Acting Insurance Commissioner, Pennsylvania
Insurance Department........................................... 10
Prepared statement........................................... 13
Patricia Vance, Senate Public Health and Welfare Committee,
Pennsylvania State Senate...................................... 34
Prepared statement........................................... 36
Matthew Baker, Chair, Pennsylvania House Health Committee........ 38
Prepared statement........................................... 40
Gene Barr, Vice President, Government and Public Affairs,
Pennsylvania Chamber of Business and Industry.................. 50
Prepared statement........................................... 53
Ken Shivers, Pennsylvania Director, National Federation of
Independent Business........................................... 58
Prepared statement........................................... 60
Ann Daane, Vice President, North America Human Resources, Case
New Holland.................................................... 62
Prepared statement........................................... 64
PPACA AND PENNSYLVANIA: ONE YEAR OF BROKEN PROMISES
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WEDNESDAY, MARCH 23, 2011
House of Representatives,
Subcommittee on Health,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:15 a.m., in
the Senate Majority Caucus Room, Pennsylvania State Capitol,
Hon. Joe Pitts (chairman of the subcommittee) presiding.
Member present: Representative Pitts.
Also present: Representative Glenn Thompson.
Staff present: Heidi Stirrup, Health Policy Coordinator;
Ryan Long, Chief Counsel, Health; Paul Edattel, Professional
Staff Member, Health; Debbee Keller, Press Secretary; Katie
Novaria, Legislative Clerk; and Stacia Cardille, Democratic
Counsel.
Mr. Pitts. The subcommittee will come to order.
I have with me seated at the dais Congressman G.T.
Thompson. He is a Member from the 5th Congressional district of
Pennsylvania and served as a hospital administrator for 28
years, so he has some expertise in the area of health care. He
serves on the Education and Workforce Committee, which has co-
jurisdiction with Energy and Commerce Committee, and one other
committee, I guess it is, Ways and Means, on health care,
primarily employer health plans, I believe. The chair will
recognize himself for an opening statement for 5 minutes.
OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
First of all, let me say it is good to be back in
Harrisburg. I spent more than 20 years here as a State
representative, and I still have many fond memories and good
friends from my time here.
On the 1-year anniversary of the Patient Protection and
Affordable Care Act being signed into law, we are here today to
examine the effects of the law, the effects it has already had
and which it will have on the States, and we will hear how
various provisions in the law are burdening businesses and
employers, precisely at a time when we need them to be hiring
new employees and creating jobs.
What we affectionately call Obamacare, its heaviest burden
on the States is the Medicaid expansion. A May 2010 Kaiser
Family Foundation report found that by the year 2019,
Pennsylvania's Medicaid rolls may grow by an additional 682,880
people and may cost the State an additional $2.041 billion over
the 2014-2019 time period.
Where is Pennsylvania supposed to come up with that $2
billion? How much spending for education, transportation, and
other priorities will have to be cut to come up with this
money? Which taxes will need to be raised to pay for this
expansion?
And, in the private sector, Obamacare levels taxes on
virtually every sector of our economy. For businesses, the law
raises the Medicare payroll tax by a total of $210.2 billion.
Employers will also be penalized for hiring new workers. They
will pay a fine of $2,000 for every full-time employee for whom
they do not provide acceptable coverage, as defined by the
government. Many employers will be forced to dump their
employees into the exchanges, just to remain competitive.
Employers will have to comply with thousands and thousands of
pages of burdensome regulations. There is something like 6,500
already and many thousand more coming out in future years that
will impose new mandates and responsibilities and new
compliance costs on businesses, while driving up health
insurance premiums and discouraging hiring.
So today, we will hear from representatives of the State
and the private sector to get their perspective on what
Obamacare means for them. I would again like to thank Governor
Tom Corbett for kindly agreeing to share some opening remarks.
At this time I would like to welcome our distinguished
witnesses, Secretary of Public Welfare Gary Alexander and State
Insurance Commissioner Michael Consedine, on panel one. On
panel two, we will have State Senator Pat Vance, chair of the
Senate Public Health and Welfare Committee, and State
Representative Matt Baker, chairman of the House Health
Committee. And on panel three, we will hear from Gene Barr,
Vice President of Government and Public Affairs for the
Pennsylvania Chamber of Business and Industry, Kevin Shivers,
Pennsylvania State Director with the NFIB, and Ann Daane, Vice
President of North America Human Resources at Case New Holland.
And finally, I would like to thank Governor Corbett's
office, both Senator Scarnati's and Dominic Pileggi's offices
and Representative Matt Baker's office for their help with
accommodations and making this hearing possible today.
[The prepared statement of Mr. Pitts follows:]
Prepared statement of Hon. Joseph R. Pitts
It's good to be back in Harrisburg. I spent more than 20
years here as a state representative, and I still have many
fond memories and good friends from my time here.
On the one-year anniversary of the Patient Protection and
Affordable Care Act being signed into law, we are here to
examine the effects that the law will have, and is already
having, on states.
And, we will hear how various provisions in the law are
burdening businesses and employers, precisely at a time when we
need them to be hiring new employees and creating jobs.
Obamacare's heaviest burden on states is the Medicaid
expansion.
A May 2010 Kaiser Family Foundation report found that by
2019, Pennsylvania's Medicaid rolls may grow by an additional
682,880 people and may cost the state an additional $2.041
billion over the 2014-2019 time period.
Where is Pennsylvania supposed to come up with $2 billion?
How much spending for education, transportation, and other
priorities will have to be cut to come up with this money?
Which taxes will need to be raised to pay for this expansion?
And, in the private sector, Obamacare levels destructive
taxes on virtually every sector of our economy.
For businesses, the law raises the Medicare payroll tax by
a total of $210.2 billion.
Employers will also be penalized for hiring new workers.
They will pay a fine of $2,000 for every full-time employee for
whom they do not provide ``acceptable'' coverage--as defined by
the government.
Many employers will be forced to dump their employees into
the exchanges, just to remain competitive.
Employers will have to comply with thousands and thousands
of pages of burdensome regulations--which will be coming out
for years--that will impose new mandates and responsibilities
and new compliance costs on businesses, while driving up health
insurance premiums and discouraging hiring.
So, today, we will hear from representatives of the state
and the private sector to get their perspective on what
Obamacare means for them.
I would again like to thank Governor Tom Corbett for kindly
agreeing to share some opening remarks with us before our
hearing got underway. Thank you, Governor.
I would also like to welcome our distinguished witnesses,
Secretary of Public Welfare Gary Alexander, and State Insurance
Commissioner Michael Consedine, on panel one.
On panel two, we will have State Senator Pat Vance, chair
of the Senate Public Health and Welfare Committee, and State
Representative Matt Baker, chairman of the House Health
Committee.
And on panel three we will hear from Gene Barr, Vice
President of Government and Public Affairs for the Pennsylvania
Chamber of Business and Industry, Kevin Shivers, PA State
Director with the NFIB, and Ann Daane (Day-nee), Vice President
of North America Human Resources at Case New Holland.
Finally, I would like to thank Gov. Corbett's office, Sen.
Dominic Pileggi's office, and Rep. Matt Baker's office for
their help with accommodations and making this hearing
possible.
Mr. Pitts. So at this time we have our first panel seated.
Each witness has prepared a written opening statement that will
be placed in the record. Our first witness is Acting Secretary
of Public Welfare Gary Alexander. Secretary Alexander oversees
a department that provides services and support to more than
2.1 million low-income, elderly and disabled Pennsylvanians.
Prior to being nominated as DPW Secretary earlier this year,
Secretary Alexander served as the Rhode Island Secretary of
Health and Human Services. He is widely recognized as a health
care and program innovator, welfare reformer and management
specialist.
Our second witness, Michael Consedine, was appointed by
Governor Corbett to serve as Insurance Commissioner for the
Pennsylvania Insurance Department pending senate confirmation.
From 1995 to 1999, Commissioner Consedine served as Department
Counsel for the Pennsylvania Insurance Department. From 1999 to
January of 2011, he was in private practice where he was
partner and vice chair of his firm's insurance practice group.
Secretary Alexander, you will have 5 minutes to summarize
your testimony. Before you do that, I would like to recognize
Congressman G.T. Thompson for his opening statement.
Mr. Thompson. Thank you, Chairman, and thank you so much
for not just convening this panel but thanks for the invitation
to be able to join you and really to be here to address very
important issues that we have.
OPENING STATEMENT OF HON. GLENN THOMPSON, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
You know, when the President signed the Affordable Care Act
into last March effectively immediately, States were strictly
prohibited from making any changes to their Medicaid programs'
eligibility standards, methodologies and/or procedures. And
while I am not an official member of the Energy and Commerce
Committee, my professional background is in health care, and as
a member of the Education and Workforce Committee and
specifically the Health Subcommittee, there is a shared
jurisdiction with Energy and Commerce over many of these
issues. This includes any changes that would identify and
reduce waste, fraud and abuse in the system.
Many States such as Pennsylvania are generous with their
Medicaid eligibility and surpass the mandatory federal
guidelines, and as we know, currently many States are
struggling to meet their fiscal obligations. States, unlike the
Federal Government, are generally required to balance their
budgets. It has become increasingly clear that drastic
increases in State obligations will force significant tax
increases or will result in cuts to vital programs to meet
these new federally dictated obligations. Estimates suggest
that Pennsylvania will see up to a 25 percent increase in
Medicaid enrollment. During the years of 2014 to 2019, this
will cost Pennsylvania alone over $2 billion. Many States will
experience similar, if not greater, funding burdens.
The Robert Wood Johnson Foundation estimates that 18.6
million new people will be eligible for Medicaid rolls
nationally. Enrollment will be substantially higher in southern
and western States. Several States will now have more than 10
percent of their population newly eligible and the national
Medicaid roll will reach upwards of 80 million people. The
bottom line: States simply cannot afford this dramatic cost.
Now, I am glad to have the opportunity to be here and look
forward to receiving some further insights and feedback on the
effect that the Affordable Care Act is having right here in the
Commonwealth of Pennsylvania, and thanks again to the chairman
for having us and thank you to all of our witnesses for being
here today.
Mr. Pitts. Thank you, Congressman Thompson, for your
opening statement.
Mr. Secretary, you are recognized.
STATEMENTS OF GARY ALEXANDER, SECRETARY, PENNSYLVANIA
DEPARTMENT OF PUBLIC WELFARE; AND MICHAEL CONSEDINE, ACTING
INSURANCE COMMISSIONER, PENNSYLVANIA INSURANCE DEPARTMENT
STATEMENT OF GARY ALEXANDER
Mr. Alexander. Thank you very much. Chairman Pitts and
members of the committee, I thank you for this opportunity to
discuss Pennsylvania's medical assistance program, the
challenges that we face because of these federal mandates and
the issues that are arising because of the Affordable Care Act.
Given your time constraints, I will get straight to the
point, two points actually. Number one, Pennsylvania's Medicaid
program as currently structured is unsustainable, inefficient,
bureaucratic and not focused on performance and outcomes.
Federal mandates are largely responsible because Medicaid is a
program that pays for volume and not value. Number two, the
federal health care law will make this problem even worse for
consumers and taxpayers. Adding more people to a broken system
is a terrible idea no matter how much money Washington wants to
throw at it.
Pennsylvania's Medicaid rolls already are heading toward a
cliff of fiscal instability, and this will clearly plunge us
over the edge if this law is not stopped. The federal health
care law requires State Medicaid programs to cover every adult
who earns up to 133 percent of the federal poverty level or 138
percent if we use this new code from the IRS.
The expansion will bring nearly 1 million new additional
Pennsylvanians onto the Medicaid rolls. That is in addition to
the more than 2.2 million on our rolls today. The Pennsylvania
Department of Public Welfare's overall Medicaid budget, the
amount spent from both State and federal dollars is already
growing at nearly 12 percent annually and is expected to exceed
$18.3 billion in the current fiscal year. That is a 97 percent
increase from the $9.3 billion budget of a decade ago.
Pennsylvania already spends more of its general fund
revenues on Medicaid than all but two States in the Nation with
about 30 percent of it going towards Medicaid. If we continue
on this path, the State will use about 60 percent of its budget
on Medicaid alone by fiscal 2019, leaving less money for other
vital services. If the federal health care law is implemented
as currently planned, this already unsustainable spending
pattern will get much worse. Contrary to what some in
Washington think, the new law will not be entirely financed by
the Federal Government. Even with the enhanced funding for
certain expansion populations, the law will cost the
Commonwealth taxpayers more than $11.4 billion over the first
full decade of implementation. This is totally unsustainable.
Certainly, a safety net is important for our most
vulnerable citizens so if Medicaid is to remain economically
viable, where does that leave us for options? The most obvious
and viable option is to give States complete flexibility to
design and manage a Medicaid program that allows us to improve
outcomes and bring more value to taxpayers and beneficiaries.
We need to make this a health program and not a benefit
program. For Pennsylvania, this solution would be a boom for
innovation, efficiency and, most of all, a healthier and more
productive citizenry. Our current Medicaid program is an
inefficient hodgepodge of command and control top-down
processes from afar. Very few of our current programs
nationally reward or even encourage prevention, wellness and
disease management and people in this Nation on the welfare
system are discouraged from working.
Administratively, the program is equally broken. Operating
multiple waivers across multiple populations is archaic, siloed
and prevents integrated health care. Bureaucrats in Baltimore
don't manage and don't administer programs and certainly don't
have to balance a budget. We do.
Public welfare reform presents us with a great opportunity
to use the resources within our Commonwealth to transform the
structure and operations of the public health system without
needless federal intervention and with the best interests of
Pennsylvanians in mind instead of being distracted by the
interest of federal bureaucrats.
Permit me to outline a few of the reforms that Pennsylvania
and other States can do on their own without the heavy hand of
Washington. We can promote improved care management through
quality outcomes, wellness and prevention and new provider
markets that drive nutrition and personal responsibility into
the programs. We can focus on data-driven consistent management
and decision-making from measured quality outcomes. We can
examine new initiatives such as healthy choice accounts for
families structured to promote personal responsibility and
incentivize preventive care. We can provide care coordination
and management for all beneficiaries through mandatory
enrollment in a primary care coordination model, a managed care
plan or a healthy choice option. We can implement smart
purchasing techniques and strategies and fair share initiatives
which empower Medicaid recipients to make cost-conscious
decisions about their medical care and competitive and
selective contracting to ensure purchases are made at the best
competitive prices.
Mr. Chairman, as we Americans have given trillions of
dollars to government entitlements with the poorest of
outcomes, we ask that Washington get off of our backs. It is
time that State governors, State legislators and others have
their chance. Washington has already had theirs. We have
firsthand experience managing our own programs; Washington does
not. We know how to balance budgets; Washington does not.
Pennsylvania is ready and able to bring innovative policy
solutions to actively address Medicaid's unsustainable growth.
The States can and should be the originators of policies and
best benefits their own diverse populations and demographic
realities. It is time we realize the ``Washington knows best''
mentality is counterproductive to innovation within States.
Thank you for allowing me to speak today.
[The prepared statement of Mr. Alexander follows:]
Mr. Pitts. Thank you, Mr. Secretary.
Mr. Commissioner, you are recognized for your opening
statement at this time.
STATEMENT OF MICHAEL CONSEDINE
Mr. Consedine. Good morning, Chairman Pitts and
distinguished members of the committee. My name is Michael
Consedine and I am Pennsylvania's Acting Insurance
Commissioner.
As you know, this is the first anniversary of the federal
Affordable Care Act. As Pennsylvania's chief regulator of the
insurance industry, I appreciate the opportunity to share with
you our efforts over the last year to navigate this new law,
our view on its impact on consumers, both individual and
business, and on our State and the challenges we face as we
move forward. But first, because as Chairman Pitts knows,
Pennsylvania is unlike many other States, please allow me to
provide a brief snapshot of Pennsylvania's health care
marketplace.
While there are more than 100 carriers licensed to write
health insurance in our State, the marketplace is in fact
dominated by nine carriers with two groups sharing over 50
percent of the market. Moreover, Pennsylvania's population is
diverse. We have both urban and rural areas. We are often
considered a State with large businesses due in part to our
urban concentrations but much of our population is employed by
small businesses. It is in this unique and in many respects
challenging marketplace that we are dealing with the
implementation of the Affordable Care Act.
If the Act was designed to serve as a roadmap to affordable
and accessible health insurance for Pennsylvanians, I will tell
you that thus far it has been a path marked by lack of clear
direction and troubling indications for the road ahead. I
recognize that some journeys do start out that way and still
one proceeds undaunted by the twists and turns ahead.
One of the first requirements we dealt with under the act
was the creation of the so-called high-risk plan designed to
act as a stopgap measure for uninsured Americans until the act
takes full effect in 2014. It was a significant undertaking to
create a new program in a very short timeframe but we made it
to this first mile marker. As of March 1, 2011, we have 2,684
enrollees receiving coverage and care. Ironically, this makes
Pennsylvania one of the more successful programs in the country
in terms of its participation.
Several provisions of the Affordable Care Act have become
effective and several additional provisions will become
effective in 2011. These requirements primarily deal with
policy design and required coverages. Compliance with these
provisions required Pennsylvania to develop new systems and
procedures, all within associated cost to the State to ensure
compliance, and it was at this point in our journey that we
first saw troubling signs for the road ahead.
While from a consumer perspective there are additional
benefits as a result of these forms, these federally mandated
coverage changes resulted in premium increases of up to 9
percent, this on top of already significant premium increases
being seen by Pennsylvania businesses and consumers. Therefore,
it is important to stress that the initial reforms have caused
an increase in premiums, not a decrease.
The Affordable Care Act also provided for several grants
from the Federal Government to the States as a way to help
States navigate the path to health care implementation. The
first, already mentioned, was PA Fair Care. We next intend to
utilize the consumer assistance grant in making health
insurance understandable to consumers. I am not sure any of us
here or even in Washington truly understand the act, in part
because it is still evolving and changing. So educating
everyday Pennsylvanians about the new law is a challenge. To
use the journey analogy, how can a State effectively give
directions to consumers when the destination itself is still
moving?
There is also an exchange planning grant. The formation of
a health insurance exchange market in each State by 2014,
really 2013, is one of the act's landmark provisions. If the
States does not set up an exchange, the State's exchange will
be run at the federal level. Implementation of an exchange is
no small endeavor. In some respects, it represents the point of
no return in the implementation of the act because of the time
and resources that States will need to expend in creating this
new enterprise. Also, the Affordable Care Act sets various
aggressive timeline for exchange implementation. As with other
areas of the law, here we are also awaiting clear direction
from HHS on key components of the exchange including the design
of the essential benefit package.
Governor Corbett has tasked the Insurance Department as the
lead agency in the Commonwealth to study implementation of the
health care exchange. We intend to look very carefully at what
type of an exchange, if any, Pennsylvania should implement
before taking that very significant step.
Overall, Mr. Chairman, we are concerned that the road to
implementation of the act is a toll road. As noted earlier, the
immediate insurance reforms imposed by the Affordable Care Act
added to the cost of coverage by mandating required benefits or
expanded coverage. Additionally, the act imposes a toll on the
insurance regulators' already strained resources. There is no
money in the act to help fund the increased workload associated
with reviewing the act nor is there any money to fund the
enforcement efforts that States will need to undertake to
ensure industry compliance. Again, this is a toll that States
are expected to pay out of already strained budgets.
As Governor Corbett noted in his remarks, the act does not
go far enough in addressing the cost drivers of health
insurance. If the ultimate objective of our journey of reform
is affordable care, we question whether the Affordable Care Act
is a clear roadmap or still an uncharted course.
So Pennsylvania, like many States, stands here today 1 year
after the Affordable Care Act enactment at a crossroads. We
could proceed down one path towards full implementation of the
law, expending substantial time and limited State resources and
funds in doing so, possibly only to find that the path is
closed by virtue of legal or legislative challenges to the
current version of the act. We could also choose a path to full
resistance of the act. However, we risk that our journey ends
in federal regulation of Pennsylvania's health insurance
market. We continue to hope that with your hope, Mr. Chairman,
members of the committee and Governor Corbett, that we might be
able to forge another path, one that results in a clear roadmap
that delivers us to the destination we all seek: health care
reform that truly addresses the issues of affordability and
accessibility in a fiscally sound manner.
Thank you, and we would be happy to answer any questions
that you have.
[The prepared statement of Mr. Consedine follows:]
Mr. Pitts. The chair thanks the gentleman. The chair now
recognizes himself for questioning.
Secretary Alexander, can you describe your experience in
dealing with the CMS bureaucracy in your attempts to be granted
Medicaid waivers? Do you find the CMS bureaucracy helpful and
cooperative? Do you find their decision-making process timely?
Do you find the actions of the CMS bureaucracy to be
burdensome? Would you please elaborate?
Mr. Alexander. Thank you, Mr. Chairman. Certainly, the
citizens that work at CMS are fine people. Many of them have
grown up in the bureaucratic abyss of Washington or Baltimore.
What I would say essentially is that the CMS process is heavily
bureaucratic, it is not timely, it is very burdensome and
archaic. Sometimes approval for just a routine question can
take months and reams of paperwork from the State. The federal
establishment keeps adding more and more employees. We here at
the State level keep decreasing our employees. We cannot
continue to mirror our operations here like the federal
establishment.
I will just give you an example of something recent. South
Carolina is trying to amend one of their home and community-
based waivers, and because they made a mistake and added one or
two sentences that shouldn't have been in the application, the
application then got put to the bottom of the pile again and
they are going to have to wait another few months. Now, when
States are trying to balance their budgets, this is extremely
troublesome. Generally what happens is, States want to make
changes to their programs. They petition CMS. It takes months
and months. The legislature will then pass a bill in June or
July and then it takes us months and months and months,
sometimes 12, 18 months or 2 years to get a decision out of
Baltimore. This leads us to have deficits in our own budgets.
All of this can't continue. We are operating multiple waivers
across multiple programs. It is very disjointed and
disorganized. So I guess the short answer is, it needs to be
overhauled.
Mr. Pitts. Thank you. Mr. Secretary, in what they call
reforming the Nation's health care system, the President and
the previous Congress decided on a plan that significantly
expanded the Medicaid program. In fact, the Administration's
Chief Actuary believes the plan will expand the Nation's
Medicaid rolls by 20 million people. Do you believe that
reforming the Nation's health care system is accomplished by
expanding the Medicaid program by nearly 30 percent?
Mr. Alexander. The Medicaid program is singularly the most
broken program in Washington. None of us would sit around and
create a health care program with outcomes or outcome-based
measures and created the way the Medicaid program is currently
structured. It is going to be a disaster for the States to
continue down this road and to add all of these people to the
rolls.
Mr. Pitts. Mr. Secretary, do you believe that PPACA's
maintenance of effort requirement hinders States from
implemented program integrity measures to root out fraud and
waste and abuse in Medicaid?
Mr. Alexander. It does. It also inhibits States from saving
money when we are on a financial cliff, and for our hands to be
tied like that under the current structure where we have no
flexibility in the program at all is disastrous. We cannot
tailor benefits. We cannot structure benefit packages for
certain populations. It is a one-size-fits-all program, and
that type of a program invites fraud, waste and abuse.
Mr. Pitts. Finally, Mr. Secretary, the CHIP program, the
expansion of the State Children's Health Insurance program,
signed into law in 2009, provided bonus payments to States for
adopting administrative changes such as eliminating asset tests
and in-person interviews to verify Medicaid eligibility. Do you
believe this bonus payment system promotes fraud and abuse?
Mr. Alexander. It certainly does because any time we are
inviting things like express-lane eligibility or presumptive
eligibility in trying to have recipients access these programs
in an expedited manner, we here on the State level have a lack
of staff to begin with so all of those items would invite
fraud, waste and abuse in the system.
Mr. Pitts. Thank you.
Commissioner, in your testimony you described the
uncertainty facing States as they decide whether to create an
exchange. Can you explain in further detail how PPACA imposes
both a financial and administrative hardship on States that
choose to set up an exchange?
Mr. Consedine. I would be happy to, Mr. Chairman. The
system in terms of what an exchange looks like, how it operates
is still dependent on significant guidance from the Federal
Government, even on such things as simple matters of the
technology involved, the computer language that the State
system is going to use to communicate with the federal system.
You know, while the law provides for grants to help studies for
implementation of the act and does provide more substantial
grants to other States for early innovator approaches, it
really still doesn't address the long-term maintenance costs
associated with setting up and running an exchange long term,
and again, there is still so much that needs to be decided in
terms of how these exchanges operate and what is going to be
acceptable to the Federal Government and what is not going to
be acceptable, and that is, as I mentioned in my remarks, sort
of the atmosphere of uncertainty that the States and businesses
and everybody are dealing with is how do you set up an exchange
or how do you build something, and essentially what we are
doing with an exchange is building something, but we don't have
any blueprints to use at this point so we are just--you can't
build effectively a sound structure when you don't have
blueprints, and we are waiting for that, and until we have
those, it is a loss of money and time and resources for States
and all of those are very precious resources at this point.
Mr. Pitts. Thank you. Commissioner, in your testimony you
cite defensive medicine resulting from frivolous lawsuits as
one of the drivers of health care costs. Do you believe PPACA
credibly addressed the issue of medical liability reform?
Mr. Consedine. I do not. I am quite clear that I believe
that is one of the major failings with the Affordable Care Act
is it really does not address the cost drivers of health
insurance. I mean, one of the things we really want as part of
reform is affordability, and the act does not go nearly as far
as it could in addressing affordability and certainly the
defensive medicine is a significant factor that really is not
addressed to any great degree as part of the reform.
Mr. Pitts. Thank you. The chair recognizes the gentleman,
Congressman Thompson, for questioning.
Mr. Thompson. Thank you, Chairman.
Thank you, Mr. Secretary, Mr. Commissioner, for
participating in the panel and for your leadership here in the
Keystone State. We very much appreciate it.
Mr. Secretary, in my opening statement I mentioned the
maintenance of effort provisions that prohibit States from
altering their Medicaid programs, the way their Medicaid
programs are administered, and this includes cleaning up waste,
fraud and abuse in the system.
Mr. Thompson. My question is, has Pennsylvania identified
areas in the system that could be improved but are being held
back because of the maintenance of effort provisions?
Mr. Alexander. Well, certainly the biggest problem we have
with the maintenance of effort provisions is really, we have to
maintain all of the eligibility levels that we have as of a
certain date, which was about a year ago. The other part of
this step I think we all seem to forget and it is sort of in
the details, always the devil is in the details, is that if
somebody--if we try to change a benefit, not an eligibility
category but a benefit and it results in anybody losing
eligibility, the State will be penalized. So the reason why
that is detrimental, of course, is of a State tries to innovate
and create benefit packages that are tailored and targeted to
certain populations so that they don't have to give those
benefits across all of the populations, which we really can't
do anyway, but if we tinker with the benefit and it results in
the loss of eligibility, the States will be penalized and in
fact if we turn the clock back to when the stimulus was first
given to the States, that was a huge problem because certain
States already had some innovation in the pipeline, and when
the new Administration came in, that all came to a halt.
Now, of course, when you have to--any time you are
administering a program this large, this fast with all of these
onerous rules and regulations, it is going to be very difficult
to root out all of the waste, fraud and abuse, and certainly
those MOE requirements would keep us down the same path so that
we certainly couldn't clean up as much as we should.
Mr. Thompson. Certainly I am of the belief that States are
laboratories of innovation, and certainly based on your
testimony from both you gentlemen, you talked about very
innovative ways to meet needs, and this is a question, just
follow-up. If the maintenance of effort provision were
obviously repealed or at least delayed for a certain period of
time, could there be some savings realized?
Mr. Alexander. Absolutely because it would give the States
the flexibility to eliminate some higher-end populations, and
if you are looking at States that are more lucrative in their
Medicaid benefit, then obviously those are the types of States
that would be able to eliminate certain eligibility categories.
Certainly that is not the goal, but when you are in dire
straits and you have to balance a budget and your State is on a
cliff, you better do everything humanly possible, and for
governors, it is a huge burden to have those MOE requirements.
Those MOE requirements should have never been put in even with
the federal stimulus. They were detrimental because it is
obviously a cliff. We got all that federal stimulus money and
now it is ending and we never made the hard choices and the
difficult choices, and now we have to make those.
Mr. Thompson. Mr. Secretary, the new law creates a
trillion-dollar entitlement program, expands Medicaid, imposes
new taxes and regulatory burdens on American employers and
workers. In your view, does the new law control and reduce the
trend of increasing public health expenditures in Pennsylvania?
Mr. Alexander. Absolutely not. Have we ever seen anywhere
the costs in Medicaid ever come down, ever? The biggest part of
this law is the expansion in Medicaid, and that is going to be
to the detriment of the States. Expanding Medicaid is no way to
give universal health care.
Mr. Thompson. Mr. Commissioner, supporters of the health
care law claim that new insurance exchanges will give small
employers the same leverage as large employers. Will the new
exchanges work or are there too many unresolved questions
regarding their structure and are there any problems you
anticipate?
Mr. Consedine. We just don't know. At this point we really
don't have any other models that we can look at and say one way
or the other they work well or they don't work well. I mean, we
have seen Massachusetts as an example of an existing health
care exchange and certainly in that case it hasn't lived up to
its promises in terms of certainly affordability. Access may
have been improved but not significantly, and the affordability
issue continues.
There are a lot of questions that are still unresolved. For
example, what is going to constitute sort of the essential
benefits package that is going to be required under the
exchange? You know, what is going to be covered under that and
what is not? I mean, there are a lot of what we call sort of
additional mandated benefits that are provided under most
health insurance policies. Autism is a good example. If that is
not part of the essential benefits package that is yet to be
developed at the federal level and the States want to provide
that as part of our essential benefits package here, we can do
that but that is going to substantially add to the cost and
that is a cost that is in that case borne by the State, and
again, that is one of those big issues that we don't know yet
what direction they are going. Hopefully sometime this summer
we will have a better sense but there are still a lot more
questions that need to be answered before we can give any sound
guidance on how this is going to work and if it is going to
work well.
Mr. Thompson. I mean, there are ideas that we had worked
on, a bill specifically, Putting Patients First Act, that was
introduced in July 2009 and it had some parts of it that were
totally ignored with the President's health care bill that was
signed, so I want to share some of those and get your opinions
on them. Would ideas like cross-State purchasing and permitting
employers to pool their resources to increase bargaining power
with insurance companies help begin the process of controlling
and lowering health care costs here in the Commonwealth?
Mr. Consedine. Well, certainly that type of buying power on
a pooled basis has been shown to be an effective way to lower
premium costs, and again, that is not something you see in this
act. You know, I think there are a lot of great ideas that were
out there but did not find their way into the reform law that
we are dealing with, and that is one of the issues we have is
we are sort of stuck with what we have and there is still a
great deal of questions on what we are going to do with it and
how it is going to work with the States but we would certainly
like the opportunity to go back to the drawing board and come
up with something that works for the country and especially
works for Pennsylvania.
Mr. Thompson. Great. Thank you.
Mr. Pitts. The chair thanks the gentleman.
Mr. Secretary, what do the words ``independence'' and
``self-sufficiency'' mean to you? The Medicaid Act says that we
are to furnish services to families and individuals to gain
independence and self-sufficiency, and that doesn't sound like
a lifetime of benefits to me. Do you think the current
regulations give States the ability to operate a program that
instills self-sufficiency and independence?
Mr. Alexander. Absolutely not. We promote in this program
and all of the other programs dependency and not self-
sufficiency and self-reliance. Clearly, the Medicaid Act spells
it out and it tells us that we are to furnish services so that
individuals and families can gain or retain independence and
self-sufficiency. Obviously we know we have very vulnerable
citizens that may need care for a lifetime, and that is why we
are here. But the vast majority of our beneficiaries or
recipients could be moved more quickly off of the program and
the current system does not allow us to do that.
Mr. Pitts. If we eliminate the maintenance of effort
requirement, then would you have the flexibility to achieve
that purpose?
Mr. Alexander. Well, if we remove the maintenance of effort
requirement, all that would enable us to do is to eliminate
eligibility categories. If we are truly going to focus on work
and employment, then we need to retool all of the federal
entitlement programs to focus on that. Even the disabled
population will tell you that they would like to go to work.
There are many barriers in the federal entitlement programs,
especially the Social Security program. This is why it is so
disorganized. We are dealing with multiple programs, multiple
federal agencies, multiple bureaucrats and it is not
integrated. If we were to eliminate barriers in some of these
programs, it would make it much easier for even our disabled
population to go to work. We should be here to empower them and
give them the tools to do this, not put barriers in front of
them. So what I would say to you is, the federal programs do
not promote self-sufficiency and reliance and independence;
they promote dependency.
Mr. Pitts. Thank you.
Commissioner, cost shifting occurs when hospitals and
doctors receive reimbursement rates from Medicare and Medicaid
that are lower than the cost of providing care. In order to
break even, providers, hospitals and physicians compensate for
these unpaid costs by increasing how much they charge other
patients, especially those that are privately insured or paid
out of pocket. You cite cost shifting in your testimony as a
driver of health care costs. I am concerned that this effect is
going to get worse under Obamacare, which forces nearly 20
million people into a Medicaid program that typically providers
even less than Medicare. Obamacare increases medical costs for
private payers by expanding the government programs and
reducing payment rates. In addition, because Obamacare did not
properly handle the issue of provider reimbursement under
Medicare, doctors are faced with the added pressure of finding
revenue elsewhere. Do you believe the expansions of Medicaid in
your State will shift costs to private payers and ultimately
increase premiums for privately insured individuals? If so,
why?
Mr. Consedine. I absolutely do, and I would be interested
to hear Secretary Alexander's views on this as well. We are
certainly concerned about the cost shifting on the Medicaid
side. We are also concerned about it on the exchange side.
Again, what we have seen in the Massachusetts example is that
costs went up and in fact that is due in large part because of
the cost-shifting issues that you cite as well as adverse
selection. So it continues to be an area that we are very
concerned about, and again, I think highlights one of our main
problems with the Affordable Care Act is, it doesn't really
address the cost side.
Mr. Pitts. Mr. Secretary?
Mr. Alexander. Mr. Chairman, the hospitals in Pennsylvania
stand to lose hundreds of millions of dollars in
disproportionate share payments to hospitals. The premise
behind the federal health care law is that by providing
everybody with insurance that the hospitals will need much less
in disproportionate share payments. If we look at the one
example that we have, which is Massachusetts, Massachusetts
openly admits that their uncompensated care is going sky high.
So if the federal health care law is based on the Massachusetts
model, if that is how we are modeling this, we are going to be
in serious trouble, and in fact, Pennsylvania's hospitals will
be in serious trouble with that reduction in disproportionate
share payments. All of this is a cost shift, and we are
operating a system where we have all of these onerous, very
onerous federal mandates, rules and regulations and we see that
we don't have enough money to pay certain providers. We don't
have enough to pay doctors adequately and we don't have enough
money to pay hospitals adequately. So we keep putting more and
more mandates on the system and there is no money. The only way
out is flexibility. We have to lift a lot of these mandates
that actually just don't make any sense, and if we have that
ability, we could tailor programs here appropriately and use
the money more wisely even across all of the programs, not just
Medicaid. So if we had that flexibility, I think it would make
it much easier for us.
Mr. Pitts. Thank you. The chair recognizes Mr. Thompson for
additional questions.
Mr. Thompson. Thank you, Chairman.
You talked about hospitals and specifically rural
hospitals. That is the world I came out of. I spent 28 years
there, and I am still trying to figure out how I got in
Congress, but it was a great learning experience working in
health care in a world of regulations and looking what mandates
and unfunded mandated and regulations, the impact that it has
on our health care system, and you gentlemen have both
referenced in terms of hospitals. Now, in Pennsylvania we have
a lot of hospitals and they are a site of providing care. Given
the fact that the President's health care bill expands
Medicaid's rolls by about 18 million, I think it what was
projected, Pennsylvania somewhere under a million more people
enrolled in medical assistance, and medical assistance paying--
and I am not sure about specifically--well, my experience in
Pennsylvania, medical assistance pays somewhere about 40 to 60
cents on every dollar of cost that a hospital or physician has.
Based on your professional experiences and your leadership
roles here, is that good news or bad news for the future of
specifically rural hospitals and underserved urban hospitals?
Mr. Alexander. I would say obviously not. I think in
Pennsylvania, because of the ruralness of the State, we have to
be very conscious for access purposes, and currently the
reimbursement rates because of this perverse system that we are
operating between State and Federal Government, does not lend
itself to be able to even increase rates adequately. We here at
the State level are operating multiple programs across multiple
federal agencies. It is very, very disorganized. If States
should be left alone to create programs that are tailored to
their own citizens and if we were able to do that, we would
even be able to take less money from the Federal Government.
Maybe some States would put money into health care. Maybe some
States would put more money into nutritional services. Maybe
some States would put more money into employment. The bottom
line is, is if we had that flexibility, we could use federal
money and State money much more wisely so that rural hospitals
or even in the inner city where they are dying for more money
would be able to have some relief.
Mr. Consedine. The only other observation I would make is
one of our concerns looking down the road is, we see already
sort of a consolidation trend occurring not only on the
insurance side where you have either health insurance companies
that are either getting out of the market altogether or they
are consolidating, the view being that you almost are going to
have to to survive this new environment under the Affordable
Care Act. The same thing is going to happen on the hospital
side too where you have the larger hospital chains potentially
acquiring rural hospitals and smaller hospitals, and long term
as they look at, you know, what hospitals are more profitable,
which are not, there is a risk that some of those rural
hospitals just go away. And again, for a State like ours where
we have large swaths of the State that are served by one rural
hospital, that is a concern to us.
Mr. Thompson. I want to follow up on one point you made in
terms of what is the likelihood that some rural hospitals may
go away, may close. I have never been one for health care
reform, and I have spent my entire professional career in terms
of health care refinement and improvement, and one of the
principles obviously of that is access, and given this medical
assistance expansion, and I am not sure what the portion of the
half a trillion dollars of Medicare cuts will hit hospitals
here in Pennsylvania but it will be significant, certainly the
bureaucracy costs that are layered on, now we have over 100 new
bureaucracies. I remember the costs when HIPAA was implemented,
my hospitals and the amount of people that had to be hired that
really don't do any direct patient care but that was to be in
compliance, those compliance costs. Given all that, is there a
likelihood in Pennsylvania if this bill goes unchecked and all
parts of it are implemented that we will see hospitals, some
hospitals close in Pennsylvania, and isn't that completely
opposite of expanding access to care?
Mr. Alexander. I would say yes. Hospitals right now are--we
have hospitals in this State that are on the brink, and I have
seen it in other States where they are just barely making it.
Any more federal top-down heavy-handed rules and regulations
and laws from Washington are not going to solve the problem,
and I like what you just said. We should be using refinement
rather than reform because that is exactly--we have a lot of
hardworking people in our hospitals and our nursing homes and
our health care providers have been doing an excellent job. It
is the government that puts roadblocks in the way. So not only
does Washington have to get off of our backs but we at the
State level in some respects have to be cognizant of what is
going on in the counties and in our local hospitals.
Mr. Thompson. Thank you, Mr. Chairman.
Mr. Pitts. The chair thanks the gentleman.
The committee received a letter earlier this year from 33
governors and governors-elect asking for the additional
flexibility that you have talked about. Sort of the theme in
this testimony, and the committee is committed to provide
States with the flexibility they need. If you have any
suggestions that you have where Congress can help lift the
mandates to provide this flexibility, we would welcome them.
This has been excellent testimony. We thank you for your
input. We look forward to continuing to work with you. This is
our first field hearing, so you are guinea pigs for us in a
way. We thank you for your excellent input. At this time the
chair will excuse panel one and call forward the second panel.
For our second panel, we will hear from two of
Pennsylvania's senior legislators, two former colleagues and
good friends. Senator Patricia Vance is the only member of the
legislature who is a professional nurse. Prior to her election
to the Senate, she served 14 years in the Pennsylvania House.
In the Senate, Senator Vance chairs the Public Health and
Welfare Committee.
Our second witness, Matt Baker, was recently elected to his
10th term in the House of Representative. Representative Baker
serves as chairman of the House Health Committee for the 2011-
12 session.
Welcome. We have your written testimony in the record. You
are now recognized for opening statement. Senator Vance, you
are recognized for your statement.
STATEMENTS OF PENNSYLVANIA STATE SENATOR PATRICIA VANCE, SENATE
PUBLIC HEALTH AND WELFARE COMMITTEE; AND PENNSYLVANIA STATE
REPRESENTATIVE MATTHEW BAKER, CHAIR, PENNSYLVANIA HOUSE HEALTH
COMMITTEE
STATEMENT OF PATRICIA VANCE
Ms. Vance. Good morning, Chairman Pitts, Congressman
Thompson. We are delighted to have you here with us today to
talk about the impact of the Patient Protection and Affordable
Care Act.
As you said, my name is Pat Vance. I am one of the 50
senators in the Pennsylvania Senate and chair of the Public
Health and Welfare Committee. Before serving in the
legislature, I was both a geriatric and a pediatric nurse, so I
hit both ends of life's spectrum, but my health care background
really gives me a unique perspective on the medical and
legislative impacts of this federal health care proposal.
Now that a year has passed since this legislation was
signed into law, it is time to evaluate some of the
consequences and rethink the direction we are headed.
First, insurance premiums have increased dramatically over
the past year. Last August, the California Department of
Insurance approved an average rate increase of 14 percent for
Anthem Blue Cross and Blue Shield of California increased its
rates in October 2010, January 2011 and is posed for a third
rate hike this spring. For some individual policyholders, this
cumulative increase could be as high as 86 percent. Mennonite
Mutual Aid Association in Kansas increased its rates 4 percent
recently to pay for provisions that were required in this
federal health care law.
In Pennsylvania, Blue Cross of Northeastern Pennsylvania
increased rates 9.9 to 15 percent as of January 1, 2011. These
rate increases far outpaced the Consumer Price Index, which as
you all probably know went up 1.6 percent before seasonal
adjustments during the year-end January 2011 according to the
United States Department of Labor. Now does not seem to be the
time to further burden taxpayers. The economy is still in
pretty dire straits. As of January 2011, Pennsylvania's
seasonally adjusted unemployment rate is 8.2 percent, slightly
better than the United States, which is 9 percent. Gasoline
prices have been surging lately due to all the problems in the
Middle East and employers have frozen wages during the past few
years, and by all indications wages will continue to stagnate.
Americans are really struggling. We hear from them every day in
the office.
The federal health care law will only add to the average
resident's financial stress with excise taxes on high-cost
plans, increases on taxes on earned and unearned income, and
penalties on uninsured individuals. On top of this, the federal
health care bill will most likely increase the deficit through
Medicaid expansion and increase subsidy costs as insurance
premiums continue to rise. The voters have called on government
to exercise fiscal restraint and it is irresponsible for all of
us to leave a legacy of debt on our children and our
grandchildren. We are really only kicking the can down the road
and making things tougher for them.
Finally, employers will struggle with mandates required
under the federal law, which will ultimately reduce their
willingness to hire new employees. Under the law, employers
have lost their flexibility, and that is a word we need to talk
about a lot. We need more flexibility in choosing benefits for
their employees. In Massachusetts, we have seen employers drop
coverage and pay the fines, which they have determined to be
cheaper. This defeats the goal of having more Americans covered
by health insurance. Now is the time to step back and reexamine
the federal health care law, the good and the bad.
In closing, thank you for this opportunity to testify on
the impact of this law on the citizens of Pennsylvania, and I
look forward to taking any of your questions.
[The prepared statement of Ms. Vance follows:]
Mr. Pitts. The chair thanks the gentlelady.
Representative Baker, you are recognized for your opening
statement.
STATEMENT OF MATTHEW BAKER
Mr. Baker. Good morning, Mr. Chairman and committee
members. Thank you for the opportunity to comment on the impact
the federal health care law has upon Pennsylvania.
As the majority chairman of the House Health Committee, I
have many concerns that the federal law will result in
unsustainable growth in Medicaid costs, higher taxes, loss of
liberty and freedom in choosing one's health insurance, being
mandated to buy insurance or face fines or penalties by the IRS
that has already been deemed unconstitutional and will likely
be decided by the United States Supreme Court on appeal.
The federal takeover of health insurance regulation and,
indeed, one-sixth of our national economy, will have serious
and costly impacts to Pennsylvania's taxpayers, businesses and
State budgets and constitutes a significant usurpation by the
Federal Government of longstanding State authority over health
insurance regulations.
Due to strong public opposition to the federal law, I have
introduced House Bill 42 along with 41 other States called the
Health Care Freedom Act that protects two essential rights: to
participate or not in any health care system, and prohibits the
government from imposing fines or penalties in that decision;
and two, protects the right of individual to purchase, and the
right of doctors to provide, lawful medical services without a
government fine or penalty.
According to the American Legislative Exchange Council
(ALEC), the federal health care law will cost $1.5 trillion
over the next 10 years, adding billions of dollars to
Pennsylvania's budget shortfall. The Heritage Foundation
estimates Pennsylvania's Medicaid costs to increase by nearly
$1 billion from 2014 to 2020 as a result of new Medicaid
mandates. Eligibility for Medicaid would increase in 2014 by
half a million people, growing Medicaid enrollment by 18
percent to over 3 million people in Pennsylvania. In other
words, in 2014 one in four Pennsylvanians walking around in our
great Keystone State would be on public welfare at greater
taxpayer expense here in Pennsylvania.
A May 2010 Kaiser Foundation report found that by 2019,
Pennsylvania's Medicaid rolls may grow by nearly 700,000 people
and may cost our State an additional $2 billion over the 2014-
2019 time frame. Under the new law, Medicaid coverage will
extend not only to those who are currently uninsured or whose
incomes are below 133 percent of the federal poverty level but
will also sweep into the program several million more
nationally below that income threshold who are currently
covered by private employer-sponsored coverage or individual
coverage. The crowding out or displacement of private coverage
will most likely occur among people who work for businesses
with fewer than 50 employees.
Pennsylvania Medicaid consumes 31 percent of the entire
State budget. Additional mandates under the federal law are
estimated to increase exponentially by nearly $1 billion on top
of this growth. Pennsylvania's Medicaid budget is growing at
nearly 12 percent a year while revenues have grown just 3
percent. The unsustainable, unaffordable and unavoidable growth
will continue as long as inflexible federal rules mandate State
policies. I believe Pennsylvania should request a waiver of the
Medicaid mandates that I believe bind States' controls,
particularly given the maintenance of effort effects on needed
cost control measures in the midst of Pennsylvania's $4 billion
budget deficit.
According to the Heritage Foundation/Lewin data, there
would be dire consequences for patients, doctors and hospitals
in Pennsylvania. They estimate 51 percent of privately insured
Pennsylvania residents would transition out of private
insurance. Fifty-nine percent of Pennsylvania's residents with
employer-based coverage would lose their current insurance.
Eighty percent of Pennsylvania's residents in a health
insurance exchange would end up in a public plan. Thirty-two
percent of the uninsured would still lack coverage.
It is my understanding that the federal law raises taxes by
almost $500 billion, or a half a trillion dollars over 10
years. The largest portion of tax increases will fall upon
small business owners, reducing capital, limiting economic
growth and hiring and probably loss of jobs and reduction of
hours and wages. The employer mandate will impose a tax of
$2,000 per employer on employers with more than 50 employees
that do not provide health insurance. The federal law will also
tax employers that offer health coverage unaffordable by the
government. These new taxes on employers will reduce employment
or be passed on to workers in the form of lower wages or
reduced hours. New and increased Medicare taxes will impact our
small businesses. Over time, higher payroll taxes will decrease
wages for their employees.
While I believe there may be some good intentions with the
federal health care act, in part, to support, I believe the
federal health care act has to be reformed to better serve
Pennsylvania citizens. In addition to constricting economic
growth and reducing employment, the health care act will
dramatically increase spending and health care as well as the
cost of health coverage. Newer and higher taxes on small
businesses and workers will impede job creation and economic
growth that they can ill afford during a time when our economy
struggles. With most States faced with deep budgetary deficits,
the federal health law adds conservatively over $118 billion
that the federal health law will cost taxpayers through 2023.
These are taxes that can be avoided and should be avoided if
proper changes are made to the federal law.
In conclusion, it is my hope and the hope of the majority
of the citizens that Congress will enact a new health care bill
that will reduce health care costs, spending and taxes as well
as the cost of health insurance coverage in a way that will do
no harm to our fragile economy or to our taxpayers already
overburdened by taxes, credit and debt. Let us work together in
a shared vision to find solutions for health care reform that
are innovative, private sector, market-driven, affordable,
accessible and based on patients' needs and choices.
Thank you very much, Mr. Chairman.
[The prepared statement of Mr. Baker follows:]
Mr. Pitts. The chair thanks the gentleman and recognizes
himself for questioning.
Senator Vance, as a health care provider, you do have a
unique perspective in this debate. Section 1311(h) of the new
health care law gives the Secretary of HHS the power by
regulation to determine which health care providers private
insurers are allowed to contract with. Do you think it is
appropriate for the HHS Secretary to have this power?
Ms. Vance. I think one of the problems with federal health
care law is how much power it does give to the Secretary. It is
undefined. Even someone who may think this is a wonderful law
is unable to ascertain what exactly will be done because there
is so much uncertainty. There is very little actually written
into the law and too much power given. So do I think that power
should be there? No. It has to be--first of all, I am not sure
I like the idea that they would dictate which health care
professionals could be hired, number one, but number two, for
it to be so nebulous does not benefit anyone.
Mr. Pitts. Senator, would you support federal legislation
to repeal the Medicaid maintenance of effort requirement in the
new health reform law?
Ms. Vance. I never liked the maintenance of effort and I am
not sure that we even need to have a law passed to do that. In
fact, if the Federal Government was accessible to a waiver from
the States, I think it could be done without legislation.
Mr. Pitts. Representative Baker, you mentioned that many
individuals that have private insurance now may end up on
Medicaid. Section 1413 of PPACA actually states that if an
individual applies to buy a private insurance policy in the
exchange and is found eligible for Medicaid, that person must
be enrolled into public program and cannot buy a private plan.
Do you think most Americans know this provision was included in
the health care law? Do you think that individuals should have
the right to buy private coverage if they want rather than be
enrolled in Medicaid?
Mr. Baker. Very good question, Mr. Chairman. I don't think
the average American really understands the full import of this
2,000- or 3,000-page document. In fact, the former Speaker of
your House said you had to pass it in order to understand what
it is in it, so it seems to me not even many Members of
Congress understood the federal law and its full import. You
are absolutely right in terms of the minimal coverage
requirements in health insurance, the mandates, the migration
of millions more Americans going into Medicaid, growing
Medicaid costs exponentially. I think there is sometimes a
disconnect that is not government costs, it is taxpayer costs,
and there are tremendous implications and ramifications in
moving more people into Medicaid welfare programs instead of
encouraging them to get out of Medicaid. Instead of growing
Medicaid, we should be reducing Medicaid, helping people. The
best welfare reform is job creation and people becoming
productive and having personal accountability and
responsibility and providing for their families and obtaining
the American dream.
So I just don't understand the concept out of Washington
that we need to grow welfare and Medicaid. We need to reduce
it. We need to shrink it. We need to have a full employment,
equal opportunity jobs bill rather than this kind of concept.
We need to reduce health care. The minimal requirement under
health care for insurance, I find it remarkable that, and the
federal judge in Florida mentioned it in his court case, that a
20-year-old who wants to just have a high-deduction major
medical or catastrophic health insurance plan is prohibited
from doing that under the federal health care bill. The Federal
Government mandates minimum health insurance requirements. And
so that is a very costly requirement. And in fact, if they
don't buy that insurance, they get fined or penalized by the
Federal Government. My goodness, that is the heavy hand of the
Federal Government and I agree with the federal judge. It is an
unconstitutional reach by Congress to imply and implore the
commerce clause for the first time in 200 years to both an
economic activity and an economic inactivity.
Mr. Pitts. Thank you. Representative, you mentioned that
Medicaid now consumes 31 percent of Pennsylvania's budget. You
also mentioned that the Medicaid budget is growing at 12
percent a year. Do you think the Medicaid growth rate will
increase as a result of this law, and if the State's revenue
growth is 3 percent, I think you said, a year, and the Medicaid
growth is 12 percent a year, or higher, what impact will that
have on the ability of Pennsylvania government to provide other
needed services?
Mr. Baker. Thank you, Mr. Chairman. That was a great
question. I think we are on a track of unsustainability and
catastrophic budget crisis if we continue down this road of
growing the welfare budgets, Medicaid budgets. I think it has
been mentioned by previous speakers that vital, rare taxpayer
funds are being crowded out by Medicaid costs that are better
utilized for transportation, education or other health care
needs, and this is definitely on a track of unsustainability if
the federal court, Supreme Court decision doesn't strike this
federal law down or if Congress does not repeal it.
Mr. Pitts. Thank you. The chair recognizes the gentleman,
Congressman Thompson, for questioning.
Mr. Thompson. Thank you, Chairman.
Thank you, Senator, Representative. It is great to have you
here. I appreciate your leadership specific to your areas of
jurisdiction committee-wise.
Senator Vance, I just want to follow up the comments that
Representative Baker made. The health care law contains a
massive expansion of the Medicaid program in order to reduce
the number of uninsured, which obviously we have heard this
morning places heavy burdens on State budgets. Now, how will
Pennsylvania respond to the expansion of the Medicaid program?
Obviously it cannot raise taxes during this economic downturn
so the tough question is, what is left?
Ms. Vance. I don't think anyone will argue it is totally
unsustainable. We cannot afford it. I know that the Federal
Government takes the burden for a couple years but after that
it comes back to Pennsylvania and to the taxpayers, and I
cannot imagine our revenues increasing that dramatically that
we would be able to cover that.
Mr. Thompson. You mentioned that employers have lost their
flexibility in choosing benefits for their employees. The
proponents of the law said that they wanted to make sure that
if you liked the insurance you had, you could keep it. However,
the regulations coming from the Secretary of Health and Human
Services would force as many as 87 million Americans with
employer-based health care to change their plan. Do you think
that we should pass legislation that would ensure that
Americans can keep the plan they have now if they like it?
Ms. Vance. Well, it appeared that the PR that came out
about the federal health care bill that said if you like your
insurance, you can keep it was speaking with a forked tongue
because in essence that is not what happened. So yes, I believe
that there should be able to have some determination for an
employer to choose. And also, if it becomes such an important
burden on the employer, that is why in Massachusetts, as you
found out, they were willing to pay the penalty rather than
because it was cheaper. We should have learned a lot of lessons
from Massachusetts. Whether we did or not is questionable.
People had an access card. They thought they had insurance but
they had no access to real health care. They still have a huge
increase in their emergency rooms. There are not enough basic
health care practitioners and we have to put our arms around
those who deliver basic health care, and just because you
happen to have an insurance card does not mean you have access.
Mr. Thompson. Very good. I couldn't agree with you more.
This should be about access and bringing down cost.
Representative Baker, always great to be with you. I
appreciate the fact that we get a chance to work together quite
a bit even outside of this area within the Pennsylvania 5th
Congressional district. During the debate over the health care
reform last Congress, there were a lot of promises made,
primarily among them that the health insurance costs would
decrease, and certainly as a part of my principles I led my
professional life by and it certainly guided me in Congress as
we refined and improved health care, whatever we did should
decrease the cost of health care for every American. However,
according to the nonpartisan Congressional Budget Office
analysis, individual health insurance premiums were raised by
an average of $2,100 per family, and this increase comes
despite President Obama's frequent promise that his health care
plan would lower premiums by $2,500 per year for an average
family. What are some of the things that you would recommend to
lower the cost of health care in Pennsylvania?
Mr. Baker. It is a good question, and I often hear it, and
thank you for your opening remarks. It is always good to see
you and work with you on a number of issues in rural
Pennsylvania. I am hearing from many constituents that they are
not happy with this law for a number of reasons, this federal
law, and one of them is that their health insurance premiums
keep going up and so they don't believe the promise of those
lowered premiums is really becoming a reality, and my good
colleague, Senator Vance, just mentioned in her testimony that
the price, the cost of health insurance keeps going up
dramatically. But some of the ideas I think we ought to be
pursuing and looking at at the State level, at least, is I
think we ought to be considering applying for a medical loss
ratio waiver. Some of the States have looked at those issues--
Maine, Nevada, New Hampshire, Kentucky and 10 other States. We
have already established a State-run high-risk pool. I think
that is helpful in this regard. We may want to set up and
consider a prescription drug donation program that provides for
the poor and the uninsured with security of prescription drug
coverage, complete a completely voluntary program for the reuse
of expensive medications. I think to the degree that we can
afford it, I think we need to look at paying medical school
loans for some physicians and nurses as a recruitment and
retention program here in Pennsylvania, especially encouraging
providers to practice in rural and underserved areas. We need
to look and perhaps allow for alternative health care
arrangements, health care sharing ministries, for instance, in
some areas that are providing good paradigms and models.
I have introduced a bill similar to the House of
Representatives' to allow people to purchase health insurance
across State lines, opening up competition, allowing for
market-driven competition to lower down insurance premium
rates. I think we need to consider equalizing the tax treatment
of insurance for individuals, and I notice my time is up. I
have many other suggestions that I could make but I just saw
the button flashing here. Do you want me to continue?
Mr. Thompson. Go ahead.
Mr. Baker. Some of the other concerns I think we need to
consider, we need to review sunset costly insurance mandates
before enactment. We really need to seriously look and have
some conversations about these costly mandates and how they
actually trigger and reflect a contraindication that we are
heading in the wrong direction that, you know, mandates may
sound good, feel good and may help some but it actually is a
cost driver increasing health insurance. I think we need to
provide perhaps tax breaks for people and businesses who buy
and sell health savings accounts and we need to provide
patients with a cost estimate of medical treatments. And
lastly, allow the poor to use Medicaid dollars possibly to
purchase private health insurance. We might want to take a look
at providing a state income tax credit for purchase of long-
term care insurance, perhaps offer again to the extent that we
can afford it, offer premium insurance to Medicaid and SCHIP
recipients who have access to employer-sponsored health
coverage, maybe take a look at establishing a cash and
counseling program for the disabled, and again, just generally
stop costly Medicaid-mandated benefits before enactment.
Mr. Thompson. Great. Thank you. Thank you, Chairman.
Mr. Pitts. The chair thanks the gentleman. I have just a
couple of more questions if you could take them.
Senator, Medicaid was initially created to provide care to
low-income children. The reimbursement rates for Medicare are
usually much lower than those of private insurance and even
Medicare. Some doctors no longer take Medicaid patients because
of the reimbursement rates. By expanding eligibility for the
program, do you believe that we are potentially jeopardizing
the quality of care for those that program was initially
intended for?
Ms. Vance. Not only will it jeopardize the children but
there are many physicians that no longer are willing to take
Medicaid patients. I particularly notice this in my area with
dental benefits, Medicaid dental benefits. It is almost
impossible to find a dentist who wants to treat Medicaid
patients. It is a disaster for people to obtain care with these
low rates, and let me stress, there is no easy answer to all
this. What we need is flexibility. Pennsylvania is almost like
five States wrapped into one. We need to have the flexibility
to treat different areas and know what works. Rural areas are
not the same as an inner city urban area, and we need to have
flexibility. I think the best thing that could happen for all
of us is to have some determination whether this law is in fact
going to meet the appeals process, this uncertainty, because
you are putting a lot of time and money into hypothetically
thinking maybe you will have to do it, maybe you won't, and
this uncertainty, it does nothing but drive up cost.
Mr. Pitts. Excellent point.
Representative Baker, Pennsylvania is home to a vibrant
medical technology industry including medical devices and
innovative new pharmaceuticals. The new health care law
includes new taxes on these industries. The Chief Actuary of
CMS has stated that these taxes would be passed on to patients.
Others believe that these new taxes might lead to less
innovation and further job loss. If either scenario is the
outcome, do you believe this is good public policy?
Mr. Baker. Absolutely not. I do not subscribe to the
attitude that more taxes are better and that that empowers
anyone. I think it is just the opposite, that it discourages
innovation. It discourages entrepreneurship. It discourages
people to be able to decide for themselves what to do with what
little money they have left after taxes are taken out of their
paychecks. And with the cost of everything going up every year,
it just exacerbates an already difficult situation. We are
still struggling to come out of the deepest recession that we
have experienced and the longest recession that we have
experienced since the Great Depression. It just seems to me
that to impose a tax, one of them that you suggested on
disabled people, for instance, a tax on prosthetic limbs and
the like on certain medical devices, my goodness, how does that
help anyone? I don't understand that. So no, I think less taxes
are better.
Mr. Pitts. Thank you. Do you have any other questions?
Mr. Thompson. Sure.
Mr. Pitts. The chair yields to Congressman Thompson.
Mr. Thompson. Thank you, Chairman.
Representative Baker, thanks for your thoughts in that
area. I mean, this is a country--in Pennsylvania, in
particular, we have been a place of innovation when it comes to
health care. We are blessed, when you look around the world in
terms of quality and innovation in this country, and, you know,
any time you tax something you repress it. Why would we want to
end that legacy of being a place of innovation and quality?
A question for both of you. Roughly 21 percent of the total
State spending, Medicare is already the single largest item in
the State budget according to the National Association of State
Budget Officers, and 31 percent based on your testimony here in
the Keystone State. Realizing that Washington is in worst
financial shape than most States, and we are working to make
budget cuts of our own at the federal level, what can Congress
do that would allow you to reduce health care costs in
Pennsylvania? Senator Vance will start and then we will check
in with Representative Baker.
Ms. Vance. I would repeat again, give us flexibility to
make our own decisions. Hopefully those of us who work on the
ground in Pennsylvania know what is needed in Pennsylvania. I
don't have the vaguest idea what may work in another State. So
if you want to help us, we need flexibility to be able to make
informed decisions about the patients and the consumers that we
hope to be able to help.
Mr. Thompson. Thank you.
Mr. Baker. I agree entirely. We need more flexibility. We
don't need more rigidity, more mandates. We need less mandates.
We need to be able to use the power and the imagination and the
freedom and the entrepreneurship of the States to be able to do
more with less. That is what we are faced with, these deep
deficits that all the States are experiencing, and it just
seems to me that the more mandates that we get from Washington,
the worse it becomes for us to try to make ends meet, and it
crowds out other budget areas that are in desperate need of
funding. So the cost implications of this federal health bill
are just astronomical, and obviously the costs will grow
exponentially unless we have waivers, unless we have mandate
relief and unless we have additional flexibility.
Mr. Thompson. Thank you both for your leadership and
testimony. Thank you, Chairman.
Mr. Pitts. The chair thanks the gentleman, and again,
thanks to the panel for your excellent testimony, for taking
time to testimony, for taking time to answer our questions. We
look forward to working with you as we seek to modify, repeal
or replace portions of this, parts of this new law, and I would
like to thank you for the use of your facilities. This is
beautiful.
So at this time the third panel will please come to the
table. We will take a 5-minute recess before we continue.
[Recess]
Mr. Pitts. The subcommittee will reconvene for panel three.
Our first witness of our third panel is Mr. Gene Barr. Mr. Barr
is Vice President of Government and Public Affairs for the
Pennsylvania Chamber. His responsibilities include directing
all legislative and regulatory activity, marketing, membership
and external communications. Our second witness, Kevin Shivers,
has been the State Director of NFIB for the last 10 years. Mr.
Shivers serves as NFIB's chief Pennsylvania lobbyist and leads
the organization's grassroots and political activities. Our
final witness is Ann Daane, is it? Ms. Daane joined Case New
Holland in March 2008 as Vice President of Human Resources for
North America. We look forward to hearing from each of you.
Mr. Barr, you have 5 minutes for your opening summary.
STATEMENTS OF GENE BARR, VICE PRESIDENT, GOVERNMENT AND PUBLIC
AFFAIRS, PENNSYLVANIA CHAMBER OF BUSINESS AND INDUSTRY; KEVIN
SHIVERS, PENNSYLVANIA DIRECTOR, NATIONAL FEDERATION OF
INDEPENDENT BUSINESS; AND ANN DAANE, VICE PRESIDENT, NORTH
AMERICA HUMAN RESOURCES, CASE NEW HOLLAND
STATEMENT OF GENE BARR
Mr. Barr. Mr. Chairman, thank you very much. Thanks to you
and Congressman Thompson for the opportunity to be here. The
chamber is the largest broad-based business advocacy group in
Pennsylvania, and on behalf of our thousands of members across
the Commonwealth, we thank you for this opportunity to discuss
this law.
Interestingly, and you will hear it now, you will hear it
outside, you will hear it wherever you go, there are others who
talk about the benefits of the law. Yes, there are some
benefits. Unfortunately, from the perspective of job creators
in Pennsylvania and across the country, the huge negatives
attached to this law greatly outweigh, in our view, the
benefits attached to it. You heard much of that earlier. I am
going to just briefly summarize the comments we have already
submitted, and the reality is, what you heard from the
governor, from the secretaries, from our elected officials
today are exactly right. This is a major problem for
Pennsylvania, for the Nation, for job creators.
From our perspective, what we need at this time, at this
economic time here, is an increased focus on jobs. Obviously
this is a balancing act between trying to take care of the most
vulnerable in our society with trying to create those economic
opportunities for everyone across the board. Unfortunately,
this act works very deliberately and very strongly, in our
view, against job creation.
For example, the application of the law applies when you
have 50 or more employees. At this time when we are desperately
seeking across this Nation to create jobs, and if you are an
employer with 45, you are going to think twice before you add
those five individuals as employees. We do not need to give
employers at any time, particularly this time in this
recession, reasons not to hire, and unfortunately, this law
makes them think more than twice about that. We have had
struggles with employers over the last year with a number of
different issues coming out of Washington, health care being
one, issues like card check being other things, which have
actively sought to discourage our members from adding our
citizens to the work rolls simply because it becomes too
difficult and too expensive to make those kinds of hires.
The bill, the law, has, as you have heard, a number of tax
increases relative to it. I am not going to get into all of
those. You have heard them already and that is certainly true.
The concern over debt is a real one. It is substantial, and
this bill, despite what some of the proponents said, when you
look at, for example, the remarks of the Chief Actuary, who is
responsible for Medicare and Medicaid services, it is
abundantly clear that the only way you can make this appear to
positively address the deficit is through smoke and mirrors,
double counting and so forth, and that has been done on a
fairly large scale there. The other way, to be honest, the only
way you can make it happen is by the cuts in reimbursement they
have proposed to doctors and hospitals that if they happen will
severely impact the ability, as Senator Vance mentioned, for
accessibility to health care, and if they don't happen, those
cuts, then what we will have happen is obviously an increase in
the debt.
The other thing that you heard and certainly we are hearing
it from our members is the pieces of the legislation that
actively discourage, someone would maybe say cynically that was
what the bill was intended to do, private employer-sponsored
health care because as you run the numbers, as any employer
must do, run the numbers in terms of profitability, expenses
and so forth, when you come down to it, many times the penalty
is going to be much easier to pay than continuing the cost of a
mandated, standardized, top-down health care plan that many
employers may not even quality for with what they offer out
there now.
This individual mandate to buy, in addition, we believe
Governor Corbett is exactly right in questioning along with
others the constitutionality of this. You heard other comments
about what has happened. We have already seen similar types of
operations in place. We have seen Massachusetts take this, as
was mentioned earlier. We have seen, sure, more people are
insured but the problem is accessibility to health care. We
have seen from everything we have seen higher ER visits for
Massachusetts. Interestingly enough, I saw a study about a year
or so ago in which the highest percent users disproportionate
users of emergency room services are Medicare and Medicaid so
current federal insurance is already not helping the ER side
but is actually accelerating that.
You heard earlier as well the importance of flexibility for
employers. The only way that employers can be successful is to
be flexible and nimble and agile to deal with the day-to-day
changes that occur in the marketplace and occur in their
operations. This reduces significantly the flexibility that is
available to employers in terms of health care, reduces their
operations, and clearly will have an adverse impact on
employers as we move forward.
There are a couple of things and again, you know, there was
much made of the previous Speaker of the House comment about
having to pass this bill so we could see what was in it. There
was another comment that she made in speaking to a group of, I
believe it was musicians and artists. She said well, we wanted
to pass this bill so that you could all have health care
coverage, and this is kind of a quote, go off and make music or
create pictures or whatever you want to do. I do not believe
the American people believe that that is the role of Federal
Government, State government or any government to abdicate that
kind of responsibility.
The other thing that we have heard quite a bit during this
debate has been well, business hasn't come forward with any
options. That is absolutely incorrect. A number of them were
articulated today. I am not going to go through those. But the
premise from the business perspective is, health care reform
needs to be more than figuring out who gets stuck with an
inflated bill. As was mentioned earlier, this bill does little
to nothing to address the health care cost issue. That has to
be addressed, and one of the ways, and particularly for us here
in Pennsylvania that is a major problem as has been mentioned
is legal reform. Former Vermont Governor Howard Dean explicitly
stated that they didn't touch that because they didn't want to
offend the trial bar. Here in Pennsylvania, Philadelphia was
recently named by a national group as the number one judicial
hellhole in the United States. United States needs legal reform
on a broad basis. Pennsylvania severely needs legal reform on a
broad basis and it is something we are attempting to address
here, and again, we are happy to hear Governor Corbett make
that comment again.
There are a number of other things clearly that we would
advance including allowing minors to be kept on the plan for
some period of time beyond. All those things we are happy to
talk about. Unfortunately, while there are a couple of good
things, as I mentioned in the plan, the overwhelming majority
of it is going to drive costs higher, reduce flexibility for
employers, severely impact job creation in this country and in
this Commonwealth, which is where we are here immediately
concerned.
And finally, let me close with this. Chairman Pitts, I know
that from our experience in the past you are a keen student of
history, and a couple of months ago I ran across what I believe
is a very interesting quote, and it came from Thomas Jefferson
in 1802, and he said, ``If we can but prevent the government
from wasting the labors of the people under the pretense of
taking care of them, they must become happy.'' That is a
tremendous piece of foresight from over 200 years ago. Thank
you.
[The prepared statement of Mr. Barr follows:]
Mr. Pitts. The chair thanks the gentleman and recognizes
the gentleman, Mr. Shivers, for 5 minutes for an opening
statement.
STATEMENT OF KEVIN SHIVERS
Mr. Shivers. Thank you, Mr. Chairman and members of the
committee. I am the State Director for the National Federation
of Independent Business and I want to thank you for the
opportunity to talk with you about the Patient Protection and
Affordable Care Act and its impact on small business owners and
workers. As I begin my statement today, I want to say for full
disclosure reasons, NFIB is one of the groups I joined with the
many States in filing a lawsuit against the Federal Government,
and we are hopeful that this will reach an expedited
conclusion. We hope it will, because this is such an impactful
law and particularly on small business.
For small businesspeople, health care is a pocketbook
issue. Nearly 81 percent of small business owners report that
finding affordable health insurance for themselves and their
employees is a challenge, and those small businesses that do
have health insurance pay on average 18 percent more for the
same health insurance benefits as large companies do. When the
federal health law was signed, its proponents promised that the
costs would decrease for small businesses. Not only have costs
gone up the year after it has passed but the new law has added
new compliance and paperwork burdens, making a flawed system
even worse.
Across the Nation, it has been reported that insurance
premiums in the small group market have risen 40 to 60 percent.
We have heard the same here in Pennsylvania. Many small
businesses fortunate enough to afford health insurance have had
their plans canceled because the federal health law's new and
restrictive rules have rendered them noncompliant. Others who
are told that their health plans will be protected or
grandfathered under the new law under the new law have learned
their plans now are noncompliant. About 60 percent of
businesses last year made small adjustments to their plans in
order to manage rising costs. By making small changes or
adjustments, these plans no longer comply with the
grandfathering provisions under the Obama health care law,
exposing businesses to more regulations and cost increases in
the future.
It is estimated that as many as 80 percent of small
businesses will be forced to give up their current coverage
within the next 2 years. In an already uncompetitive market,
more canceled plans and more regulations mean that small
businesses have fewer choices than they had before the law was
passed, making higher costs inevitable.
The new law also imposed myriad tax and paperwork headaches
for small businesses. Compliance costs from the 1099 provisions
alone will place an enormous burden on small businesses. The
cost associated with tax preparation paperwork is the most
expensive paperwork burden that the federal government imposes
on small business owners. It costs as much as $74 an hour. New
taxes on various products, services and payroll are especially
harmful to small business. And a new insurance company tax that
will be paid almost exclusively by small businesses is expected
to cost as much as $5,000 per household.
The new federal law also has taken away one of the few
consumer-directed pieces that currently exists in the health
care marketplace today. The new law prohibits individuals from
using pre-tax dollars, like those from a flexible spending
account or a health savings account, to purchase over-the-
counter items. Now individuals must make an appointment with
their health care provider in order to obtain a prescription to
purchase things like basic remedies to alleviate the discomfort
of the common cold. This mandate further taxes an already over-
utilized system and it forces doctors to take time away from
patients who really need that medical care.
Another provision of the Obama health care law which has
failed to live up to its promise to reduce health insurance
costs is the small business tax credit we all have heard about.
While proponents of the new federal law told us that tax
credits would help small business to purchase health insurance,
in reality, the tax credits are limited. The full value of the
tax credit applies to only a small number of small businesses
under very specific circumstances, and it is temporary, so the
costs will rise again once the credits expire.
For more than two decades, small business owners have cited
the rise in health care costs as their primary concern. Since
1999, premiums have increased nearly 100 percent in the small
group market. Unfortunately, the new Obama federal health care
law only perpetuates the problem. One year after its passage,
small business owners are bracing for higher costs, more rules
and regulations, fewer choices and less flexibility.
I want to thank you for considering the views small
business and we stand ready to assist you in finding an
alternative to this current federal problem. Thank you.
[The prepared statement of Mr. Shivers follows:]
Mr. Pitts. The chair thanks the gentleman and recognizes
Ms. Daane for 5 minutes for an opening statement.
STATEMENT OF ANN DAANE
Ms. Daane. Thank you, Mr. Chairman and other members of the
committee. Thank you for the introduction. I am Ann Daane, Vice
President of Human Resources at Case New Holland, and I thank
you again for the opportunity to testify today.
Chairman Pitts, we are proud that New Holland began here in
Pennsylvania and that New Holland remains the North American
brand headquarters. We have large facilities, and we are very
proud of our many employees who build, develop and design
equipment. We have more than 1,600 employees here in
Pennsylvania.
Today I am going to speak about the health benefits that we
as employees receive from Case New Holland. For all of us, our
health care benefits are important, and for our company, we
want to make certain that we receive the highest quality health
care at an affordable price. We believe that Congress has not
done enough to reduce the cost of health care.
In the United States, all full-time and part-time Case New
Holland employees are eligible for coverage. Almost 90 percent
of our active workers elect coverage for themselves and for
their families. We cover 17,200 active employees and their
families at a cost of $76 million annually. We also provide
coverage to 11,800 retirees and their families at an additional
cost of $72 million. We offer a choice of consumer-driven
health care plan options and these plans have account-based
incentives that let enrollees make their own decisions about
their health care needs. We also have wellness and chronic care
management programs, and almost nine out of ten of our
employees participate in at least one wellness activity every
year. That has resulted in a significant decrease in the health
risk factors for those who participate.
We believe that the health reform law needs to be changed.
The rising cost of health care is affecting job growth, and is
hurting all American companies who must compete in the global
market. Rising costs are also affecting every American worker.
The new law does not control health care spending. We believe
it adds additional costs for our employees, and for Case New
Holland, we expect to spend $126 million over the next 10 years
just to comply with the new provisions.
We are most concerned about the following three items in
the health reform law. Number one, the new taxes that are
imposed on prescription drug manufacturers, medical device
manufacturers and insurance products. These new taxes will be
passed on to us as purchasers in the form of higher costs.
Secondly, the new law makes reductions to Medicare payments.
Providers will shift costs to private purchasers, which will
increase our costs. And thirdly, the new law requires employers
to make plan and benefit changes--adult child coverage to age
26, new prevention and wellness coverage, new appeals and
grievance processes.
There are more than 130 million Americans who receive
health care coverage through their work. At a time when many
employers are struggling merely to offer coverage, these new
plan and benefit requirements will add more cost. We do want to
see changes in the health care system to reduce overall costs.
We have five suggestions on what should be changed.
Number one, support consumer-directed health care plans.
These innovative options empower our workers to make decisions
about their own health care needs. Employers should have
flexibility in their plan design so they can be innovative for
their employees. Secondly, medical liability reform must be
enacted. The Congressional Budget Office estimates that medical
liability reforms would save $52 billion over 10 years just in
public programs alone. It would save even more systemwide.
Number three, adoption of health information technology. We
need adoption of health information technology to create a more
efficient health care marketplace. Number four, change Medicare
payments to reward value, not the volume of service. And
lastly, repeal those provisions of the new health care reform
law that increase costs on employer-sponsored coverage.
We must work together to find solutions to our health care
cost crisis. For Case New Holland, we will continue to offer
our employees coverage. It is important that they are healthy
and productive. But we need greater competition and consumer
engagement in a more efficient health care system. Our country
needs this because Americans are paying more and more for
health care and getting less and less value. Americans are
fearful of losing their jobs and their health insurance
coverage at the same time, and America is in an economic
situation where we cannot afford the rising costs of health
care.
In conclusion, Case New Holland believes Congress must fix
what isn't working, then move forward to create solutions that
address the underlying health care crisis: the costs.
Thank you again, Chairman and the committee, for allowing
me the opportunity to speak to you today.
[The prepared statement of Ms. Daane follows:]
Mr. Pitts. The chair thanks the panel for their opening
statements, and I will begin with questioning. I recognize
myself for 5 minutes.
Mr. Barr, in your testimony, you state that PPACA limits
the flexibility of consumer-driven plans like health savings
accounts, flexible savings accounts. Shouldn't Congress promote
rather than restrict consumer involvement in health care
decisions? Would you elaborate?
Mr. Barr. Mr. Chairman, I could not agree more. Over the
years, many of our employers here in Pennsylvania and across
the country have moved more and more to these health savings
accounts. Oftentimes it works well with many other benefits or
options, which is why we talked about the flexibility.
Sometimes employees would rather have these HSA versus another
plan, have more on another piece of the benefits side. This
virtually eliminates that by making a standardized top-down
this is what you are going to have to cover. HSAs also have a
very positive benefit in that they have retirement options as
well. There are retirement benefits, and we constantly hear
that Americans don't save enough for retirement. This is a
vehicle that allowed them to do that while also making
participation, making them cognizant about what their health
care costs are. Here in Pennsylvania, you heard Governor
Corbett mention about the Health Care Cost Containment Council.
The chamber is a member of that. We believe that by driving out
more information to employees they are going to be able to make
these kinds of informed decisions.
And finally, someone passed on to me a little while ago a
very interesting piece of information, and that is, out of all
the medical procedures, there are only two that have gone down
in cost in recent years. Those two are plastic surgery and
Lasik surgery, which interestingly enough are typically ones
that aren't covered by insurance and ones that people go out
and shop for. I think it shows the market works. We have to
continue to drive people into the market, have consumers make
informed decisions, not create a plan that must be applied to
everybody to the detriment of individuals, to the detriment of
employers. Thank you.
Mr. Pitts. Thank you. Again, Mr. Barr, this is a simple
question. Will the new health care law cost our economy jobs,
in your opinion?
Mr. Barr. Mr. Chairman, absolutely we believe it will.
First off, as I mentioned, there are detriments to jobs
creation here that cause employers to think twice about whether
or not they want to add those jobs. There are enough issues out
there on other public policy sides that clearly make it more
difficult for employers to add jobs already, and I mentioned
some of the things that we have seen that have been discussed
in Washington and we have been fortunate they have been held
off, things like card check. The other problem becomes the debt
side, and one of the things that Kevin had mentioned was the
1099, which fortunately Congress has passed and I guess is
sitting awaiting the President's signature. What it
demonstrates, yes, this 1099 provision which required employers
to report everything about $600 needed to be done away with.
The problem is from a financial and a debt perspective, what
was built into the law was well, great, everyone is not going
to be able to comply with this, it is going to make us $17
billion, therefore this works again on that house of cards upon
which, in my view, this entire law is built, this financial
house of cards, once you start pulling pieces out of it, none
of it holds together. From the individual mandate to the other
financial pieces, once you begin picking at the real problems
in this, it falls apart.
Mr. Pitts. Thank you.
Mr. Shivers, the Obama Administration has touted the
availability of a small business tax credit created by PPACA.
However, I see the credit as creating an incentive to depress
wage increases and too limited to help many small businesses.
Do your members generally believe this credit will
significantly help small businesses provide coverage to their
employees?
Mr. Shivers. No, we don't. I mean, we have encouraged our
members, you know, if--we actually have a tax calculator and
there are links to the Internal Revenue Service site where you
can actually as a business owner, you know, plug in your
information and learn if you are eligible for that credit. We
advise our members if you are eligible for the credit, take
advantage of it. The problem that we are finding, I think it
was the Congressional Budget Office reported recently that the
average credit that a small business receives is only going to
cover about half of the cost increase in premiums. So if
premiums have gone up 40 percent and, you know, the credit is
only going to cover 20 percent of an increase, I am still left
with a 20 percent increase in my health care costs.
Mr. Pitts. If Congress, Mr. Shivers, would have passed
legislation allowing for small business health plans, I think
we used to call them association health plans, rather than
PPACA, would that have done more to help job creators provide
health insurance? Would you expound on that?
Mr. Shivers. Absolutely. Small business health plans, the
idea that a flower shop could partner with a tool-and-dye maker
that could partner with a barbershop and be able to get that
economies of scale and be able to purchase their health
insurance at a substantially lower cost and also have enough
people within their pool to manage that risk, it provides a
couple of things. Again, it lowers costs but it also gives
employers greater flexibility. We had heard that there were
some, you know, businesses and insurance companies that were
even debating the idea of providing a consumer-directed health
care option, a health savings account as part of this small
business health plan to even drive savings even further.
Unfortunately, it was one of those plans that never even made
it into the drafting room, I guess.
Mr. Pitts. Thank you.
Ms. Daane, what plans are you putting in place to prepare
for the requirement that you provide health insurance to your
employees or face a penalty? Would you ever consider dropping
coverage or paying the penalty if it would be less costly?
Ms. Daane. Our employees are our most important asset, and
right now we have not even considered dropping coverage for our
employees. Certainly the plans that we put in place are an
important way for us to control spending. Our wellness plan is
an important way for us to control spending. But should the
costs continue to increase, we will need to make difficult
decisions about how what we are going to do. That could impact
the number of jobs that we have. We may need to move labor to
lower-cost regions.
Mr. Pitts. What has been your experience with your wellness
program? How has it been structured and what kind of success
have you seen? Has it resulted in lower costs?
Ms. Daane. It has. Our wellness program has been very
successful, and the employees who participate have seen their
health care risk factors drop by as much as 18 percent. We have
88 percent of our employees participate in at least one of our
wellness activities over the last year. We include things like
annual health assessment, biometric screenings, lifestyle
improvement programs like smoking cessation, walking programs.
We give them access to personal coaches to develop individual
plans for health goals. We make a 24/7 nurse line available to
them. A conservative estimate for the amount of savings that we
have seen from these plans is about $1.6 million net return
annually.
Mr. Pitts. Thank you. The chair recognizes the gentleman,
Mr. Thompson, for questioning.
Mr. Thompson. Thank you, Chairman. Thanks to the panel for
being here and being part of this important issue we are
talking about.
Mr. Barr, I want to follow up, I thought you did a great
job of describing in terms of the 1099 reporting mandate, how
that really is a taxing scheme in terms of dipping into the
pockets of small businesses more than anyone else and going
after revenue. I wanted to look at that from the standpoint,
you know, we have worked hard to try to repeal that section. I
know we voted on it, I think a number of times, and we are
waiting for the Senate to do the right thing and the President
also to do the right thing, but if that is unsuccessful and
that reporting mandate is allowed to go forward, what would
that mean for your member companies?
Mr. Barr. Well, obviously it creates a whole new paperwork
burden for everyone across the board and obviously smaller
businesses would be much more at risk for that than others.
However, there is one positive from the 1099 requirement in
terms of job creation. My understanding is the IRS is standing
ready to hire many hundreds of people in order to take care of
1099 requirements. I guess that is the only caveat to the lack
of job creation.
Mr. Thompson. I think they have to get funding through the
House first, and I don't think that is going to happen.
Mr. Barr. Congressman, it is a great question. It is a
severe problem, and again, you point out, you are exactly
right. It is a tax. The IRS knows it. Not every business,
particularly small to medium size, will have the wherewithal to
fully comply, and we all know, compliance with federal tax
regulations is burdensome, cumbersome and very difficult, and
they know that, and again, they built the $17 billion into
their finance calculations.
Mr. Thompson. Have any, not just that mandate but any of
the new mandates within the health care bill impacted the cost
of coverage for your member companies at this point?
Mr. Barr. Clear, when you look at mandates, here in
Pennsylvania we dealt with mandates over the years. We have one
of the highest number of mandates that is required coverage for
insurance here in Pennsylvania. We know that that drives up the
cost as we look at more mandates coming down. Obviously those
that we have not done here in Pennsylvania will lead to that as
well, and clearly, when you have a prescribed, standardized,
minimal, our employers are going to have to look at it.
Employers who believe they have a good plan now may not have a
plan that meets the guidelines when that comes down and will
have to make those modifications quite obviously at a higher
cost.
Mr. Thompson. Thank you.
Ms. Daane, one promise we continually heard during the
health care debate was that if you like your health care plan,
you could keep your health care plan. Do you foresee your
employees being able to keep their current plans?
Ms. Daane. I think we will work very, very hard to be able
to let them keep their current plan. Part of the issue for us
is that right now the law is so unknown and so nebulous that it
is hard for us to know whether our current plans will be in
compliance with the legislation. So it is very hard for us to
be able to say whether or not they will be able to keep their
plan. I think as challenging for us is that unknown, that
uncertainty costs us money as we work with consultants, as we
work to try to understand whether or not our plans are
compliant. We need some clarity on the bill.
Mr. Thompson. In terms of the plans, do you have a cost
estimate for an increase in 2011 to comply with several new
provisions of the law, specifically the adult child coverage
and expanded benefits and administrative requirements?
Ms. Daane. We think for 2011, just for the small amount of
compliance that we are going to need to do with this bill, it
is going to cost us $1.2 million. Even with all the unknowns in
the bill, we do know that the costs kick in more aggressively
in 2013 and 2014. So it is $1.2 million for 2011. It is about
$126 million over the next 10 years. Those are frightening
numbers.
Mr. Thompson. They are. And how many employees--because you
talked about you do full time and part time so that $1.2
million is spread over how many employees?
Ms. Daane. Ten thousand, approximately.
Mr. Thompson. Mr. Shivers, good to see you. Thanks for
being part of the panel. My question for you is, even with the
exemption for companies with 50 or fewer employees, do you see
the employer mandate harming the growth potential of smaller or
mid-sized firms, especially those with low margins? In other
words, the employer mandate is simply a tax on jobs.
Mr. Shivers. Yes, I do see it as a problem. President Obama
when he was lobbying for the law visited Pennsylvania, actually
visited one of our members who told him that this was going to
be a burden on her business. She ran a bakery up in Allentown.
And the President said but you have fewer than 50 employees,
and she said but I won't grow. You know, where is the incentive
for me to expand my business because I am always going to worry
about what are the mandates and provisions under that law.
The other issue is, even though those small businesses may
be exempted, they are still responsible for following many of
the reporting requirements and other provisions under the law.
You know, that 1099 provision is going to be extraordinarily
high threshold for a small business to meet. Of course, it
varies from industry to industry but, I mean, we have heard of
one small company who may have filed, like, 25 forms last year,
under the new rules would be required to file as many as 300.
There was a small business in Lancaster that reported to the
newspaper that this would require them now to file as many as
3,000 forms. So you can imagine just the cost of paperwork. And
all of it is intended to trip a business up because if I don't
file a form, I file that form incorrectly, now I am subject to
audits and, you know, now I am going to be, you know, dealing
with all kinds of other costs and other issues that are
associated with just trying to protect my business.
Mr. Thompson. Thank you.
You know, we have heard the Democrats speak a lot about the
incentives in the new law for small businesses to continue to
provide coverage, and they often refer to the small business
health care tax credit. Is this tax credit of any value to your
member companies?
Mr. Shivers. Again, what we are finding is that, you know,
the credits that are offered are very small, very modest. You
know, if you are looking at a business of 25 employees at an
average wage of $50,000, they might quality for a partial
credit. But, you know, that partial credit is going to be
tricky. You know, a business with 19 employees at an average
wage of $35,000 would receive no credit because of the way, the
formula that is used to calculate that credit. So, you know,
businesses that are eligible for it, we tell them take
advantage of it but at the end of the day it is not going to
mitigate the cost increases that they are seeing in their
premiums right now.
Mr. Thompson. Thank you. Thank you, Mr. Chairman.
Mr. Pitts. The chair thanks the gentleman and we will start
a second round.
Ms. Daane, you said that your compliance costs are $126
million to comply with the new law over the next 10 years. How
does this affect your ability to hire new employees, new
workers when so many Pennsylvanians are desperately seeking a
paycheck today?
Ms. Daane. We cannot sustain any kind of a system where
health care costs grow faster than the rest of the economy. The
costs take us in the wrong direction, and it is going to have a
significant impact on our labor cost. We compete in a global
economy, and as labor costs increase, it has a devastating
impact on our ability to be able to maintain employees in the
United States. To adapt to the cost pressures, we are going to
make some difficult decisions. We are going to be forced to
move jobs to other regions where labor costs are lower. We are
going to have to eliminate some jobs altogether or certainly we
are going to have to think about how much expansion we can
tolerate. We may have to reduce benefit levels, and that could
include both medical benefits, retiree contributions, those
kinds of coverages. We would have to make some very, very
difficult decisions.
Mr. Pitts. Thank you.
Mr. Barr, much of the focus regarding the impact of this
new health care law on employers centered on the employer
mandate. However, I believe an overlooked factor has been the
compliance costs associated with the new law. Forms will be
required for employers from numerous federal departments and
agencies, be it Department of Labor or HHS or the IRS, in order
to enforce new federal mandates. You briefly mentioned in your
statement compliance costs. Can you expand further on the
onerous compliance costs that will burden businesses with reams
of paperwork, audits, whatever?
Mr. Barr. Certainly, Mr. Chairman. Part of it we talked
about a little bit already, which has been this 1099
requirement. In addition, given that there is going to be a
standardized--some of this is still evolving quite certainly
but given that we have a standardized plan with the minimums
you are going to have meet, you are going to have to document
to the Federal Government that your plan meets those. You are
going to have to continue to make all of the requirements and
all of the reporting this is calling for so that the Federal
Government can ensure that you as an employer are, one, sending
in your 1099. My understanding is this was done so as not to
deliberately undercount employees. You are going to have to
continue to maintain that your coverages meet minimum standards
for the Federal Government and all of those other things that
surround that. We all know the paperwork continues to burden
businesses, small, medium and large. This simply adds to that
burden in many ways. And again, we really do hope the 1099
requirement goes away. It is probably the most burdensome piece
of this.
Mr. Pitts. And Mr. Shivers, on the grandfather provision,
do you think it is fair that if a small business could find an
insurance company that would provide a less-expensive policy
than their current plan that they would lose their
grandfathered status?
Mr. Shivers. That is very unfair, sir. You know, the
President promised that, you know, if you like your health plan
you will be able to keep it under my law, and what we are
finding is that is not the case. In fact, 80 percent of
businesses are expected to drop their coverage within the next
2 years and, you know, many small employers are doing their
level best to keep the coverage that they have, you know, to
use it to attract good, quality workers, and, you know, with
the cost drivers when you are facing a 40 to 60 percent
premium, you have got to make some tough choices in terms of
how you pay for that coverage. And just making a slight change
in that plan to address the proliferation in cost, you are
ineligible. That just simply isn't fair.
Mr. Pitts. Thank you. The chair recognizes the gentleman,
Mr. Thompson, for additional questions.
Mr. Thompson. Thank you, Chairman.
Mr. Shivers, can you explain how impending regulations
authorized by Obamacare such as the essential benefits package
jeopardize the availability of coverage options already offered
by small businesses?
Mr. Shivers. Not specifically understand that particular
regulation, Congressman. I can tell you one of the challenges
that our member are concerned about is, you know, my plan that
exists today may not quality once the regulations are, you
know, actually published and, you know, that creates the
predictability and instability in a system that makes it really
hard for a small businessperson or any businessperson to be
able to plan and run their company.
Mr. Thompson. Is it fair to say that obviously individual
businesses are all unique in terms of their characteristics,
the average age of their workforce, you know, when businesses
get to know their employees and the demographics,
characteristics, and the fact is that they might wind up having
to pay for some type of mandated coverage which may not even
apply. There may no need for that health care service among the
characteristics and the demographics of their workforce.
Mr. Shivers. That is correct, sir. You know, for many--you
know, there is a competition issue, and, you know, for small
businesses, you know, it is not just a competition for
consumers, it is a competition for good workers, and, you know,
for years, small businesses have been frustrated because they
haven't been able to offer to good prospective workers the same
kind of benefit packages that larger companies could do at a
lower cost, and, you know, this system does nothing to, you
know, raise the bar for that business to give them additional
tools with which they can go out and attract good, quality
people to their workforce. You know, we have come up with a
one-size-fits-all cookie-cutter approach and you are absolutely
right. You know, my workforce and the people that I am
attracted to work in my company may be very different and then
another company and that lack of flexibility is a very big
problem under this law.
Mr. Thompson. Well, Washington has been famous for one-
size-fits-all cookie-cutter approaches, whether it is health
care or energy policy or education, and it always fails. Always
fails the individual citizens in the end.
Ms. Daane, you mentioned that the Medicare and Medicaid
reimbursement system shifts more costs onto private insurance.
That is certainly something I saw in my responsibilities as a
manager within a rural hospital. Medicare and Medicaid never
paid more, they always paid less. And so when you determine
your rates and you determine your rates based on the cost of
the service to provide, you really have to take into account
what we call payer mix, and as government paid less, in my
professional opinion, let alone my life experiences, that is
why commercial insurance gets more expensive, which was
absolutely ignored within this process of looking at the health
care bill.
In your view, will that problem be exacerbated if 20
million more people are enrolled in the Medicare programs, some
of whom used to have private insurance?
Ms. Daane. Without a doubt. You know, cost shifting is
something that we already see as a certain percent of the cost
of coverage for our employees. You add their people to the
Medicare, to the Medicaid system, there is going to be more
cost shifting. Our cost as a private employer is going to go up
without a doubt. I think then you marry that to the method of
reimbursement, which is you are reimbursed on volume, not on
value, that then, you know, kind of exponentially increases the
damage that that does. We are a company that makes products
that are used by rural consumers, and we have employees in
rural areas. Chairman Pitts has been to our plant. Mr.
Thompson, I would invite you to come. We make the best round
bailer in the world and we are very proud of that. Our
customer, our employees in the rural part of many of the States
where we do business, we need to have a system that ensures
that those rural providers continue to exist, that there is,
you know, kind of the continued vitality of rural providers,
both hospitals and service providers. The bill as it stands
does not do that. In fact, it is very detrimental to that.
Mr. Thompson. And my final question to Mr. Barr, what are
your thoughts as to whether employers in general will drop
health insurance coverage and pay a $2,000-per-employee
penalty?
Mr. Barr. Well, Congressman, that is going to come down to
an individual decision. Ann mentioned the fact that they are
probably not going to do it. They have to attract a certain
kind of individual. Certain large companies may be better
situated. The reality is, someone is going to sit down and look
at what the cost of family coverage and single coverage is
going to be for them to provide as a mandate, particularly now
that it becomes standardized to all their employees if they
have a 7,500-person operation, and they are going to have to
weigh those. They are going to have to look at the cost of
providing health care versus $2,000 a person, as I mentioned. A
cynical person might say for those who really wanted a
government-run plan, this is certainly one way this is going to
accelerate that, and clearly, individual companies, individual
employers are going to be making those decisions, sometimes
purely for survival. In order to keep going, they are going to
have to do that.
The other thing that I will just say in summary, and I
guess one of the things that we have seen from the employer
base is that we have got to learn to trust the free market and
entrepreneurs more. We continue to get this, well, we are going
to prescribe, you are going to give this set of benefits and
this set of benefits, and you have heard, you know that doesn't
work. You know from your experience that doesn't work. Every
situation is different. Geographic areas are different. And
what works in a given area doesn't work in another. Certain
employees value certain benefits more than others. And to the
extent that we take that flexibility--you have heard that word
a lot--to the extent that we put those mandates on, we make it
so much more difficult to have a competitive jobs environment
here.
Mr. Thompson. Thank you. Thank you to each one of you.
Mr. Pitts. And again, thank you for taking time to present
testimony and answer questions. This has been a tremendous
panel as you share your expertise.
One of the jobs we have is to educate the public as to the
requirements and the costs of PPACA, and there is no one better
than the employer community to do that, and as we do that and
as we look to modify, repeal and replace PPACA with real
reform, we look forward to working with you in that regard and
we hope that we will have much better news for you on the
second anniversary of Obamacare before it is fully implemented
as we meet again. Again, thank you very much.
In conclusion, I would like to thank Governor Corbett, all
of the witnesses, the members that participated in today's
hearing. I remind members that they have 10 business days to
submit questions for the record, and I ask the witnesses to
please respond promptly to these questions.
The subcommittee is now adjourned.
[Whereupon, at 12:30 p.m., the subcommittee was adjourned.]