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

        THE HEALTH CARE LAW'S IMPACT ON JOBS, EMPLOYERS, AND THE ECONOMY

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

                                    HEARING

                                   before the

                          COMMITTEE ON WAYS AND MEANS
                         U.S. HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 FIRST SESSION

                                   __________

                                JANUARY 26, 2011

                                   __________

                               Serial No. 112-03

                                   __________

             Printed for the use of the Committee on Ways and Means

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                          COMMITTEE ON WAYS AND MEANS

                         DAVE CAMP, Michigan, Chairman

    WALLY HERGER, California             SANDER M. LEVIN, Michigan
    SAM JOHNSON, Texas                   CHARLES B. RANGEL, New York
    KEVIN BRADY, Texas                   FORTNEY PETE STARK, California
    PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
    DEVIN NUNES, California              JOHN LEWIS, Georgia
    PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
    GEOFF DAVIS, Kentucky                XAVIER BECERRA, California
    DAVID G. REICHERT, Washington        LLOYD DOGGETT, Texas
    CHARLES W. BOUSTANY, JR., Louisiana  MIKE THOMPSON, California
    DEAN HELLER, Nevada                  JOHN B. LARSON, Connecticut
    PETER J. ROSKAM, Illinois            EARL BLUMENAUER, Oregon
    JIM GERLACH, Pennsylvania            RON KIND, Wisconsin
    TOM PRICE, Georgia                   BILL PASCRELL, JR., New Jersey
    VERN BUCHANAN, Florida               SHELLEY BERKLEY, Nevada
    ADRIAN SMITH, Nebraska               JOSEPH CROWLEY, New York
    AARON SCHOCK, Illinois
    CHRIS LEE, New York
    LYNN JENKINS, Kansas
    ERIK PAULSEN, Minnesota
    RICK BERG, North Dakota
    DIANE BLACK, Tennessee

                           Jon Traub, Staff Director

                      Janice Mays, Minority Staff Director

                                C O N T E N T S

                                   __________
                                                                       Page

    Advisory of January 19, 2011, announcing the hearing.............     2

                                   WITNESSES

    Austan Goolsbee, Ph.D., Chairman, Council of Economic Advisors...     6
    Douglas Holtz-Eakin, Ph.D., President, American Action Forum.....    38
    Scott Womack, President, Womack Restaurants......................    60
    Joe Olivo, Owner/CEO, Perfect Printing...........................    67

                           SUBMISSIONS FOR THE RECORD

    Mr. McDermott....................................................   138
    Mr. Pascrell.....................................................   140
    Mr. Rangel, NFIB.................................................   166
    Campaign to End Obesity Action Fund..............................   167
    James T. Lette...................................................   169
    LumaCorp.........................................................   170
    Main Street Alliance.............................................   171
    National Business Group on Health................................   174
    National Partnership for Women & Families........................   177
    National Private Duty Association................................   179

        THE HEALTH CARE LAW'S IMPACT ON JOBS, EMPLOYERS, AND THE ECONOMY

                                  ----------

                          WEDNESDAY, JANUARY 26, 2011

                         U.S. House of Representatives,
                                   Committee on Ways and Means,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 9:04 a.m., in
    Room 1100, Longworth House Office Building, the Honorable Dave
    Camp [chairman of the committee] presiding.
        [The advisory of the hearing follows:]

    HEARING ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                     Chairman Camp Announces Hearing on the

          Health Care Law's Impact on Jobs, Employers, and the Economy

                Ways and Means Hearing to Examine the Impact of

     Taxes, Regulations, and Mandates Contained in the Health Care Law on
                        Economic Growth and Job Creation

    January 19, 2011

        House Ways and Means Committee Chairman Dave Camp (R-MI) today
    announced that the Committee on Ways and Means will hold a hearing on
    the impact the ``Patient Protection and Affordable Care Act'' and
    ``Health Care and Education Reconciliation Act of 2010'' will have on
    the U.S. economy and employers' ability to hire new workers and retain
    existing employees. The hearing will take place on Wednesday, January
    26, 2011, in 1100 Longworth House Office Building, beginning at 9:00
    A.M.

        In view of the limited time available to hear witnesses, oral
    testimony at this hearing will be from invited witnesses only. However,
    any individual or organization not scheduled for an oral appearance may
    submit a written statement for consideration by the Committee and for
    inclusion in the printed record of the hearing. A list of invited
    witnesses will follow.

    BACKGROUND:

        The Democrats' health care overhaul imposes more than one-half
    trillion dollars of tax increases and numerous pages of mandates and
    onerous regulations on employers. Employers of all sizes are expressing
    concern that the new mandates and regulations will deter them from
    hiring new employees, threaten their ability to retain existing
    workers, and harm their ability to increase wages for existing
    employees. The new health care law compounds the uncertainty employers
    and entrepreneurs are facing amid the most challenging economic climate
    since the Great Depression. Making matters worse, some insurance
    companies and employers have already increased their health care
    premiums, in part, to comply with the new health care law, exacerbating
    the drag on the U.S. economy from rising health care costs.
        In announcing this hearing, Chairman Camp said, ``Employers have
    repeatedly expressed their concerns about the effects of the Democrats'
    health care law. This hearing provides us the opportunity to directly
    hear from employers about the higher taxes and new mandates that are in
    this law. This will also serve as a basis for how this Committee, and
    Congress, can best respond to the concerns of employers and workers and
    refocus its energy to develop common sense solutions that prioritize
    affordability, job creation, and economic growth.''

    FOCUS OF THE HEARING:

        The hearing will examine the economic and regulatory burdens
    imposed by the enactment and implementation of the ``Patient Protection
    and Affordable Care Act'' (P.L. 111-148) and the ``Health Care and
    Education Reconciliation Act of 2010'' (P.L. 111-152). It will explore
    the impact on jobs stemming from the new taxes and new federal
    regulatory requirements. It will also analyze the impact of the
    employer mandate on job creation.

    DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

        Please Note: Any person(s) and/or organization(s) wishing to submit
    for the hearing record must follow the appropriate link on the hearing
    page of the Committee website and complete the informational forms.
    From the Committee homepage, http://waysandmeans.house.gov, select
    ``Hearings.'' Select the hearing for which you would like to submit,
    and click on the link entitled, ``Click here to provide a submission
    for the record.'' Once you have followed the online instructions,
    submit all requested information. ATTACH your submission as a Word or
    WordPerfect document, in compliance with the formatting requirements
    listed below, by the close of business on Wednesday, February 9, 2011.
    Finally, please note that due to the change in House mail policy, the
    U.S. Capitol Police will refuse sealed-package deliveries to all House
    Office Buildings. For questions, or if you encounter technical
    problems, please call (202) 225-1721 or (202) 225-3625.

    FORMATTING REQUIREMENTS:

        The Committee relies on electronic submissions for printing the
    official hearing record. As always, submissions will be included in the
    record according to the discretion of the Committee. The Committee will
    not alter the content of your submission, but we reserve the right to
    format it according to our guidelines. Any submission provided to the
    Committee by a witness, any supplementary materials submitted for the
    printed record, and any written comments in response to a request for
    written comments must conform to the guidelines listed below. Any
    submission or supplementary item not in compliance with these
    guidelines will not be printed, but will be maintained in the Committee
    files for review and use by the Committee.

        1. All submissions and supplementary materials must be provided in
    Word or WordPerfect format and MUST NOT exceed a total of 10 pages,
    including attachments. Witnesses and submitters are advised that the
    Committee relies on electronic submissions for printing the official
    hearing record.

        2. Copies of whole documents submitted as exhibit material will not
    be accepted for printing. Instead, exhibit material should be
    referenced and quoted or paraphrased. All exhibit material not meeting
    these specifications will be maintained in the Committee files for
    review and use by the Committee.

        3. All submissions must include a list of all clients, persons and/
    or organizations on whose behalf the witness appears. A supplemental
    sheet must accompany each submission listing the name, company,
    address, telephone, and fax numbers of each witness.

        The Committee seeks to make its facilities accessible to persons
    with disabilities. If you are in need of special accommodations, please
    call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four
    business days notice is requested). Questions with regard to special
    accommodation needs in general (including availability of Committee
    materials in alternative formats) may be directed to the Committee as
    noted above.

        Note: All Committee advisories and news releases are available on
    the World Wide Web at http://www.waysandmeans.house.gov/.

        Chairman CAMP. The Committee will come to order. Good
    morning. Today's hearing is on the health care law's impact on
    jobs, employers, and the economy. We will have two panels
    today.
        Our first panel will feature Austan Goolsbee, who is
    chairman of the Council of Economic Advisors.
        I will begin by making an opening statement, and then I
    will yield to my friend and ranking member, Mr. Levin.
        I want to start by reading the following quote. ``I know
    one of the things that's come up is that the 1099 provision in
    the health care bill appears to be too burdensome for small
    businesses. It just involves too much paperwork, too much
    filing. It's probably counter-productive. It was designed to
    make sure that revenue was raised to help pay for some of the
    other provisions. But if it ends up just being so much trouble
    that small businesses find it difficult to manage, that's
    something we should take a look at. So there are going to be
    examples where I think we can tweak, and make improvements.''
        That was President Obama on the day after the November
    elections. The President was saying the health care law appears
    to be too burdensome for small businesses, that it involves too
    much paperwork, too much filing. And last night, in his State
    of the Union Address, the President again referred to the 1099
    provision, as we have come to call it, as a flaw.
        But more importantly, the President asked us to identify
    and bring to him items that need to be fixed. And clearly, in a
    bill that's over 2,000 pages long, there is more than just the
    1099 provision we need to address.
        With unemployment rates stuck above 9 percent for the last
    20 months, and with my home state's unemployment at nearly 12
    percent, I have one simple question today. How is it that
    Congress passed a health care bill that is
    ``counterproductive'' to American employers? Especially at a
    time we need to be looking at solutions that encourage, not
    impede, job creation.
        That's the focus of our hearing today, the health care law,
    and its impact on the economy, on employers, and their workers.
    If signed into law, the Democrat's health care law imposes more
    than a one-half-trillion dollars of tax increases and thousands
    of pages of mandates and onerous regulations on employers.
        My friends on the other side of the dais have argued that
    we shouldn't be debating health care anymore, that we need to
    move on, and focus on jobs and the economy. What they need to
    recognize is that employers of all sizes are expressing concern
    that the new mandates and regulations will deter them from
    hiring new employees, threaten their ability to retain existing
    workers, and harm their ability to increase wages for existing
    employees.
        The new health care law compounds the uncertainty employers
    and entrepreneurs are facing under the most challenging
    economic climate since the Great Depression. Making matters
    worse, many insurance companies and employers have already
    increased their health care premiums to comply with the new
    health care law, exacerbating the drag on the U.S. economy from
    rising health care costs.
        That's the problem with the health care law that puts
    Washington, D.C., the Federal Government, at the center,
    instead of patients and doctors. And when you take a
    Washington-knows-best approach to legislation, you usually end
    up with a bill that only works for Washington, instead of
    working for the American people.
        At the end of the day, the health care law fails to control
    costs, it fails to let Americans keep the insurance they have
    and like, despite the President's promise, it fails to protect
    jobs, it fails to ensure seniors have access to their doctors
    and hospitals, and fails to prevent tax increases from hitting
    middle-class families and the small businesses we need to move
    our anemic economy forward.
        The hearing today is just the first of many with regard to
    the health care law. It's my intention to give the American
    people and employers, both large and small, the opportunity
    they did not have when this law was being written, to testify
    in an open hearing about the impact this law will have on them.
        We know what the experts have said. We all know that the
    non-partisan Congressional Budget Office has estimated the
    health care law will increase premiums for millions of families
    by up to $2,100 on average by 2016. That's $3,200 more
    expensive than the Republican alternative I offered last
    congress.
        We all know that the Obama Administration's own officials
    have predicted that as many as 7 out of 10 employers will have
    to change the coverage they offer to their employees because of
    the law.
        We all know, from the joint committee on taxation, that
    there are well over $500 billion in new taxes, many of which
    will hit middle-class families and small businesses. That's
    what the experts have told us.
        Today we will hear something different. We will also hear
    from real employers, and what they think about this law, and
    what they think the impact will be on their businesses and
    their employees. I look forward to hearing this testimony and
    getting more of this sort of insight in the future. After all,
    these are the very people who have to live with the decisions
    that are made here in Washington.
        But before we do, I ask unanimous consent that all Members
    be allowed to submit an opening statement for the record.
        Chairman CAMP. Hearing no objection, I now yield to the
    ranking member, Ranking Member Levin, for the purposes of an
    opening statement.
        Mr. LEVIN. Thank you, Mr. Chairman. Dr. Goolsbee, I
    understand, will be here until 10:30. He will have a chance,
    Mr. Chairman, to respond to some of your criticisms that I
    don't think are valid.
        But we want to hear from you, Dr. Goolsbee, so I will be
    brief.
        Last night, the President said some very clear things about
    the health care issue. He said, ``Instead of re-fighting the
    battles of the last two years, let's fix what needs fixing, and
    move forward.'' My concern about the hearing is that, indeed,
    we will be re-fighting the battles of the last two years.
        For example, as to 1099, we introduced legislation in the
    last session. It passed here. It was opposed by the then
    minority because of the pay for. Ironically, much of what is in
    the bill was in the pay for is now the law of the land. We
    should have acted on 1099 last session.
        In his speech, the President also said, ``What I'm not
    willing to do is to go back to the days when insurance
    companies could deny someone coverage because of a pre-existing
    condition.'' He went on to point out that the law is now making
    prescription drugs cheaper for seniors, and giving uninsured
    students a chance to stay on their parents' coverage. So, I
    repeat, he then went on to say, ``Instead of re-fighting the
    battles of the last two years, let's fix what needs fixing, and
    move forward.''
        I think that's exactly what we should do, and I would hope
    that would be the tone of the hearing today. I yield back.
        Chairman CAMP. Well, thank you. Welcome to the Ways and
    Means Committee, Mr. Goolsbee. Under our rules you will have
    five minutes. Your written statement will become part of the
    record. And so, welcome, and you may begin.

       STATEMENT OF AUSTAN GOOLSBEE, PH.D., CHAIRMAN, COUNCIL OF
                  ECONOMIC ADVISERS, WASHINGTON, D.C.

        Mr. GOOLSBEE. Thank you, Mr. Chairman. And I would like to
    say good morning to Chairman Camp, Ranking Member Levin, and
    all the Members of the Committee. Thank you for inviting me to
    testify here today. And I know we were up late, and I saw
    several of you last night, and I appreciate your time.
        The Affordable Care Act was designed to make sure that
    health insurance coverage is affordable for individuals,
    families, and businesses. And while millions of people are
    benefitting now, much of the impact of that act will begin when
    the major coverage provisions take effect in 2014.
        The best evidence that we have gathered from outside
    experts suggests that, in addition to slowing the growth of
    Medicare spending and significantly reducing the deficit over
    the next 10 years and the 10 years after that, that the
    Affordable Care Act can be a significant benefit to the job
    market by easing the burden of health care costs on small
    businesses, and by reducing the growth rate of health care
    costs for all businesses.
        Now, the impact of the Affordable Care Act on the labor
    market is an important topic. I applaud you for having this
    hearing. I believe there has been a significant amount of
    confusion on this issue, and I am happy to have this
    opportunity to try to clarify that.
        I think the President laid out last night in a way that is
    most helpful, and you iterated in your opening statement, Mr.
    Chairman, that we should try to work together to improve--
    whatever is broken or problematic we should fix together.
    Anything that reduces costs is going to help jobs in this
    country.
        Health care has, for years, been one of the most pressing
    cost issues facing the business world. Those costs have been
    rising dramatically, long before there ever was an Affordable
    Care Act, and the Affordable Care Act's intention is to try to
    address that.
        I would highlight two basic mechanisms that I think the
    Affordable Care Act can have a--has had and will have a
    significant positive impact on the job market. The first
    mechanism is in the area of small business. Now, the role of
    entrepreneurs and small businesses in job creation and in the
    economy is well known. Equally well known is the fact that
    small businesses have, for years, consistently said that the
    cost of health care is one of their most significant problems.
        Small businesses that want to provide insurance for their
    workers face much higher costs than large firms do for exactly
    the same plans. And in many states they also face the risk that
    a single sick employee, or even an employee's ill family
    member, will send their premiums through the roof for all of
    their employees.
        The Affordable Care Act has begun to help make small
    business more competitive by making health insurance more
    accessible and more affordable. One of the first provisions to
    take effect is the small business health care tax credit that
    helps offset the costs of coverage. That applies to as many as
    four million small businesses that may be eligible right now
    for that small business tax credit.
        In addition, the Affordable Care act can level the playing
    field for small businesses by giving these businesses and their
    workers access to the same kinds of stable premiums that larger
    businesses enjoy. The exchanges pool risk and reduce
    administrative costs for small businesses. New insurers will
    not be able to raise rates when some individual in the group
    becomes sick. And this will allow small firms to offer
    competitive health benefits. People can start their own
    company, or go work for a fast-growing small business without
    worrying to that they would have to give up access to secure
    affordable coverage. And that impact on job mobility is
    critically important.
        The other mechanism that I would highlight are the many
    things that the act does to try to reduce costs overall, and
    reduce the health care cost inflation rate.
        These include the immediate reduction in the implicit tax
    from the uninsured. Right now, the uninsured get health care in
    emergency departments or in other very high-cost ways. The
    estimates suggest that that is a hidden tax passed on to
    everyone else of up to $1,000 per worker. And by covering the
    uninsured, the Affordable Care Act will reduce that hidden tax
    directly.
        Second, it makes innovations in the delivery systems in
    Medicare and Medicaid that, if we have successful innovations
    there that are adopted in the private sector, can reduce costs.
        Chairman CAMP. If you could, just sum up very quickly.
        Mr. GOOLSBEE. Sum up. Commitment to prevention and
    wellness, to patient-oriented outcomes, and to modernizing the
    health IT system. Those cost reductions and the small business
    credits can have a quite beneficial effect on the job market.
        [The prepared statement of Austan Goolsbee, Ph.D.:]

        [GRAPHIC] [TIFF OMITTED] T0870A.001

        [GRAPHIC] [TIFF OMITTED] T0870A.002

        [GRAPHIC] [TIFF OMITTED] T0870A.003

        [GRAPHIC] [TIFF OMITTED] T0870A.004

        [GRAPHIC] [TIFF OMITTED] T0870A.005

        Chairman CAMP. All right. Thank you. And as I said, your
    full statement will be part of the record. And thank you for
    that.
        Last night the President did say of the ongoing health care
    reform debate that, instead of re-fighting the battles of the
    last two years, let's fix what needs fixing and move forward.
    And he mentioned specifically the 1099 provision. What else
    does the President believe needs to be fixed in this new law?
        Mr. GOOLSBEE. Well, I would say the 1099 provision, which
    was designed to reduce tax evasion, what put this burden on
    small business, was identified early as an important one.
        You saw the President last night also say he was open to
    look at things. I know that there have been people that said we
    should have done more on medical malpractice reform, and the
    President said he was open to looking at that.
        Now, I would highlight that the Affordable Care Act does
    create pilots that it funds in states to figure out--different
    states have experimented with ways to address medical
    malpractice reform, and it authorized examining and creating
    pilots to help us figure out what works in that area. But I
    would say that's an area that the President is open to ideas,
    and we would want to work with you on.
        Chairman CAMP. So there is 1099 and medical liability
    reform. Those are two items. Are there any other items?
        Mr. GOOLSBEE. I would say that the President is open to
    working with you if you identify other items. But the basic
    thrust of the Act, of trying to get costs down and trying to
    help small business to afford care, is fundamentally the right
    approach. And so I think that we want to stick with it.
        Chairman CAMP. Well, in regard to holding costs down,
    which--I appreciate that sentiment and goal--both the CMS
    actuary and the Congressional Budget Office say the legislation
    that was enacted will likely increase, not decrease national
    health expenditures. And if they're right, isn't the health
    care law an economic failure that will increase health care
    spending and cost jobs? And I'm not asking if you agree with
    CMS or CBO, but I'm asking, if they're right, isn't this reform
    a failure?
        Mr. GOOLSBEE. I don't view it as a failure. I think the key
    thing of the Affordable Care Act is trying to get the health
    care cost inflation rate down.
        If more people are being covered and having their health
    improved and have the security to know that they cannot be
    denied coverage because of a pre-existing condition, the amount
    of total health spending is different than looking at what the
    prices are, and trying to control health care cost inflation.
    So, in my view, that wouldn't be the right way to evaluate it.
        Chairman CAMP. But the expert non-partisan agencies that we
    rely on, like the Congressional Budget Office, like the
    actuaries at CMS, tell us that overall health spending is
    likely to go up under this legislation.
        And if the stated claim that holding down health care costs
    is really a justification for this bill, and will help the
    economy and help businesses, particularly small businesses, and
    that isn't going to happen, how is this committee expected to
    evaluate this legislation, other than that it doesn't meet the
    stated goals, and that the reform that was purported was a
    failure?
        Mr. GOOLSBEE. Well, I was trying to make the distinction--
    and I apologize if I didn't--between the amount of total
    spending and the, essentially, spending per person, or the cost
    of the same procedure.
        So, the Congressional Budget Office and many health
    economists out in the country believe that the things that I
    have described in my testimony are ways that we can, for any
    given business, reduce the health care cost inflation rate, and
    make them more competitive for small businesses, giving health
    care credits that they can use to help offer health care to
    their workers, where they do not now.
        That is important. That will facilitate job creation. That
    is a different question than the one I think you're asking, Mr.
    Chairman, which is what will be the total spending on health
    care, overall, not on the prices, but on total spending. And
    total spending has been rising quite dramatically for many
    years. And I would observe that CMS's data suggested that
    health care spending overall rose at the slowest rate this past
    year that it has since they have been keeping records.
        Chairman CAMP. Well, the Congressional Budget Office also
    indicated, as I said in my opening statement--I don't want to
    repeat that, though--but that health care premiums for millions
    of families will also go up by over $2,000 per family. And,
    obviously, in contrast to a reduction in premium, which
    occurred with the bill that I offered.
        So, whether you--however you slice it, whether you look at
    the macro sense or you look at individual families, costs are
    going up. And as you said in your opening statement, getting
    costs under control in health care is a very important goal,
    and absolutely one we should look at.
        Well, thank you very much. At this time I will yield to the
    ranking member. He has five minutes.
        Mr. LEVIN. Thank you, Dr. Goolsbee. You are very polite.
    And I think proceeding that way is important.
        But I think there needs to be driven home very clearly the
    distinction you make. Driving down costs does not mean
    necessarily that expenditures will not go up. We have now over
    50 million people who have no insurance, whatsoever. And
    bringing most of the 50 million people so they have health care
    insurance and have health care may increase overall
    expenditures while we drive down the cost per patient. And
    there is nothing inconsistent.
        And John Boehner's proposal has been analyzed. It would add
    only three million people to the insured. We are the only
    country, industrial country, on this globe that has anything
    like 50 million people who have no insurance whatsoever, the
    only nation like that.
        So, you said it very discreetly, but I think it was clear.
    And I think we need to make those distinctions very clear,
    indeed.
        Now, let me ask you about another argument that's made
    about the health care reform. And now that language has been
    somewhat moderated, I will use what's been said here, that it's
    a job-killing bill--reform. I don't think we should use that
    language, whatever language we use. Would you comment on that?
        Mr. GOOLSBEE. Well, I would say, as a strictly factual
    matter, I think it's an inaccurate statement to say it's job-
    killing. I think the evidence suggests that the role of small
    business in job creation, and the role of reducing the health
    care cost inflation rate in job creation suggests that the two
    primary tenets of the Affordable Care Act may have even a
    significant positive impact on the job market.
        You may have seen a health economist at Harvard, David
    Cutler, look at the best evidence we have of the projected
    impacts of these various inflation-reducing measures, and ask,
    ``What would that mean for job creation or destruction,'' and
    found it would be job creating, in the nature of hundreds of
    thousands of jobs per year.
        If you look at the evidence on employers, health care costs
    have been rising dramatically every year for many years. And
    that has been a tremendous burden on them, and has limited
    employment growth.
        So, anything that we can do to reduce that inflation rate
    will have a positive impact. And I did not mean in any way to
    say to the chairman or to anyone else that we should close our
    minds and not be open to important ideas of how to improve
    this, or how to find other ways to get costs down. We should.
    The President has made that clear, and I would like to
    reiterate that, that we are open to sensible ways to improve
    care, to improve coverage, and to get costs down. I think to
    describe it as job-killing is not accurate, based on the
    evidence that we have.
        Mr. LEVIN. Okay, just briefly in your testimony you refer
    to Patient-Centered Outcomes Research Institute as something
    that can help make treatments work better. And that means, I
    think, it will affect costs and try to get a hold of costs. Do
    you want to comment briefly on that? You have about 30 seconds.
        Mr. GOOLSBEE. Well, I would say----
        Mr. LEVIN. Some have said that Washington is going to
    dictate the care patients receive.
        Mr. GOOLSBEE. It's not--that institute is not a dictation
    machine, it's not meant to do that. It is meant so that we can
    share information across the country of what do we find, what
    kind of treatments work.
        The best analogy is my own. When I was a kid, it was
    routine to take everybody's tonsils out. I got my tonsils out,
    I was in the hospital three days. And of our own kids--I have
    three children--the studies indicated that that was not
    effective, except in certain circumstances. Now, our middle son
    had--I'm not a doctor, but--some kind of inflamed tonsils, had
    his tonsils removed. But our other two kids did not.
        And that is a case where looking across the country,
    studies showed that it was more effective--that it was, in some
    sense, more dangerous to routinely just take all kids' tonsils
    out, and it's quite a significant expense to both families and
    to the health system that we were routinely doing that.
        I would use that as kind of a personal example of what the
    intention of this would be, would be to share that information
    so doctors----
        Chairman CAMP. All right, thank----
        Mr. LEVIN. Thank you.
        Chairman CAMP. Thank you very much. Mr. Herger is
    recognized.
        Mr. HERGER. Thank you very much, Mr. Chairman. And, Mr.
    Goolsbee, I thank you for appearing before us, and your
    testimony.
        But as I listen to you, there seems to be, in the
    Administration, a night and day difference between what I hear
    you saying on lowering of health care costs and what this
    Obamacare is doing for our small business and creating jobs,
    and what I hear small businesses in my district telling me. And
    later this morning we will be hearing from some small business
    owners who do know firsthand what it takes to create jobs.
        It's one thing to come up with academic arguments for why a
    particular policy will be good for job creation. It's another
    thing to have those results actually demonstrated in the real
    world. What we are going to hear from business owners in my
    district, and what I have heard from small businesses, is a
    very different story than the one you have presented. Their
    near-unanimous opinion is that this health care law is going to
    absolutely be devastating to their small businesses, and to
    creating jobs.
        Let me share with you some of the feedback that I have
    received from business owners in my northern California rural
    district. Robert Boisey of Burney, California, writes, ``I am a
    small businessman who is retired and collecting Social
    Security. I started my business in January of 2008, and it
    immediately took off. In 2009, I made more money than I ever
    have in my life, and I was ready to add 1 or 2 employees when
    they started talking about Obamacare. I have now decided not to
    expand, and to contain my business at a smaller size.''
        And then, from a Charles Watts of Chico, California,
    writes, ``I have been a business owner builder/contractor for
    35-plus years, and have survived 3 other recessions, this being
    the worst. What I don't understand is how our government
    figures that business owners can maintain work in an economy
    with a collapsed housing market, with no future in sight of
    recovery for years. Our company is hanging on by a thread. And
    if I have to provide health care for employees, I will have to
    close it down, no questions asked. I would have no other
    option.''
        And then a Mike Mullin in Cottonwood, California, writes,
    ``As it stands right now, I can't afford to grow or hire new
    employees. Currently, the paperwork alone is a nightmare in
    labor costs. If Obamacare is not repealed, it will definitely
    increase labor costs, which is the most expensive part of
    running a business. Also, the 1099 deal definitely needs to go.
    If I have to cut a 1099 to every vendor I use, I won't have
    time to do my work.''
        Mr. Goolsbee, this is just a sample of what I and other
    members of this Committee are hearing from small business
    owners in the real world. I have double-digit unemployment in
    every one of the 10 counties in my district. We cannot afford
    this--to get this wrong. Can you explain why the
    Administration's claims are so out of touch with what we're
    hearing from people who are actually creating jobs?
        Mr. GOOLSBEE. Well, Congressman, I respect that question,
    and I appreciate you bringing that evidence. I think the one
    thing I have noticed when I have talked to many small business
    people and large business people is some misunderstanding on
    the part of some business people of what's in the law, or what
    provisions would apply to them.
        So, small businesses are--if you have 50 employees or
    fewer, you are not required to provide coverage to your
    employees. Second, small businesses, up to four million of them
    right now, would qualify for a very substantial tax credit to
    help cover their costs
    that--they have never had such a credit before. And third, as
    we move to the exchanges, for the first time, small businesses
    will be able to get insurance coverage at a price that is
    comparable to the price that large businesses currently offer.
        So, among very small businesses in the country, the
    majority do not offer any health care coverage now. And the
    surveys of the NFIB and other small business organizations have
    shown again and again--before there ever was an Affordable
    Coverage Act--that health care costs are one of the most
    pressing problems facing small business, that they had very
    hard times hiring employees to come work at their businesses,
    because the employees that were at large companies would say,
    ``I would love to work at that start-up, but I can't get
    coverage if I move there, it will be too expensive.''
        Chairman CAMP. Thank you.
        Mr. GOOLSBEE. So, I think----
        Chairman CAMP. Your time has expired.
        Mr. GOOLSBEE. I apologize, Mr. Chairman.
        Chairman CAMP. Mr. Johnson is recognized.
        Mr. JOHNSON. Thank you, Mr. Chairman. You know, you have
    said a lot of things that don't seem to be true in the real
    world. Maybe you better get out there and talk to people.
        But, you know, that health care tax credit, for instance,
    very few small businesses that I talk to and their employees
    will benefit from the credit. In fact, CBO estimated that 88
    percent of those who get health insurance from a small business
    work for a business that will not receive the credit. There are
    different credit amounts and eligibility requirements prior to
    2014 than exist after the exchanges are operational. And after
    2013, an employer can only claim the credit for 2 years. That's
    not giving them much.
        One of the purposes of this hearing is to look at the
    impact of health reform law on jobs. I think we can all agree
    it is critical to pursue policies that create jobs, not
    eliminate them. And the health reform law places significant
    restrictions on physician ownership of hospitals. You've almost
    put it to a complete halt. And yet, my experience with
    physician-owned hospitals, they are far above in benefits to
    the patients of a regular hospital. They are precise, they know
    what they're doing.
        Many projects, in planning, had to stop. And expansions
    were curtailed. Every one of those decisions had a negative
    impact on jobs in states like Texas. Industry experts tell me
    at least 30,000 jobs would have been created if this provision
    had not been enacted. Can you explain to me how the
    Administration could have supported a provision they knew would
    negatively impact well-paying health care jobs in many
    communities?
        Mr. GOOLSBEE. Well, Congressman, I will need to look into
    this exact provision, and I will get back to you. I know that
    the primary goal of the various provisions in the act are how
    do we provide the best possible care at the lowest possible
    price, or with the lowest rate of inflation. If there are
    things about physician ownership of hospitals or any other
    subject that we can get together and work on, and find evidence
    that it could improve care and reduce costs, the President is
    open to look at any such ideas.
        So, I will have to get back to you on this. I am not
    familiar with the details.
        Mr. JOHNSON. Okay. Well, that's just one area of that bill
    that doesn't appear to be beneficial to the industry.
        You know, we talked about 1099 reporting requirements, and
    I presume now you are in agreement that we need to get rid of
    that provision. Is that true?
        Mr. GOOLSBEE. That is true.
        Mr. JOHNSON. Okay. I'm hearing it from you and the
    President, I think.
        Mr. GOOLSBEE. Yes.
        Mr. JOHNSON. All right. Then let's do it. The health care,
    overhaul, provides health plans in existence on the date of the
    law's enactment, that they would not be required to meet all
    the requirements of the new law. And you all argued that it
    would allow individuals to keep the health insurance they have,
    and like. The statute did not define grandfathered plans, other
    than to ensure that all plans resulting for the length of the
    agreement--it's clear that many employer plans will not enjoy
    the grandfathered plan protections from the new law. Can you
    discuss that a little bit?
        Mr. GOOLSBEE. Yes. What I would say is the--clearly, the
    intention and the overall impact of the Affordable Care Act is
    to--the President believes in the private system, and it is
    designed to try to preserve the option that if the employer is
    happy with the plan that they have, they can stick with the
    plan.
        The intention of the grandfathering clause is to make it so
    that if there are things in the Act that would have some impact
    that the employer or patient doesn't want, they could just
    stick with what they have.
        Now, you always have to choose the lines of what to draw--
    what counts as the same plan. Now, there is flexibility. You
    can--if you are getting the same insurance, but you want to
    change providers, that's still permissible, and you still keep
    the grandfathering. If you fundamentally change the nature of
    what health care you're getting, then the point of the
    grandfathering would not apply. And so that's why we put----
        Mr. JOHNSON. Yes, but isn't that only for two years after
    you do that?
        Mr. GOOLSBEE. It depends which, but on some of these there
    are phase-outs.
        Mr. JOHNSON. All right. Thank you, Mr. Chairman.
        Chairman CAMP. Thank you. Mr. McDermott is recognized.
        Mr. MCDERMOTT. Dr. Goolsbee, I fly across the country 35
    times a year for 20 years, and I have been flying with United
    Airline attendants who have now gotten a little older. And I
    doubt there is a single flight I fly on where there isn't one
    flight attendant who is working simply to keep her benefits
    because her husband has a job that doesn't have benefits.
        And when I read the attack on the job-killing aspects of
    this bill, I--they read the report from CBO and it sounds like
    they're saying we're going to kill jobs. But, in fact, that
    flight attendant would gladly give up her job at age 60 if she
    had health care for her family in some other mechanism.
        Now, is that killing the job, or is that her choosing to
    leave the work force?
        Mr. GOOLSBEE. To me, that sounds like a retirement. And the
    CBO report that you're citing, they did make clear that there
    would be a reduction of total jobs, but that most of those
    would be on what they call the labor supply side, of people not
    having to work as many years just to keep their medical
    benefits. So, to me, that would not be a job killing, that
    would be a retirement.
        Mr. MCDERMOTT. So it really is political theater,
    hyperbole, to make it seem like this bill kills jobs.
        Mr. GOOLSBEE. I'm just an economist----
        Mr. MCDERMOTT. You're not going to----
        Mr. GOOLSBEE. I'm not----
        Mr. MCDERMOTT. Okay. Let me ask another question. You know,
    I--we're going to have another panel, and they've rounded up
    some people who say this doesn't help small business. And I'm
    sure that if you go through this country of 300 million people,
    you can find some small businessman or woman for whom it
    doesn't work.
        But my--from reading your testimony, it sounds like more
    small businesses are buying insurance today. If I read the
    figures you had for United Health and for Kansas City's Blue
    Cross Blue Shield program, it sounds like people are actually
    getting in because of the small business tax credits.
        Mr. GOOLSBEE. I think that's true. I would make three
    points. The first is if you don't have insurance, which, the
    smaller the employer you get, the greater the share that do not
    offer insurance now, because they would have to pay
    substantially more for exactly the same policy as large
    employers do, this--the small business health care credit gives
    them the opportunity to offer insurance for the first time, and
    you have seen substantial take-up.
        Second, even if you already offer it, the small business
    tax credit reduces the cost to you in a way that has never
    existed before.
        And third, we should not underestimate the importance of
    the exchanges that will be coming online, which will allow
    small businesses to get insurance at the kinds of prices and
    steady levels that large employers have had.
        Those three things are critically important to small
    business. And for years, before there was an Affordable Care
    Act, they have been wanting to have, for some time, these types
    of credits and access to this type of insurance.
        Mr. MCDERMOTT. And they have also talked about wanting to
    pool and--so that small businesses could join a pool----
        Mr. GOOLSBEE. Yes.
        Mr. MCDERMOTT [continuing]. And they could then buy, like
    Boeing or Weyerhaeuser, or one of the large company buys. So
    this really gives them the ability to get that kind of benefit,
    is what you're saying?
        Mr. GOOLSBEE. Yes, that's a better way to say what I was
    saying, is it allows them to pool. That's what the exchanges
    are for, it allows them to pool and get prices as if they were
    a large employer.
        Mr. MCDERMOTT. You may not have read the testimony of the
    people who are following after you, but I--can you think of any
    reason why a small business man or woman could not find a way
    for health care, if they're making money? Is there any reason
    why, beyond they don't want to do it? I mean is there some
    economic reason?
        I don't understand, if you're making money in a business,
    how you can't put some of that money toward the health care of
    your workers. You would certainly care about your workers, I
    would guess.
        Mr. GOOLSBEE. Well, look. It would be presumptuous of me to
    tell other folks. I don't know what the circumstances of
    different businesses are. I do know this, that if you take
    employers that are employing people without giving them health
    care coverage, the reason that there would be a mandate is to
    try to get away from the system we have now, which is people
    don't have coverage, still get sick, and they go down and they
    get medical care at the highest possible expense, and it
    doesn't become free just because it was in the emergency
    department. That's a cost that gets passed directly on to the
    employers who do cover their employees. And that cost is as
    high as $1,000 a worker.
        So, I don't put any moral judgement of any kind. I know
    we've been through a very tough spot in the last few years, and
    everybody has been trying to get by, and we're trying to turn
    the corner to grow our way out of these problems. I think small
    business credits to help them afford to give coverage, as well
    as giving them the opportunity to buy at the kind of prices
    that larger businesses do, and doing everything we can to slow
    the growth rate of health care cost is important.
        Chairman CAMP. All right, thank you. The time has expired.
        Mr. MCDERMOTT. Thank you.
        Chairman CAMP. Mr. Tiberi is recognized.
        Mr. TIBERI. Thank you, Mr. Chairman. Dr. Goolsbee, the
    President repeatedly mentioned throughout the debate and
    afterwards that Americans making less than $200,000 or families
    earning less than $250,000 would not see their taxes increased,
    with respect to the Democrats' health care bill.
        I would like you to tell me whether each of the following--
    in a yes or no answer--would suffice that were included in the
    health care law constitutes an increase in taxes for
    individuals or families making less than $200,000 or $250,000:
    a new tax on individuals who did not purchase government-
    approved health insurance.
        Mr. GOOLSBEE. I don't think that's an accurate way to
    describe it, no.
        Mr. TIBERI. Not a new tax?
        Mr. GOOLSBEE. I don't think that's an accurate way.
        Mr. TIBERI. A new ban on the use of flexible savings
    accounts, HSAs, HRAs on using pre-tax income to purchase over-
    the-counter drugs?
        Mr. GOOLSBEE. I don't--that's not a tax increase of a
    normal form, and that's part of a broader reform effort,
    obviously.
        Mr. TIBERI. An increase from 7.5 percent to 10 percent of
    income, the threshold after which individuals can deduct out-
    of-pocket medical expenses?
        Mr. GOOLSBEE. [No response.]
        Mr. TIBERI. Not a tax increase?
        Mr. GOOLSBEE. I--as I'm saying, if you--I do not consider
    the Affordable Care Act, as a whole, to be a tax increase in
    people making less than $200,000.
        Mr. TIBERI. I've got two more. Impose a new $2,500 cap on
    families' ability to use pre-tax dollars to fund an FSA.
        Mr. GOOLSBEE. Could you----
        Mr. TIBERI. A $2,500 cap----
        Mr. GOOLSBEE. $2,500 cap----
        Mr. TIBERI [continuing]. On----
        Mr. GOOLSBEE. I don't consider that a tax increase.
        Mr. TIBERI. A new 10 percent tax on indoor tanning
    services.
        [Laughter.]
        Mr. GOOLSBEE. [No response.]
        Mr. TIBERI. Not a tax increase?
        Mr. GOOLSBEE. Well, that seems like a strictly voluntary
    thing that one could choose.
        Mr. TIBERI. But not a tax increase?
        Mr. GOOLSBEE. [No response.]
        Mr. TIBERI. Here is the point, Dr. Goolsbee. We have, in
    this bill--and I'm quoting from the bill--a number of things
    that are going to--that's going to impact people, individuals,
    who make far less than $200,000.
        I had a lady contact me in December who said she had just
    found out from her employer and her doctor that she could no
    longer manage her kids' health care costs with respect to
    prescription drugs, over-the-counter drugs, and now she was
    going to have to contact the doctor every time she wanted to
    deduct something from her flexible savings account, and had
    just found out in December, months after the health care bill
    was signed into law, that actually, her tax was going to
    increase, her income tax was going to increase, because her FSA
    was going to go from $5,000 to $2,500. And thus, her income was
    going to go up, with respect to her taxes, which means she was
    going to be paying more taxes.
        So, two things were occurring in her mind that she had no
    idea with respect to the health care debate, that she was going
    to be paying more taxes, and her ability to mention her health
    care was going to be taken away from her, that she was not
    going to have to call her physician's office, which is going to
    make, ironically, the physician's office more involved, not
    less involved, and there is a cost to that, as well.
        So, I know you chuckle about this, but the President was
    very, very firm in that nobody making less than $200,000, or
    families less than $250,000, would see income taxes go up, any
    taxes go up. And now we see a Department of Justice defense
    that this bill is constitutional because it's a tax, the
    individual mandate is a tax.
        So, on one side, we say it's not a tax--or you say it's not
    a tax, the Administration. On the other side, you say it is a
    tax. So, which is it?
        Mr. GOOLSBEE. Well, Congressman, first, let me apologize. I
    was only chuckling about the tanning salons. I wasn't meaning
    to make light of it.
        As I say, we are open to work--if we look at the FSA rules,
    all I would say on FSA's is this was part of a broader package,
    that it's not picking out one thing in isolation and not taking
    into account other benefits. If you are paying for something
    with a pay for, but it's going to reduce health care cost
    inflation, or we're going to get additional coverage that you
    didn't have before, you do have to take it in totality before--
    --
        Mr. TIBERI. Here is my point, sir. I am just saying if you
    are telling the American people, and the President is telling
    the American people--if I am advising you, and you repeatedly
    say it's not a tax increase, and Mrs. Smith, who sees her FSA
    go from $5,000 to $2,500, and now she can't buy baby aspirin at
    the store and deduct it from her FSA, she looks at that as a
    tax increase.
        So, there is a credibility issue. And again, we can chuckle
    about it, but this is a tax increase----
        Mr. GOOLSBEE. I didn't chuckle about it, and I don't mean
    to----
        Chairman CAMP. Just respond briefly, and then we will move
    on.
        Mr. GOOLSBEE. Okay. My only brief response is if it changes
    the FSA rule, but simultaneously gives her a significant
    reduction in the cost of her health care, that should not be
    viewed as a tax increase on her, even though just looking at
    one component, you would say, ``I had a disallowed expense on
    an FSA.'' But the point is taken in totality, it's not a tax
    increase.
        Chairman CAMP. All right. Thank you. Mr. Davis is
    recognized.
        Mr. DAVIS. Thank you, Mr. Chairman. I guess it all depends
    on what the meaning of ``is'' is. This is a big of a Back to
    the Future moment, when taking it in totality it's a huge tax
    increase.
        I deal with constituents at all places in the economic
    spectrum, and they talk about a lack of purchasing power,
    they're seeing their dollars go down. And small business
    owners, in particular, contrary to the gentlemen that say this
    is not job-killing, I have met with hundreds of business owners
    over the last two years, and, really, since this bill
    implemented this year, business after business, our Chambers of
    Commerce members are telling us, and telling our office and me,
    they're not hiring people because they cannot afford to provide
    coverage, which leads me to a question.
        Since we referred to the tanning tax as a strictly
    voluntary thing--I don't think the IRS agents would feel that
    way--but I want to ask you about the burdens of the Democratic
    health care law on small business.
        For example, suppose you own a small business with 50 or
    more employees, and that business is not eligible for the small
    business tax credit, and can't afford to purchase health care
    for your employees. Contrary to the propaganda, rates have gone
    up significantly; they're going to continue to go up, because
    we didn't go after the cost drivers. The health care law
    requires you to provide health insurance or pay a fine.
        Now, how would having to afford the cost of health
    insurance or paying the fine help your company grow and create
    jobs? Because when we get into this pricing issue here, there
    is, I think, a faulty assumption that businesses have unlimited
    supplies of money. The vast majority deal with vendors that
    have fixed costs on materials, as part of a supply chain.
        And hence, on the outside, they often--and particularly if
    they're dealing with larger, established businesses, price
    ceilings that they cannot exceed. So that margin skinnies down.
    The average manufacturing company that's considered successful
    in this company (sic) might make an eight percent profit margin
    at the end of the year. And we're watching health care just go
    up at an astronomical rate.
        Here is my question. How would having to absorb the cost of
    health insurance or paying the fine help you grow jobs? Tell me
    that.
        Mr. GOOLSBEE. Well----
        Mr. DAVIS. That is a tax in your bill.
        Mr. GOOLSBEE. Well, here is what I would say, Congressman,
    and I appreciate the evidence, and we are open to working and
    looking at the evidence.
        If you take large employers, more than 95 percent of them
    offer health care. If you go to the five percent that do not
    and say, ``Isn't it going to hurt those five percent, that they
    will be required to provide health care,'' I do think it is
    appropriate that we consider what is the cost that they are
    applying on to other employers when they aren't offering health
    care, and that's the hidden tax that already exists. The growth
    of health care costs has been astronomical year after year,
    before there ever was an Affordable Care Act. And the
    Affordable Care Act is trying to bring that more under control.
        So, that there are--that the majority of small businesses
    in the country, some four million, would qualify for the credit
    is good for those businesses. To try to find an individual
    business who did not provide health care before, has over 50
    employees, is not planning to use the great benefit of the
    exchange to get--so that they would have the opportunity to get
    significantly lower prices for their health care, to me feels a
    little bit of a selected example, when taken in totality----
        Mr. DAVIS. Well, let's take this to a simple--the small
    companies, why couldn't they just pool together? Wouldn't that
    make sense? And--to be able to handle this issue, and to have
    the government stay out of it? Let the private market work.
        Mr. GOOLSBEE. Well, they haven't----
        Mr. DAVIS. I mean I ran a business for 12 years, and we ran
    into this time after time, where costs did go up. And the costs
    under this bill are going up dramatically. I know people who
    won't hire employees because they're going to go over the 50
    threshold. Why should I hire somebody, if I'm going to be
    taxed? And you called just a minute ago, that----
        Mr. GOOLSBEE. Well, as I say----
        Mr. DAVIS [continuing]. Didn't tax----
        Mr. GOOLSBEE [continuing]. You're selecting a group of
    employers that's at some specific sliver, and I am highlighting
    that there are millions of businesses just below that, which
    are the majority of small businesses in the country, who are
    getting a very significant tax credit----
        Mr. DAVIS. Well, let me just point something out. You've
    asked us to take it in totality. And, just between Mr. Tiberi
    and I, we've probably pointed out 20 individual examples that,
    taken in totality, all point to significant increases in costs
    on business under this bill.
        And I think we come back to the details. We're going to
    have to address the cost drivers. And we don't address the cost
    drivers, beginning here in Washington, with creating a huge new
    bureaucracy that places more overhead--if you ask any business
    owner about this bill, they will ask the question, ``How can
    you create over 100 new agencies, commissions, and boards,
    massively increase the regulatory side of this, and somehow
    reduce costs, while raising taxes on businesses and cutting the
    direct access to benefits?''
        Every doctor that I know calls this a denial of care bill,
    when they look at the economic aspects of this. And we are
    dealing with very different sets of definitions of terms, and
    we can't be fluid about that. I yield back----
        Chairman CAMP. All right. His time has expired. Mr. Neal is
    recognized.
        Mr. NEAL. Thank you, Mr. Chairman. Mr. Chairman, I would
    like permission to insert the CBO's preliminary analysis of the
    repeal of this health care legislation into the official
    record.
        Chairman CAMP. Without objection.
        [Information as follows: Mr. Neal]

                              Rep. Charlie Rangel
                            Statement for the Record
                          Wednesday, January 26, 2011
    1099 Repeal
        The House voted on July 30, 2010, on HR 5982, which would have
    repealed the expanded 1099 reporting requirements.
        One of the revenue provisions in the health care reform law is an
    expanded reporting requirement that would have increased business to
    business information reporting (using form 1099). Repealing the
    provision in 2010 would result in revenue loss of $19.1 billion. The
    repeal in HR 5982 was fully paid for through the closing of a number of
    tax loopholes, including loopholes that incentivize companies to send
    U.S. jobs overseas.
        Repealing the provision in 2011 would result in revenue loss of
    $21.9 billion.
        Because HR 5982 was brought up under suspension of the rules, it
    needed support of two-thirds of Members to pass. Unfortunately, it was
    defeated by Republican opposition:

                                           Yeas         Nays          NV

    Democratic---------------------------------239------------1-----------14

    Republican                                   2          153           23

        Mr. NEAL. Thank you. And, Mr. Goolsbee, if we were to
    repeal the health care bill, as some are proposing, that means
    eliminating $40 billion worth of tax credits. Doesn't that
    represent a tax increase?
        Mr. GOOLSBEE. It would be very problematic, and it would be
    particularly problematic on small business. But it would be a
    major tax increase.
        Mr. NEAL. All right. Let me take you to some of the facts
    here. One of the difficulties in the discussion of this
    legislation is that if our friends on the other side are asked
    by the local news media in their respective constituencies
    whether or not they favor banning pre-existing condition, they
    will say yes. If they are asked, ``Is it not a good idea to
    keep your children on your health care plan up until they're
    26,'' they will say, ``Yes.'' If they are asked if it's a good
    idea to cap out-of-pocket expenses, they will say, ``Yes.''
    Carrying insurance from one job to the other? They will say,
    ``Yes.''
        The problem with that argument is, from an actuarial
    reality, or from risk analysis, how do you accomplish those
    outcomes if you don't require those who can afford insurance to
    buy it, and to help those who can afford it to get into the
    risk pool through the mandate?
        I mean that--by the way, I wanted to say something for the
    record. This is very important. The mandate was the compromise
    in Massachusetts that was proposed by Governor Romney. That's
    how we got there. Senator Kennedy advocated for years, spent a
    career talking about health care. The difficulty is that, in
    attempting to do it, the compromise became the mandate.
        Would you speak to that issue about actuarial reality, risk
    analysis, and what insurance companies might do to suggest that
    they could accomplish the former, as I've outlined it, to get
    us to the latter?
        Mr. GOOLSBEE. Well, look. I do think the basic point of the
    matter is to get away from the economic problem of cream
    skimming and figuring out who is more likely to get sick and
    dropping them. And when you have circumstances like that, a lot
    of times markets can--the free market can fail when you have
    big differences of information like that.
        That has plagued the health care system all along, and that
    is the point of the Affordable Care Act, is to try to get
    everybody into the system, so you can't either free-ride off
    your neighbor and, so on the other side, they can have some
    assurance that the probability of whatever illness is
    approximately the probability in the overall population, as
    opposed to everybody that knows they have the--some disease
    signing up only once they get sick. I think that's the basis.
        Mr. NEAL. I would encourage all the members of this
    committee, and others, to visit an emergency room on a Friday
    or Saturday night. And if you can't do that, or you live in a
    rural area and it's more difficult, then I would encourage
    Members to be in touch with their local hospitals to find out
    what health care delivery is in the emergency room.
        And for that man or woman who walks out of that emergency
    room thumbing their nose by suggesting that they beat the
    system, they didn't really beat the system. In fact, those
    costs are passed on to all of us. That's the whole idea of
    spreading risk, which I would have thought the other side would
    have paid a great deal of attention to, given their proclivity
    for the suggestion that we ought to allow the market to work.
        Mr. GOOLSBEE. Look, I think that's the uncompensated care--
    --
        Mr. NEAL. Precisely.
        Mr. GOOLSBEE [continuing]. Is a hidden tax on everybody,
    and it's a big one, $1,000 a worker by some estimates. And we
    cannot forget that that tax exists. It's very important. And we
    can get that cost down. And that is a big cost driver.
        Mr. NEAL. Thank you, Mr. Chairman.
        Chairman CAMP. Thank you. Mr. Nunes is recognized.
        Mr. NUNES. Thank you, Mr. Chairman. Mr. Goolsbee, were you
    involved at all in the President's State of the Union address,
    in designing it or writing it or reviewing it, previewing it?
        Mr. GOOLSBEE. Yes, a little bit.
        Mr. NUNES. Okay, so you're familiar with the health care
    portions of the speech last night?
        Mr. GOOLSBEE. Yes.
        Mr. NUNES. Okay. So the new 1099 reporting requirements.
    Last night, to paraphrase, the President called it a ``flaw,''
    I think. At what point did he have the epiphany that it was a
    flaw?
        Mr. GOOLSBEE. I don't know the answer to that,
    specifically, but the chairman quoted the President from a
    significant time ago. It wasn't at the State of the Union that
    he had it.
        Mr. NUNES. Did the President or White House or anyone
    affiliated with the executive branch ever hear from any Members
    of Congress that this was a problem, 1099 problem, during the
    year-long health care debate?
        Mr. GOOLSBEE. I wasn't involved in the legislative
    discussion, but I think it's probably fair to say yes.
        Mr. NUNES. Okay, thank you. What--so the President has now
    admitted that the policy he supported was flawed. He asked for
    other creative ideas. Where should this committee start? What
    creative ideas should we look at to identify possible
    additional flaws, other areas that we could reduce costs,
    improve the quality of health care, where should we start?
        Mr. GOOLSBEE. Well, I do think that the previous congress
    people have identified, hearing from constituents and from
    business leaders themselves, if there are ways that we can
    reduce administrative costs, reduce regulatory or compliance
    burdens of the form.
        Mr. NUNES. Any specific ideas? Is there anything like 1099
    that we should strip out of the current health care law, or
    anything that we should put in?
        Mr. GOOLSBEE. Well, I think 1099 is a good one, and the
    President outlined that we should look together at the medical
    malpractice issues that can lead to defensive medicine and
    those things. That strikes me as also a productive place to
    look.
        Mr. NUNES. So medical malpractice we should look at. Any
    other areas----
        Mr. GOOLSBEE. I mean----
        Mr. NUNES [continuing]. You can think of?
        Mr. GOOLSBEE. Those two, plus the general approach of
    talking to the small business community strike me as three
    important ones to begin with.
        Mr. NUNES. I want to focus on the uninsured now, move to
    the uninsured. We have heard members of this Committee already
    this morning say that there is 50 million uninsured, I think
    was the number, and maybe there is more than that. Or
    possibly--at least people think there is more than that.
        I was under the understanding when we passed this, two new
    entitlements adding to the two old entitlements of Medicare and
    Medicaid in the health care law, that this would be the Utopia
    for health care, and that everyone would now be covered. Is
    that happening?
        Mr. GOOLSBEE. I would say we are dramatically increasing
    the number by tens of millions in who is covered. There
    obviously was the issue of undocumented immigrants who are
    not--were never intended to be getting covered under the----
        Mr. NUNES. So how many new people have we covered since the
    law has been implemented that wouldn't have been covered under
    the old laws?
        Mr. GOOLSBEE. Well, the full coverage provisions don't go
    into complete effect until 2014. But the estimates are in
    excess of $35 million.
        Mr. NUNES. Why did it take so long to--why did we wait
    until 2014 to implement this, when we have this health care
    crisis and all these folks uninsured?
        Mr. GOOLSBEE. I----
        Mr. NUNES. I know you didn't write the law, but you look at
    the numbers.
        Mr. GOOLSBEE. Yes, I look at the numbers. On any
    significant change of this nature, usually there is some
    transition period. Historically----
        Mr. NUNES. Was it possible to hide the budget consequences
    of the health care provision?
        Mr. GOOLSBEE. No.
        Mr. NUNES. So we don't have a debt problem?
        Mr. GOOLSBEE. We have a long-run fiscal problem facing the
    problem, for sure. But----
        Mr. NUNES. Does health care have a part in that?
        Mr. GOOLSBEE. In reducing it, yes.
        Mr. NUNES. So this health care bill is going to reduce
    the----
        Mr. GOOLSBEE. The deficit.
        Mr. NUNES. The deficit?
        Mr. GOOLSBEE. Yes. According to the non-partisan
    Congressional Budget Office, to repeal the health care act
    would increase the deficit by a quarter trillion dollars over
    the next 10 years.
        Mr. NUNES. Wow. Thank you, Mr. Chairman.
        Chairman CAMP. All right. Mr. Reichert is recognized.
        Mr. REICHERT. Thank you, Mr. Chairman. Mr. Goolsbee, I've
    been taking some notes while you have been answering questions.
        So, this Affordable Health Care Act, you say, was designed
    to reduce costs, yes?
        Mr. GOOLSBEE. Yes.
        Mr. REICHERT. Improve access, increased access for people?
        Mr. GOOLSBEE. Yes.
        Mr. REICHERT. Slow the growth rate of health care costs?
        Mr. GOOLSBEE. That is its intention.
        Mr. REICHERT. And reduce the deficit?
        Mr. GOOLSBEE. Yes.
        Mr. REICHERT. All of those things. I'm just an old retired
    cop, so I think--you know, I'm not a doctor. I've not been in
    the medical profession. So I'm just trying to understand this,
    like every other American across this country.
        So, these were the goals. But I really--I want to go back
    to what Mr. Nunes and some others have pointed out. I'm really
    having a tough time understanding how a provision like the 1099
    form gets included in a bill that's supposed to accomplish all
    these things, reducing costs, et cetera. Because, if I'm not
    mistaken--do you know how the 1099 provision was inserted in
    the bill?
        Mr. GOOLSBEE. I do not.
        Mr. REICHERT. You don't know what Member of Congress, or
    who came up with the language? Or was it the Administration
    that suggested the----
        Mr. GOOLSBEE. It wasn't an Administration proposal, but I
    wasn't involved in the----
        Mr. REICHERT. So you have no idea? This is your project,
    right?
        Mr. GOOLSBEE. I'm just--well, it's not my--I'm just an
    economist.
        Mr. REICHERT. You're just a spokesperson?
        Mr. GOOLSBEE. I'm not a spokesperson, I'm an economist.
        Mr. REICHERT. So why are you here today?
        Mr. GOOLSBEE. I am here to help evaluate the economics of
    the Act.
        Mr. REICHERT. Well, let me just ask you. The 1099 form----
        Mr. GOOLSBEE. Yes.
        Mr. REICHERT [continuing]. We don't know how it got in
    there. But somehow it increases the cost of the bill by $19.2
    billion. You have to hire 16,000 IRS agents. How can that just
    be overlooked? I think the American people have a credibility
    issue when you say that you're here to reduce costs, then all
    the sudden, miraculously, you discover that there is a $19.2
    billion cost in there that shouldn't be there. How does that
    happen?
        Mr. GOOLSBEE. Well, as I say, I wasn't involved when
    Congress----
        Mr. REICHERT. But how does that happen?
        Mr. GOOLSBEE [continuing]. Passed the legislation. But what
    I will say is, the people that supported it were trying--the
    goal, which has been a bipartisan goal, of reducing the amount
    of tax evasion, people who do not pay taxes on income that they
    should pay.
        Mr. REICHERT. I know what----
        Mr. GOOLSBEE. This was designed in a way----
        Mr. REICHERT. Excuse me, excuse me----
        Mr. GOOLSBEE [continuing]. That was excessively
    burdensome----
        Mr. REICHERT. Excuse me. Okay. I know what the goal was. My
    question was, how did it get into the bill. And your whole
    premise is that this was to reduce costs. And $19.2 billion
    gets somehow inserted into the bill, and no one knows how.
        Mr. GOOLSBEE. My understanding----
        Mr. REICHERT. Did I hear you say just a little bit earlier,
    too, that you can keep your health care plan if you like it, or
    something like that, in one of your answers?
        Mr. GOOLSBEE. That is the intention, yes. That's why the
    grandfathering clause exists.
        Mr. REICHERT. Okay. I remember President Obama visited our
    retreat last year, and he was asked that question. And we have
    heard that time after time after time. ``You can keep your
    health care plan, if you like it.''
        However, in his comments to us--and I will paraphrase his
    quote--he said, ``Well, there may have been some language snuck
    into the bill that runs contrary to that premise.'' How do you
    explain that? I mean you're telling me today that you can keep
    your health care plan if you like it, but the President says
    there is language in the bill that runs contrary to that
    premise.
        Mr. GOOLSBEE. I apologize, Congressman. I'm not trying to
    be coy. I haven't heard the President say that. But I would
    like to look at that before I made any comment on it.
        Mr. REICHERT. Yes. Well, it's in print.
        Mr. GOOLSBEE. Okay. I will----
        Mr. REICHERT. Can you see why the American people are
    confused about this bill, and whether or not it provides any
    benefits at all to them? Whether or not it does all those
    things that you laid out earlier, decreases cost, increases
    access, and is good for business and reduces the deficit?
        I mean I just pointed out two things here that have quite a
    bit of controversy around it, and seems to be rather serious
    conflicts with the premises that you have laid out in this
    bill. Mr. Chairman, I yield back.
        Chairman CAMP. Thank you. Mr. Thompson is recognized.
        Mr. THOMPSON. Thank you, Mr. Chairman. Dr. Goolsbee, thank
    you for being here. My colleague, Mr. Neal, asked that the
    independent CBO analysis be read into the record. And I would
    like to just ask you on that issue--I'm glad he did that, it's
    an important fact that I believe we need to take into
    consideration--but that analysis says--and I think you pointed
    this out, that this--repeal of this bill would actually drive
    the deficit up by about $250 billion over the first 10 years,
    over a trillion in change over 20 years.
        So, if that were to happen, and it had this upward push on
    the deficit, how would that impact business and investment in
    this country?
        Mr. GOOLSBEE. Well, I believe that the--certainly
    addressing our longer-run debt issues is an area of bipartisan
    agreement, that we do need to do that, and that to not do it
    contributes uncertainty. And so I think repealing this and
    making that problem worse would likely add more uncertainty on
    that score.
        Mr. THOMPSON. And a hit on the businesses that we're trying
    to--or hopeful will get going----
        Mr. GOOLSBEE. Could be.
        Mr. THOMPSON [continuing]. Get the economy up. Thank you.
    On the uncompensated care issue, I just want to point out I
    think everybody can find this out. I know that I did the run,
    and in my rural district in northern California last year the
    uncompensated care cost was $70 million. And the uncompensated
    care fairy doesn't deliver a check to the hospital when that
    happens. That's spread out, and the rest of us pay for that
    through higher taxes, higher insurance premiums, et cetera.
        On the 1099 issue, I think it's important to point out that
    we took up the repeal of that bill last year in congress. And I
    think everybody on this side of the dais voted to repeal that.
    So this is not a newfound issue. This is something that we
    tried to fix in the last congress.
        And I also want to point out that when this came up in the
    debate, I went out to every one of my counties and asked
    business people, chambers of commerce, as to the impact of
    that. And there was concern that it was going to be
    problematic. A lot of folks said, however, that it's just a
    matter of time before the software catches up to it, and the
    problems resolve. But everybody, irrespective of their position
    on it, noted that it was trying to solve an almost $20 billion
    tax evasion problem.
        So, as we repeal this, which we will do, we're going to
    need to figure out how to solve that problem.
        And, Mr. Chairman, on the issue of the cost going up, I
    just want to read from a statement by Blue Cross--or by Blue
    Shield of California. And I think everybody knows that premiums
    have been going up in my home state. But the head of Blue
    Shield writes, ``These rates reflect trends that were building
    long before health reform. Our individual market medical costs
    are rising rapidly, due to higher provider prices, increased
    utilization, and the fact that healthier people are dropping
    coverage during a bad economy. Health reform will help slow
    down this trend by expanding coverage, which will keep
    healthier people in the system, and, through quality and cost
    containment initiatives, such as the independent payment
    advisory board, Center for Medicare and Medicaid Innovation,
    Patient Centered Outcomes Research Institute, and other
    initiatives for prevention and coordinated health care.''
        And I would like to ask that the head of Blue Shield's
    statement specifically stating that health care reform has
    nothing to do with their increased price be read into the
    record.
        Chairman CAMP. The statement will be----
        Mr. THOMPSON. And I yield back the balance of my time.
        Chairman CAMP [continuing]. In the record, without
    objection.
        [The information follows: Mr. Thompson:]

        [GRAPHIC] [TIFF OMITTED] T0870A.006

        [GRAPHIC] [TIFF OMITTED] T0870A.007

        Chairman CAMP. Dr. Boustany is recognized.
        Mr. BOUSTANY. Thank you, Mr. Chairman. To my friend from
    Massachusetts, I have spent countless hours in emergency rooms,
    and there is a hidden tax, as you suggest. But also, your
    solution in expanding Medicaid coverage is also a hidden tax.
    And it's basically an unsustainable situation. We can do
    better.
        Mr. Goolsbee, my medical career spanned 1978 through 2003.
    And to put it in perspective for you, in medical school I saw
    the first drug to treat peptic ulcer disease, which radically
    changed not only the quality of care for folks, but the cost of
    care. And since then, of course, we have seen all kinds of
    developments in pharmaceuticals and medical devices that have
    given patients more than just a hope and a prayer. I remember
    dealing with heart attack patients, giving them an aspirin and
    a first-generation beta block. And now--you know, in my career
    we did complex open heart surgery using all kinds of assist
    devices and things that have saved lives, improved the quality
    of life.
        I can go on and on about all the problems of cost,
    coverage, quality, and so forth, but I'm going to focus on one
    particular issue. Last night the President talked about
    innovation, research and development, American competitiveness.
    And one area where we have stood out, as a country, is in our
    development of medical devices and pharmaceuticals. We are
    first and foremost in the world on this. And we stand to lose
    that competitiveness, partly as a result of what's being
    proposed here: the innovation tax, a 2.3 percent tax on medical
    devices.
        Now, let me--why is this not only a danger for innovation?
    It's also a danger to job growth, and could potentially lead to
    significant job loss. Let me just point out a couple of
    statistics.
        Sixty-two percent of the companies that develop these
    devices, that do the research and development, are very small
    businesses. Sixty-two percent have less than twenty employees.
    Only 2 percent have greater than 500 employees. These are small
    and mid-sized firms that really take on the responsibility of
    creating that innovation in research and development.
        So, my question is, will this tax on innovation run
    contrary to the President's plan to expand research and
    development? Secondly, will it hurt job growth, along with
    innovation? And, thirdly, how do you reconcile this with, on
    one hand, the President wants to extend the R&D tax credit,
    and, on the other hand, wants to impose a new innovation tax?
    This is just very inconsistent.
        So--and then, finally, as we look at tax reform and the big
    picture--and the President has talked about fundamental tax
    reform, cleaning it up, simplifying it--if you look at this
    bill, this law, it has added significant complexity to the Tax
    Code, way beyond where we were, just a year ago. And so, I
    would like you to address those three points.
        Mr. GOOLSBEE. Okay, Congressman. Well, first, let me thank
    you for your service to the country, as a medical professional,
    as well as a doctor (sic). We need more people in the medical
    profession with a commitment like that.
        I would say on the issue of medical devices the area of
    innovation, medical innovations particularly, are critically
    important, both for our health and for our industrial base. In
    this case, the medical devices fee is being offset to some
    considerable degree by the fact that there will be an expansion
    in the demand for those devices by the fact that we are having
    35 million-plus new customers----
        Mr. BOUSTANY. But, sir, that's debatable, because a lot of
    these patients are getting that care. It's just not being
    compensated for.
        Mr. GOOLSBEE. In----
        Mr. BOUSTANY. I can tell you I have operated on patients--
    --
        Mr. GOOLSBEE. I would like to see----
        Mr. BOUSTANY [continuing]. Complex open heart surgery, and
    you never saw----
        Mr. GOOLSBEE [continuing]. Including advanced devices?
        Mr. BOUSTANY. Advanced devices, as well, yes.
        Mr. GOOLSBEE. Look, this is an area--if there are areas
    that have a negative impact on innovation, we should examine
    those.
        Now, it had been our data that we first came to the table
    with, the suggestion was that the increased demand for the
    medical devices would be, in some sense, far in excess of what
    impact the charge on the medical devices would be. But we are
    open to looking at----
        Mr. BOUSTANY. You really need to look back at that
    assumption.
        Mr. GOOLSBEE. On R&D tax credit and medical innovation,
    that's an area the President has put as much or more--dedicated
    as much or more resources to medical research as anyone ever
    has before.
        Chairman CAMP. All right, thank you. Mr. Heller is
    recognized.
        Mr. HELLER. Thank you, Mr. Chairman. I appreciate holding
    this hearing. I know it's a little backwards, to actually hold
    hearings after a bill passed, but at least we will have a
    hearing on the bill. So, thank you.
        Last night--and thank you for being here, Dr. Goolsbee.
    Last night the President said, ``If you have ideas about how to
    improve this law by making care better or more affordable, I'm
    eager to work with you.'' Do you believe he meant that, when he
    said it?
        Mr. GOOLSBEE. Yes, I do.
        Mr. HELLER. Well, he said the same thing in 2010, during
    his State of the Union. Do you believe he meant it when he said
    it then?
        Mr. GOOLSBEE. Yes, I do.
        Mr. HELLER. He said it in 2009. Do you believe he meant it
    when he said it then?
        Mr. GOOLSBEE. Yes. And I hope that we will commence working
    together.
        Mr. HELLER. Well, I've got a letter here July 23, 2009. I
    wrote the President, asking him specific questions about the
    health care bill because he wanted input. July 23, 2009. He
    didn't reply to the letter. Why didn't he reply to the letter?
        Mr. GOOLSBEE. I don't know the answer to that. I apologize,
    Congressman.
        Mr. HELLER. In September 8, 2009, because I'd received no
    reply from the first letter, I wrote him another letter. And I
    think it was pretty reasonable. And I'd like to quote some
    parts from it. It says, ``I introduced the Step Towards Access
    and Reform, the STAR Act, in late July. While this legislation
    will not be a silver bullet solution to all the problems facing
    our health care system, my bill addresses medical liability
    reform, improves access to breast and lung cancer screenings,
    takes other important steps towards reform that I think most
    Americans would support.''
        I never received a response from this letter. Why didn't I
    receive a response from this letter?
        Mr. GOOLSBEE. Congressman, I don't know the answer to that.
    But I will offer to read and respond to the letter, or find
    anyone that would. I mean the--if your ideas address medical
    liability reform, other forms of screening or preventative
    care, that sounds like exactly the kind of thing that we want
    to always be on the lookout for, good ideas.
        Mr. HELLER. I guess my point is, would a reasonable person
    believe that the President had no interest in what the minority
    party at the time had to say on this piece of legislation?
        Mr. GOOLSBEE. I don't think a reasonable person would
    believe that. But I can see that it would be frustrating if he
    did not reply to the letter you sent him.
        Mr. HELLER. Would a reasonable person believe what he said
    last night, again?
        Mr. GOOLSBEE. Yes, I think they would, and I think they
    did. And I am here to say that we are open to the ideas. And I
    would be both open and appreciate to see that or other letters.
        Mr. HELLER. Do you think the President--he mentioned TORT
    reform. Do you think he is serious about TORT reform?
        Mr. GOOLSBEE. Yes, he mentioned the medical malpractice
    reform in general. There is some significant pilot projects,
    and working through the states in the bill now, and the
    President is open to looking beyond that.
        Mr. HELLER. Let me ask you a couple of other questions. Do
    you agree with the President and CBO's assessment that the
    health care bill signed into law last year will reduce
    unemployment?
        Mr. GOOLSBEE. Yes. I believe that it has the potential to
    be a job creator because of these cost-saving measures that I
    outlined in my testimony.
        Mr. HELLER. When?
        Mr. GOOLSBEE. Over the next 10 years and over the next 20
    years----
        Mr. HELLER. Well, maybe in 2014----
        Mr. GOOLSBEE [continuing]. The small business part would
    be----
        Mr. HELLER. You keep throwing out 2014. Maybe in 2014 we
    will reduce unemployment through this bill?
        Mr. GOOLSBEE. No, I think it's--the small business credits
    can have, and have had, an important impact right away, and
    there are other parts that come in in 2014.
        Mr. HELLER. Okay. So you're saying that we should at least
    have seen some impact on unemployment with the passage of this
    bill last year?
        Mr. GOOLSBEE. Over what it would otherwise be. That's the--
    that's not just my conclusion, that's the conclusion of many
    outside experts.
        Mr. HELLER. Why is Nevada's unemployment level at 15
    percent? And what impact does that have on the unemployment in
    Nevada?
        Mr. GOOLSBEE. Well, I believe that the reason Nevada's
    unemployment rate is high, like the unemployment rate in the
    rest of the nation, is because we have gone through the worst
    financial crisis since the Great Depression that has had a
    devastating impact on the economy, and we are trying to work
    our way out of that.
        Mr. HELLER. So you don't think----
        Mr. GOOLSBEE. I think the Affordable Care Act is not the--
    --
        Mr. HELLER. Okay.
        Mr. GOOLSBEE [continuing]. Cause of----
        Mr. HELLER. So you don't think higher taxes, bigger
    government, and unreasonable regulations would have anything to
    do with the unemployment rate in Nevada?
        Mr. GOOLSBEE. The taxes have actually been lower. The
    President cut taxes for 95 percent of workers, and has not
    raised taxes in that sense.
        Mr. HELLER. Thank you, Mr. Chairman.
        Chairman CAMP. All right, thank you. And because of our
    time limitations, the next questioner will be the last
    questioner for this panel. And Mr. Blumenauer is recognized for
    five minutes.
        Mr. BLUMENAUER. Thank you very much, Mr. Chairman. Dr.
    Goolsbee, I would like to go back just where you left off a
    moment ago, because this litany of somehow higher taxes and
    more regulation--if I understand it correctly in your
    testimony, you pointed out that we have had a million private-
    sector jobs added in the course of the last year. Is that
    correct?
        Mr. GOOLSBEE. Yes, 1.3 million, actually.
        Mr. BLUMENAUER. And, if memory serves, that's more than the
    net job creation of the entire Bush White House years in eight
    years.
        Mr. GOOLSBEE. I believe that is true.
        Mr. BLUMENAUER. And in terms of taxation for the--over the
    course of the last year-and-a-half, isn't it true that taxes
    were actually lower than they were prior to the President
    taking office, because of the 40-some percent of the Recovery
    Act that was tax reduction?
        Mr. GOOLSBEE. Yes, that's certainly true, and it's
    certainly true in the aggregate, as well, that the tax
    collections as a share of income are down.
        Mr. BLUMENAUER. So, to somehow have the speculative bubble
    that burst in Nevada, which is probably worse than any state,
    perhaps with the exception of what happened in Florida and
    parts of Arizona, to try and blame that on the Administration's
    high taxes and health care, isn't that kind of turning the
    facts on their head?
        Mr. GOOLSBEE. Well, I'm not----
        Mr. BLUMENAUER. Don't mean to put words in your mouth,
    but----
        Mr. GOOLSBEE. I've been to Nevada many times and enjoy it
    there. I'm not trying to get anybody mad at anybody else. I
    will say the President did not raise taxes; cut taxes, did
    everything he could to prevent a depression. And we avoided a
    depression.
        And now we are to a phase, as the President outlined last
    night, that we need to grow and innovate and compete, and he is
    open to ideas from both sides of the aisle of how to improve
    the health care act, as well as other ways to innovate.
        Mr. BLUMENAUER. Terrific. Could you comment for a moment on
    the trend line we were on, in terms of affordability of
    employer-provided health care, in terms--before we gave the tax
    credits that people--actually made it easier, and the health
    care plan actually gives an alternative to people if employers
    jettison them--under the reform act we have here, people have
    an alternative.
        But what was the trend line we are on, if the health care
    act is repealed?
        Mr. GOOLSBEE. I would say before the health care act, I
    would summarize the trend line as bad. And so, if we repeal it
    and go back to that, I think it would return to bad.
        So, I guess what I would say is that the act is attempting
    to address a series of cost drivers. It's trying to help small
    business. There are things like the 1099 aspect of the bill.
    There are other things that may need improvement.
        But I fail to see how the correct answer to some flaw is to
    get rid of tax credits for four million small businesses, to
    allow discrimination against pre-existing conditions, to
    reinstate the uncompensated care hidden tax on employers, a
    number of things in the bill that are really good, I don't see
    why we should get rid of those, rather than just fix the things
    that need to be fixed.
        Mr. BLUMENAUER. And, of course, for the record, our
    committee passed, and the House approved, legislation to fix
    the 1099. So that's something that, last congress, we were on.
        I want to just conclude on the notion of what impacts there
    are for small business. Currently, small business pays more--
    our committee has heard--pays more than large business. They
    are doing it without the--up until the Affordable Care Act--
    without the tax credits. How is small business going to be
    affected if some of my friends have their way, and somehow this
    bill is repealed?
        Mr. GOOLSBEE. If you repeal the bill, I believe it would
    have a significantly detrimental impact on small business, that
    while you can try to find an individual small business that
    fits in some place and say, ``That person would be harmed,'' we
    know, overall, four million small businesses qualify for a
    health care credit that they never had before and that they
    have wanted for decades.
        And we know that to set up exchanges that allow the pooling
    of risk will allow small businesses to get health care coverage
    and insurance at prices that are significantly lower than they
    are now, because right now they have to pay significantly more
    than large businesses do, and it's a major competitive
    disadvantage.
        Mr. BLUMENAUER. And you said this last year health care
    costs went up at a lower rate than ever before recorded.
        Mr. GOOLSBEE. It was overall spending.
        Chairman CAMP. All right, thank you.
        Mr. BLUMENAUER. I'm sorry.
        Chairman CAMP. All time has expired. I want to thank you,
    Mr. Goolsbee, for appearing before the Ways and Means
    Committee. I appreciate your testimony. And since all Members
    have not had a chance to question, I would ask you to allow
    Members to submit questions in writing, which will then become
    part of the written record of this hearing. Again, thank you
    for being here.
        Mr. GOOLSBEE. Thank you, Mr. Chairman, for giving me that
    opportunity, and I would be happy to accept any questions,
    letters, or anything else from Members of the Committee.
        Chairman CAMP. Thank you. Thank you very much. Panel one is
    concluded, and we will now move to panel two.
        While our panel gets seated, I did want to introduce our
    panel to the Committee. We have three witnesses on panel two.
        Mr. Douglas Holtz-Eakin is currently president of the
    American Action Forum, and is a commissioner on the
    congressionally-chartered financial crisis inquiry commission.
    During 2001 and 2002 he was the chief economist of President's
    Council of Economic Advisers. He previously served as the sixth
    director of the non-partisan Congressional Budget Office.
        Mr. Olivo is the president and co-owner of Perfect
    Printing, located in Moorestown, New Jersey. It was established
    in 1979. He has been president of the second-generation firm
    since 1988. It was originally established as a traditional
    retail copy center, and he has grown the business from 10
    employees to 45 employees. He co-owns the company along with
    his wife, mother, and two brothers.
        Mr. Scott Womack is a franchisee. And during his time as an
    IHOP franchisee has received numerous sales growth and
    performance awards, and was named Midwest franchisee of the
    year in 1993 and 2005, and regional franchisee of the year in
    2008 of the northern region.
        I want to welcome our witnesses to the Ways and Means
    Committee. I thank you very much for taking time out of what I
    know are busy schedules to be here, and help enlighten the
    committee on the health care law's impact on jobs, employers,
    and the economy.
        Each of you will have five minutes to give your testimony.
    There is a green light, and then there will be a yellow light,
    which gives you one minute to sum up, and then the red light is
    to conclude your testimony. And obviously, with all the people
    who want to have a chance to ask you questions, we're going to
    try to stick pretty closely to that schedule.
        So, why don't I begin with Mr. Douglas Holtz-Eakin? Welcome
    to the Committee, and you have five minutes.

     STATEMENT OF DOUGLAS HOLTZ-EAKIN, PH.D., PRESIDENT, AMERICAN
                     ACTION FORUM, WASHINGTON, D.C.

        Mr. HOLTZ-EAKIN. Well, thank you, Mr. Chairman, Ranking
    Member Levin, and Members of the Committee. It's a great
    pleasure to be here today. I appreciate the opportunity to
    appear.
        In my written testimony I sought to make four points that I
    will briefly summarize here. The first is that the mandates and
    assorted taxes in the Affordable Care Act are an impediment to
    jobs and growth in the United States, particularly at this
    moment, that on balance, the Affordable Care Act will raise the
    cost of insurance--this will crowd out scarce resources for
    hiring and for increasing pay, and directly hurt consumers--
    that the Affordable Care Act has strong incentives for
    employers to drop their employer-sponsored insurance. To the
    extent that they do so more than the CBO anticipates, we will
    not only have strong disruption in labor market contractual
    relationships, we will also have much large budgetary costs
    associated with the act than were anticipated.
        And then, finally, even if that doesn't come to pass, the
    Affordable Care Act is, indeed, a budgetary danger at a very,
    very important moment in the U.S. fiscal history, and is a
    strong step in the wrong direction.
        Let me begin by elaborating on the latter only briefly. I
    think my views on the Affordable Care Act's budgetary
    implications are, by now, well known. We are in a situation
    where the fiscal outlook is a direct threat to the U.S.
    prosperity and freedom, that to undertake this act, which has a
    wide array of budgetary gimmicks, relies on unsustainable
    assumptions for cuts in Medicare that double-counts particular
    receipts, whether they be the class act premiums, receipts into
    the Medicare Health Insurance Fund under various taxes, or
    Social Security premiums, and to otherwise omit costs from the
    legislation itself, gives a very misleading picture of the
    budgetary impact, and that any fair reading of it is that it
    increases the deficit dramatically by as much as $500 billion
    over the first 10 years.
        More generally, at the common sense level, we cannot set up
    too open-end entitlement programs that grow at eight percent a
    year as far as the eye can see, faster than the economy will
    grow, faster than revenues will grow, and not fix Medicare and
    Medicaid, and expect to improve the budget outlook. And this
    act did not.
        Turning to the labor market implications, there are many
    mandates and taxes, and these will compete for resources for
    hiring, and they produce a bias against labor. If you look at
    the employer mandate, the best outcome for employers who have
    more than 50 employees is that it's a non-event. The best thing
    that could happen is nothing; the worst thing that could happen
    is they will be subject to penalties and fines, and lead to
    drops in coverage.
        For those with fewer than 50 employees, this is a barrier
    to growth. Adding the 50th employee is a severe tax, and any
    small business is going to recognize this. There is in the act,
    as has been widely advertised this morning, a small business
    tax credit. It's important to recognize that it is temporary,
    so there is no permanent fix to this problem. It is very
    complicated. And even if someone winds their way into it, it
    has negative economic incentives for growth. If you add
    employees or pay better, you lose credits. It's a tax on your
    success, and should be perceived as such.
        There are 700 billion other dollars worth of taxes in the
    act. There are taxes, for example, a surtax on payrolls labeled
    a Medicare payroll surtax of 9/10ths percent. There is a 3.8
    percent investment--net investment tax. These have nothing to
    do with health care reform. These are pure taxes. They're
    exactly on the same group of small businesses and entrepreneurs
    that were at the focus of the recent discussion about the
    desirability of raising taxes in a recession. This bill
    replicates exactly the mistake that the previous congress
    avoided, and they will hurt jobs and growth in the United
    States.
        There are hundreds of billions of dollars of fees, whether
    they be on pharmaceutical companies, medical device
    manufacturers, or the health insurers themselves. As I lay out
    in my testimony, these can only be perceived as taxes. They
    will only show up as higher premiums in insurance. And they
    have a dramatic impact, because they are not deductible. So
    they are, almost two-for-one, more expensive than they appear.
        The upshot is that these $700 billion of taxes and fees
    will hurt the economy at a time when it can't afford it. The
    impact as well is to raise insurance premiums at a time when
    the economy can't afford it, and we have seen that on top of
    the additional benefits that the act mandates. If you have to
    cover more benefits, you have to raise premiums. There is no
    way around it. This is a bill that is going to raise premiums.
        And since it doesn't control health care costs, there is no
    offset on the basic underlying problem. We have seen that from
    CBO and the CMS actuary.
        The upshot is we are going to see continued pressure upward
    on health care cost, on insurance premiums. The taxes will
    contribute to that. And employers may drop coverage. And if
    you're a worker who has their coverage dropped, you've
    disrupted your labor market bargain. That's a bad thing for the
    labor market at a weak time. So, on top of the growth in jobs
    incentives, we have the disruption for those lucky enough to
    have a job.
        So, I would be happy to answer your questions. I am pleased
    to be here today. But I think, on balance, it is a fair reading
    of this law that it is bad for jobs and growth at a time when
    we need both.
        [The prepared statement of Douglas Holtz-Eakin, Ph.D.
    follows:]

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        Chairman CAMP. Thank you very much.
        Mr. Womack, you are recognized for five minutes. And your
    written statement will be made a permanent part of the record.

    STATEMENT OF SCOTT WOMACK, PRESIDENT, WOMACK RESTAURANTS, TERRE
                             HAUTE, INDIANA

        Mr. WOMACK. Thank you, Chairman Camp, Ranking Member Levin,
    members of the Ways and Means Committee. Thank you for this
    invitation to testify today. My name is Scott Womack, owner and
    president of Womack Restaurants, a 12-unit IHOP franchisee in
    Indiana and Ohio. I am pleased to be here today to testify on
    behalf of the U.S. Chamber of Commerce. I also come before you
    today on behalf of my company, my industry, and small
    businesses and entrepreneurs.
        My first jobs were as a busboy and a cook. After college I
    joined the grocery industry. After five years I got fired, and
    found myself starting over. I was lucky to land a job at IHOP,
    as a manager. And soon, with a $15,000 loan from my parents, I
    bought my first IHOP franchise. After 10 years I began building
    IHOP restaurants. In 2006 I purchased a development agreement
    to expand into Ohio. Now, this would mean jobs in Ohio, not
    just in my restaurants, but also in construction, real estate,
    and also manufacturing. But thanks to this new law, those are
    not going to happen.
        The restaurant industry serves an important role in our
    economy, employing 12.7 million people. I like to say it's an
    industry of first opportunities and second chances. First jobs,
    first careers, the first shot at small business ownership, and
    also second chances for people starting over, maybe from a
    forced career change or re-entering society from incarceration,
    or a second job for those people digging out of a financial
    hole. Stories like mine are born every day in the restaurant
    industry.
        The restaurant business is built on a small business model,
    with profit margins of five to seven percent. We're the most
    labor-intensive of any industry, ranking dead last in revenue
    per employee, at $58,000 per employee. This compares to retail
    at $170,000, banks at over $400,000, and other industries that
    actually bring in millions of dollars per employee in revenue.
        Now, for restaurants, this new requirement to provide
    health coverage is not just a marginal cost increase. This is a
    huge new expense. And at $7,000 annually per employee, it is
    beyond our ability to pay. So, let me just be real clear about
    that.
        Now, I estimate this to be 50 percent greater than my
    earnings. So please understand me. That is more than I can
    actually pay for the coverage. Our only alternative is to pay
    the penalties. Those penalties are not tax deductible. So that
    puts my company at risk, and many companies simply will not be
    able to pay those penalties, and will not survive.
        Restaurants are already facing many challenges, including
    rising commodity, fuel and energy prices, rising state and
    local taxes, and higher unemployment taxes. Restaurants are
    unable to raise prices in this economy. We don't have a way to
    replace the lost income. Our only alternative is to cut costs.
    Cutting costs means cutting staff. It means reducing hours. It
    means pushing people into part-time status.
        It also means that we will have to cut outside services,
    further hurting small businesses that serve my company. We will
    be forced to stop building restaurants and forfeit our
    investment. This future development would have amounted to
    about $22 million in construction and development spending, and
    260 full-time jobs.
        Another casualty of this is the restaurant equipment
    industry, which is a uniquely American industry. That industry
    has already been devastated by this recession.
        Furthermore, our lenders require us to maintain certain
    levels of profitability. Our mortgages, leases, and franchise
    agreements are commonly 15 to 20 years long. They do not go
    away in 2014. Those are obligations we cannot walk away from.
        Other parts of the law are also causing harm. I may not be
    able to continue to offer the coverage that I currently offer
    to my management staff, due to the compensation non-
    discrimination rules in the law.
        Obviously, there are other examples of issues that have
    been raised today, issues with the HSA plans, taxes on
    investments, tax on the health insurance, and of course, the
    Cadillac tax, which will eventually hit everyone.
        To that end, we are asking that Congress repeal this health
    care law. If that cannot be achieved, we urge you to address
    some of the major problems with the law. This bill is a ticking
    time bomb that will devastate our industry. A change of course
    now could end this uncertainty. Therefore, I am asking you to
    introduce and pass legislation that would repeal the employer
    mandate. The members of the U.S. Chamber of Commerce will work
    tirelessly to help you pass it.
        I thank the members of this committee for the opportunity
    to testify today, and I look forward to working with you in the
    future to fix the problems created by this law, and implement
    real market-driven solutions. Thank you.
        [The prepared statement of Scott Womack, follows:]

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        Chairman CAMP. Thank you very much, Mr. Womack.
        Mr. Olivo, you are also recognized for five minutes. And,
    likewise, your written statement will be part of the permanent
    record.

         STATEMENT OF JOE OLIVO, OWNER/CEO, PERFECT PRINTING,
                         MOORESTOWN, NEW JERSEY

        Mr. OLIVO. Thank you, Chairman Camp, and thank you to the
    Committee for not just the opportunity, but the honor to
    provide my testimony today. My name is Joe Olivo, I am a small
    business owner. And I appreciate being able to relate to you
    the concerns that I have with the health care legislation, how
    it has already begun affecting my company, and some of the
    problems I see as the plan becomes fully implemented.
        I am the president and co-owner of Perfect Printing in
    Moorestown, New Jersey. I own the company, along with my wife,
    my two brothers, and my mother. It was started in 1979, as a
    literal Mom and Pop copy center. I have run the business for
    the past 23 years. We have been very fortunate we have been
    able to grow it to a high of 54 employees prior to the economic
    downturn, and we currently have 45 employees.
        An area which is of great concern to me that's been spoken
    about today is the 1099 compliance requirements. Simply put, I
    do not have the resources in place to implement this law, to--
    the resources that I will have to put in place, as far as
    software programs and calculating and managing receipts are
    just much more than I have the resources to do.
        And I think it's important, when you think of the burdens
    that these--the legislation places on a small business, is
    thinking in the context of businesses like mine. In a good
    year, our profit is $.03 on every dollar we earn. Every time
    there is a new regulation that's put in place such as this, it
    typically comes out of that profit margin. It leaves me less
    resources in which I can grow my business, give my employee
    wage increases, and contribute to their benefits.
        A key issue for any employer is how and when to grow the
    business. My company is currently on the cusp of the 50-
    employee mark, which--we were just there 2 years ago. And at
    that point I would be legally bound to offer my employees
    insurance, or face a penalty for not doing so. Besides being
    ridiculously complex, it's my understanding that even at the--
    once I go over the 50-employee mark, I can face penalties if
    one of my employees is eligible for the government-subsidized
    plan, even if I am providing insurance.
        I'm still in the process of trying to compute the exact
    ramifications of this part of the law, but based on my current
    premium rates, the penalty is actually less expensive than the
    premium rates. So I find it ironic that the part of the law
    that is--mandates me to provide insurance to my employees is
    really an incentive not to provide insurance to them at all.
        And this takes me to the issue of what we currently offer
    our employees. I am able to pay 100 percent of the premium cost
    for my individual employees. I pay 56 percent of the family
    portion. I am able to do this because we're able to use a high-
    deductible health savings account that we instituted six years
    ago. Now, this is important, because during the debate prior to
    the passage of this legislation we heard time and time again
    that my employees would be able to keep their existing
    coverage. Within 30 days of the law's passage, I received a
    notification from my insurer that my plan would no longer be
    offered.
        So, my understanding is, because of the preventative care
    requirements and how it was treated under a high deductible
    plan, it was no longer in compliance with the law. So, after
    20-plus years of myself voluntarily providing insurance for my
    employees, and paying most of it at my own cost, I am now told
    that this is no longer acceptable to the government.
        Another area of concern to me is the tax credits that have
    been mentioned today that were promised to small business
    owners to help us pay for insurance. This point was made over
    and over, and even persuaded some in the small business
    community to support this plan, because they felt it would be a
    net positive for them.
        I can say now that I have checked the tax credits for my
    company of 45 employees, and we are not eligible for a single
    dollar in tax credits. I have learned from fellow small
    business owners. I spoke to a woman that owns a bridal salon
    with three employees, and she had spoke to her accountant. She,
    too, is not eligible for a single dollar in tax credits. So,
    these are the issues that I know have already begun affecting
    my business.
        But it's the unknown that causes me as much or greater
    concern. You have to understand. When I grow my business, when
    I take financing to buy a new press or increase the investment
    in my business, I put my personal assets on the line. I put my
    home on the line as collateral, my family's home on the line as
    collateral. When you have this much unknown, and unknown cost
    certainty in a law--and I challenge anyone on this committee to
    tell me what my health care cost will be two years from now--it
    creates much less of an incentive for me to take the necessary
    risk.
        So, I will leave you with this, as I hand over the
    microphone. My story is personal, but it is by no means unique.
    There are hundreds of thousands, if not millions, of small
    business owners across this country facing the same issues. And
    how can we ask those businesses to help the economy prosper,
    yet put a drag on one of the main engines of economic growth?
        Chairman CAMP. All right.
        Mr. OLIVO. Thank you.
        [The prepared statement of Joe Olivo follows:]

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        Chairman CAMP. Thank you all for your testimony. We will
    now go to the questioning period. And as I indicated, we will
    pick up where we left off. And so, Mr. Roskam is recognized for
    five minutes.
        Mr. ROSKAM. Thank you, Mr. Chairman. I just want the record
    to reflect that I respond promptly to emails and letters from
    Dean Heller, and even shoves in the elbow.
        Mr. Holtz-Eakin, I'm sure you watched the speech last night
    that the President gave. And one of the things that struck me
    was his presentation of, really, a straw man argument, and that
    is the assertion--we even heard that asserted today from Mr.
    Goolsbee--that we don't want to go back to the days of, you
    know, folks being pressed out and not included on pre-existing
    conditions.
        There is really nobody that's proposing that. House
    Republicans, Chairman Camp authored, I think, a very thoughtful
    piece of legislation that dealt with that through high-risk
    pools. Could you comment sort of generally on this whole notion
    of two different visions?
        Dr. Boustany mentioned this in responding to Mr. Neal when
    he said, ``Look, the underlying premise of this new law is to
    expand coverage by putting people on Medicaid.'' You alluded to
    this in your brief opening statement about entitlements
    outpacing the economy in general. Could you just give us a
    couple more thoughts on that?
        Mr. HOLTZ-EAKIN. Well, certainly, thank you. And with all
    due respect to the President, I think it is a straw man
    argument. If you roll the clock back to the beginning of the
    debate over health care reform, there was a bipartisan
    agreement that it would be desirable to control the growth of
    health care spending in the United States, and to cover more
    Americans with affordable options. That's a bipartisan
    objective.
        The difficulty is that this law doesn't control costs. And
    unless that is done, you will never be able to control
    insurance costs. And thus, even someone who has insurance will
    find it unaffordable.
        The second thing I would say is that there are severe
    problems in using Medicaid as a source of coverage expansions.
    Having a piece of paper that says, ``I'm a Medicare
    beneficiary'' does you no good if you can't see a provider. And
    Medicaid beneficiaries are denied providers, you know, at much
    higher rates than Medicare or private insurers. About half of
    them can't find primary care physicians. So they end up in
    emergency rooms at twice the rate of even the uninsured. That's
    not a solution to a coverage problem.
        The third thing I would say is there is a competing vision.
    The other vision is genuinely controlled health care costs.
    Give people control of their money, use those resources wisely,
    allow them to choose insurance that fits their family
    circumstances, their lifestyle, and make insurers compete,
    whether it be across state lines, or more vigorously within
    states, so that you get decent insurance options and underlying
    control of the costs. That's another route to the same two
    goals. But it's a shared goal, and it always has been.
        Mr. ROSKAM. Thank you. Mr. Olivo, the previous witness, Mr.
    Goolsbee, said that there is a great deal of confusion about
    the health care law. And I was kind of thinking about that, and
    I was listening as he asserted that.
        And, in one element, I would agree with that. There is
    confusion. There is a great deal of ambiguity, for example,
    about who gets exemptions from the Administration. There is
    about 200 businesses or unions or other groups that have been
    exempted. Apparently it's an exemption program that's only
    based on their initiative. In other words, you have to ask for
    it, it's not a blanket exemption. And it's not a permanent
    exemption, it's a one-time exemption. So there is a great deal
    of ambiguity and uncertainty, and you alluded to that.
        But at another level, there is a real sense of clarity
    about the health care law. For example, you figured out that
    the cost pressures on you are making a dynamic such that it
    might make more economic sense to your bottom line not to offer
    coverage, and to have folks go into the pool. You figured out
    that you're knocking on the door with 45 employees. Once you
    hit a 50-employee trigger, then your world changes on a whole
    host of things.
        Could you reflect on how it is that the health care law,
    and that sense of clarity that I have articulated, how is that
    driving the business decisions for you and your family, as
    you're trying to move this company forward?
        Mr. OLIVO. Thank you for your question. Yes. I mean the
    health care--the problem with the health care, the expenses
    have increased so much, especially against any other expense
    within my business. And you have to understand, like I had
    pointed out, is when we invested and put our personal assets up
    for collateral, I don't have the luxury of being wrong in my
    assumptions.
        So, when there are these costs, and I feel that there is
    costs that are unknown in addition to that, I have no choice
    but to be reflexively--take much less risk--maybe not buy
    another press or hire that extra employee until it's
    absolutely--I absolutely have to have them. So it really forces
    me to be much more conservative in how I invest in the
    business.
        Chairman CAMP. Thank you. Mr. Buchanan is recognized.
        Mr. BUCHANAN. Thank you, Mr. Chairman. Mr. Eakin, I wanted
    to ask you a question, because I get asked this a lot back
    home. And I think the ranking member had mentioned it.
        How in the world can you add 32 to 52 million people, where
    you give either free or highly subsidized health care, and
    think, even though there is a third party out there that says
    that the deficit--we'll reduce the deficit, where are they
    coming up with this information, other than in Washington?
        Mr. HOLTZ-EAKIN. Well, on the substance, I believe I've
    been very clear. I do not believe that this reduces health care
    costs. And if you add that many uninsured people to the pool,
    they will use more health care services. And all the evidence
    is health care costs will go up.
        With regard to the CBO's estimate of the budgetary impacts
    of the bill, my gripe is not with the CBO, which does its job
    under the rules that the Budget Act imposed. My gripe is with
    the drafters of the law, who used the Budget Act rules to make
    sure that CBO came up with exactly the answer they wanted, even
    though it was in defiance of economic common sense.
        Mr. BUCHANAN. Yes, and I just want to say I was chairman of
    the Florida Chamber, and chairman of our little Chamber, and we
    had about 2,500 businesses, locally. This has been, by far, the
    biggest issue in the last 10, 20 years. This isn't something
    that's happened the last couple of years. Everybody is
    challenged. I get hundreds of stories, but everybody is
    challenged.
        And that's why I don't understand, if people really get out
    and talk to businesses in their community or not. Being in
    business 30 years myself, and not a career politician, I can
    tell you this is drowning a lot of businesses.
        I was in a business this week, one of the largest private
    employers in our region. His health care cost, he told me, went
    up a million-and-a-half dollars. Now, maybe he has 400
    employees or 300 employees. If that's not job killing--that's
    his point to me; I know they don't like that term--but when
    your premiums are going up, the CBO, I think--no, the CEO
    roundtable mentioned that health care costs for a family of 4
    are about $10,000 in corporate America. They say in the next 10
    years, with this health care bill being considered, it's going
    to go from $10,000 to $30,000.
        I was at another small business--I wasn't there to talk to
    them about--they wanted to talk to me about private pharmacy.
    And he said, ``By the way, Mr. Congressman,'' on the way going
    out, he said, ``I want to show you this,'' and he brought out
    his bill. Just got his increase a couple of weeks ago. Another
    23 percent increase. So, everybody is going up 23, 30 percent a
    year.
        My experience is you get a bill and it's 28 percent, and
    you say, ``Oh, my God, and you start working towards trying to
    get it down to 18. You cut some benefits, you have the
    employees pay a portion of it.
        So, again, I don't see--and I think the ranking member
    mentioned our expenses are going to go up there--I don't see
    the offsets anywhere. I think this is a $1 trillion large
    entitlement going forward, and it does little or nothing for
    small businesses in the country.
        And I think it is--however you want to look at it,
    personnel expense used to be 20 percent of the payroll, or
    whatever, benefits 20 percent of what you paid someone. Today
    there is a general feeling out there, ``Do you want the salary,
    or do you want the benefits, but you can't have both.'' And
    that's what is driving, I think, a lot of things up here.
        Let me mention--you had mentioned about being in the
    printing business, and I was in the printing business for a lot
    of years. How much has your cost gone up, say, in the last five
    years and then the last year, this year and then next year? Do
    you see a general trend, or a percentage increase over, let's
    say, 6, 10 years? Pick a number.
        Mr. OLIVO. I would say the last 10 years the renewal for
    our existing policy has never been less than 12 percent, and
    has been as high as 49 percent. So every year we are faced
    with, as you described, the task of re-evaluating what type of
    new policy are we going to have to implement in order to
    provide coverage, to the point that we're still able to provide
    a plan that we pay 100 percent of the premium cost for our
    employees.
        Mr. BUCHANAN. And then let me--Mr. Eakin, one other thing I
    touched on earlier today--I had to step out. But we have people
    that have talked to us about this medical tax. And I think one
    of our surgeons mentioned something about that. Many of them
    are telling me that they're going to pay more in tax than they
    will even make in profit, this 2.3 percent tax.
        The fact of the matter is there is--the medical device
    industry has about 400,000 employees in the country, and
    another--indirectly, about 2.5 million people--2 million jobs
    that's being created. And they said if this tax goes into
    effect, it's going to really impede their ability to grow their
    companies. Do you have a thought on that?
        Mr. HOLTZ-EAKIN. Well, as I laid out in the testimony,
    there are only a couple of possible outcomes. Number one, they
    eat the tax, but they don't have the financial resources to do
    it, so they will probably go out of business. Number two, they
    take it out of employee costs. That means lower wages, fewer
    jobs, bad for struggling labor market. Or, number three, you
    pass it on to consumers in the form of higher prices. If
    medical devices are more expensive, insurance is going to be
    more expensive, and the problems of employers get multiplied.
        And, as I mentioned, there is a perverse aspect of these
    taxes in the bill, which is that they're not deductible. So, to
    just break even, if you have $1 of tax, you have to have $1.54
    in additional revenues. So you have to raise prices a lot, and
    that's a big pressure upward on premiums in this law.
        Chairman CAMP. Thank you. The gentleman's time has expired.
    Mr. Pascrell is recognized.
        Mr. PASCRELL. Thank you, Mr. Chairman. I want to just
    respond first to Mr. Buchanan's remarks. What you have
    described is unsustainable, the exact situations which you have
    described.
        Between 2007 and the passage of health reform, I had many
    small businesses--I have a small business advisory committee.
    And the increase in their health cost was between, on average,
    28 to 40 percent a year. Health care reform, or as some on the
    other side would like to refer to it, Obamacare--and they say
    it with such love and charity--you can't sustain those numbers.
    I don't mean you, personally. We can't.
        And those businesses, 60 percent of them, are no longer
    doing any business. They're done. The primary cause of those
    businesses closing their doors--the primary cause; there are
    other causes--is what they have paid in their premiums.
        And I want to talk to you, Mr. Olivo, fellow Jersey guy.
    What's interesting, I read a little bit about what you said,
    because I came in a few minutes late. But I want you to think
    about this. Ninety-five percent of businesses are exempt from
    employer responsibility requirements. I just wanted to start
    with that.
        Now, I think there is a possibility--I'm not saying this is
    guaranteed or for sure--that it sounds like your carrier might
    have pulled a fast one on you, and I will tell you why. When
    they raised your rates and lowered your benefits last year--by
    the way, that's not unfamiliar to any of us--and we were a good
    scapegoat. Obamacare was the perfect scapegoat before it even
    went into effect. ``We'll blame this bill, which will become an
    act, on whatever we do this year.'' You saw what happened in
    California. It's a scapegoat. And we expect that. We're all big
    people, we understand what happens in a political debate.
        You stated that your insurance carrier informed you that
    they would be--not be renewing your high-deductible coverage
    due to the preventative health benefits in the new law. Are you
    aware of the fact that the new preventative benefits don't
    apply to plans such as yours that are grandfathered? I would
    ask you--I ask that rhetorically. I just want you to think
    about that.
        And are you aware that the new--the IRS rules, not the new
    IRS rules--permitted high-deductible plans to waive the
    deductible for preventative services, even before reform was
    enacted?
        You know, I get a charge--I get a big charge--out of
    listening to folks tear this thing apart. Someone on the panel
    made this statement in a magazine that, ``The elimination of
    denial of coverage for pre-existing conditions, and the
    elimination of the lifetime limit, those things drive up costs.
    Premiums are going to go up in the short run if we don't take
    into consideration pre-conditions.''
        This is a battle. There is no question about it. We battle
    civilly here between what the insurance companies want out of
    this and what the patient really needs, so we can really drive
    down the cost.
        We agree over the last 10 years premiums have skyrocketed.
    You and I both agree with that, two Jersey guys here. Families
    face bankruptcy due to medical bills. We agree.
        Mr. OLIVO. Certainly.
        Mr. PASCRELL. Okay. And competition decreased--I go through
    each state--in the insurance industry. In fact, you know, the
    average state, there are two or three people, companies,
    writing insurance. That's a good situation. Not for us, but for
    somebody else.
        I haven't heard any response about those kinds of things.
    And why should you? You've got a script. Let's follow the
    script. The number of uninsured individuals grew that now, 1 in
    5 young Americans under the age of 65 are uninsured. Those are
    the numbers from the Kaiser Foundation. These conditions are
    not ideal.
        Nine months after health care reform, I am proud to say
    that change is already underway. And I would conclude my
    remarks that if health care reform is bad for business, why
    have over 120 businesses in my state, New Jersey, received
    grants to support groundbreaking biomedical research on
    pancreatic cancer, brain injury, Alzheimer's, and more? This
    money supports jobs.
        Well, I have 150 employers in my state enrolled in the
    early retiree reinsurance program. Cities like Newark,
    Paterson, Clifton, all enrolled. And even big businesses, such
    as Johnson & Johnson, Mercedes Benz are enrolled in the
    program.
        Chairman CAMP. The gentleman's time has expired.
        Mr. PASCRELL. They see the benefits.
        Chairman CAMP. Thank you for concluding.
        Mr. PASCRELL. And I thank you, the panel, for telling us--
    --
        Chairman CAMP. Mr. Smith is recognized for five minutes.
        Mr. PASCRELL [continuing]. What you did.
        Mr. SMITH. Thank you, Mr. Chairman, and thank you to the
    panel for sharing your expertise and insight. Mr. Holtz-Eakin,
    if you could reflect a little bit on uncompensated care, is it
    conceivable that even Medicaid would fall into a category that
    a hospital would perceive to be uncompensated care?
        Mr. HOLTZ-EAKIN. Yes, there are two large forms of cost-
    shifting in the insurance industry. One is from uncompensated
    care, the traditional someone walks into an emergency room
    uninsured, gets care, and has to be covered somewhere, and the
    second is the shifting from government programs, where Medicare
    pays about $.70 on the dollar, relative to private insurers,
    and Medicaid pays even less, roughly $.50 to $.55 on the
    dollar, depending on where you are. And those gaps have to be
    made up elsewhere, as well. So, those are shifted under private
    health care costs.
        Mr. SMITH. And, I mean, is it your assertion as well that
    the health care bill does immensely grow the Medicaid rolls?
        Mr. HOLTZ-EAKIN. Half of the coverage expansions come
    through Medicaid expansions. Sixteen million Americans will be
    put into a system that involves considerable cost shifting on
    to private insurance, and which, at present, they are twice as
    likely to go to E/R's, instead of having that care on a regular
    setting, and where they can't find a--particularly a primary
    care provider at anywhere near the rates other people can.
        Mr. SMITH. Would it be conceivable that any federally
    initiated medical liability reforms, that they might pre-empt
    some state medical liability laws?
        Mr. HOLTZ-EAKIN. There is the option always for federal
    pre-emption. And so it would depend on how the law was written.
    But we do know that state-level experience has shown that a
    variety of different malpractice reforms have been effective at
    controlling some of the costs, and that if you had a strong
    federal pre-emption that applied universally, you would have a
    much bigger impact.
        Mr. SMITH. I say that because I am a little bit nervous
    that Nebraska might lose its rather optimal scenario, given its
    medical liability----
        Mr. HOLTZ-EAKIN. Draft carefully, sir.
        Mr. SMITH. Duly noted. And I appreciate the business
    perspective shared here this morning, as well, certainly
    reflective of many of my constituents, some of whom have said
    they have held off hiring new employees, simply because of the
    unknowns contained in the health care bill.
        So, with that, in the interest of time, I will yield back.
    Thank you.
        Chairman CAMP. Thank you very much. Mr. Schock is
    recognized.
        Mr. SCHOCK. Thank you, Mr. Chairman. I too will be brief. I
    have questions for the business owners.
        You know, last year the President said his major focus in
    2010 would be jobs. In 2011, last night in the State of the
    Union, he said his major focus will be jobs. So, as two
    employers, I'm kind of curious, specifically with regards to
    how the health care bill is going to affect jobs, particularly
    those opportunities for the young people in America who rely on
    part-time employment through their high school and college
    years to supplement their income to pay for education, which
    the President talked about last night being so important to
    America's competitiveness in getting long-term gainful
    employment for their futures.
        Scott Womack, you mentioned that you have 800 employees.
    And I'm wondering if you have studied this bill--which it
    sounds like you have--the effect on what this will mean for
    your ability to hire part-time employees, considering the bill
    really, from what I'm hearing from my employers in my district,
    almost incentivizes doing away with part-time employment, and
    really consolidation of the number of employees you have.
        Is that what you've found? Or how do you see, if this bill
    is implemented as it stands now, will affect the employment
    opportunities you can provide?
        Mr. WOMACK. Well, thanks for the question. Actually, it
    incentivizes moving people from full-time status to part-time
    status. That part-time and hourly job market right now is
    absolutely saturated with people, people who are not working.
        So, the reality is that we will be looking to get people
    under that 30-hour threshold, wherever we can. So I don't see
    it helping at all.
        Mr. SCHOCK. And of the 45 employees who are full time that
    you offer health insurance to, how many of those 45 take your
    health insurance?
        Mr. OLIVO. That would be my company. Currently, out of
    those 45, I believe it's approximately 30 take the coverage.
        Mr. SCHOCK. And do you know the other 15, do they not take
    it because their spouse or someone else offers----
        Mr. OLIVO. That is correct. No one in my company is
    uninsured.
        Mr. SCHOCK. So it's not too bad that 30 out of your 45 seem
    to think your health care is a preference, and using the term
    in the bill, is ``adequate'' coverage.
        Mr. OLIVO. Yes. Their biggest complaint would be--is the
    cost of the premiums on the family side. But, yes, the coverage
    is great. They feel it's very fair.
        Mr. SCHOCK. Do you know if your health care coverage that
    you offer now is going to meet the minimum standard in the new
    law for adequate health care coverage?
        Mr. OLIVO. The coverage that we offered in 2010 will not.
    We have already been notified of that, because of how
    preventative care is treated.
        Mr. SCHOCK. And how much do your agents or your third-party
    administrators suggest--how much will your insurance premiums
    increase to meet the new standard?
        Mr. OLIVO. We just got our premium increases in the other
    day. It's a 12 percent increase in premium, but also a
    significant increase in how emergency room visits are treated.
    It's much more costly to go to the emergency room,
    significantly more.
        Mr. SCHOCK. And so, what will the cost per premium, on the
    average, be for you?
        Mr. OLIVO. For an individual, the cost per premium in the
    coming year will be approximately $280 per month per
    individual.
        Mr. SCHOCK. Have they looked at what the--when the bill is
    fully implemented in four years, what it will cost for you to
    be able to provide that minimum adequate health care coverage,
    as specified by the law?
        Mr. OLIVO. I have no way of computing that at this point.
        Mr. SCHOCK. Oh. I would ask your third-party administrator
    to do that, because I'm sure they're doing that.
        So, thank you very much for your comments here today.
        Chairman CAMP. Thank you. Mr. Kind is recognized.
        Mr. KIND. Thank you, Mr. Chairman. I want to thank our
    panelists for their testimony here today.
        Mr. Chairman, from my perspective, I think today's
    discussion is very healthy, and I would encourage you to hold
    more hearings in regards to the Affordable Care Act, because
    there is some belief out there that with the passage of the
    Affordable Care Act, that somehow the discussion ends, and it
    doesn't, that somehow the work ends, and it shouldn't. I think
    we will be judged, ultimately, in this congress and future
    congresses, by working hard to find out what's working in the
    health care system and what isn't, and making adjustments along
    the way.
        So, getting testimony like this, and feedback in regards to
    the shortfalls which all of us are trying to accomplish, I
    think it's going to be helpful.
        But there has been a lot of discussion in regards to job
    creation, and what the Affordable Care Act means in that
    regard. Now, let's just recall. We've had 11 consecutive months
    of private sector job growth in this economy, since the passage
    of the Affordable Care Act. We have had 1.1 million new private
    sector jobs that have been created. Over 207,000 of that is in
    the health care industry, alone.
        And I don't know how many of you saw a recent Forbes
    article that was printed in the Forbes magazine, but a recent
    article in Forbes highlights how small business tax credits in
    the reform law are already helping small employers deliver
    health care coverage to their employees. According to Forbes--
    we'll just look at the facts, here--insurance companies are
    reporting a significant increase in small businesses offering
    health care benefits to their employees.
        For example, United Health Group, the nation's largest
    health insurer, added 75,000 new customers working in
    businesses with fewer than 50 employees within the last year.
    Coventry Healthcare, a large provider of health insurance to
    small businesses, added 115,000 new workers in 2010,
    representing an 8 percent increase. Blue Cross Blue Shield of
    Kansas City, the largest health insurer in the Kansas City
    area, reports an astounding 58 percent increase in the number
    of small businesses purchasing coverage in their area since
    April of 2010.
        Repeal of the Affordable Care Act, as my colleagues last
    week voted for, would entail the largest tax increase on small
    businesses in our nation's history--16,000 small businesses in
    western Wisconsin alone will see their taxes go up, who are
    today benefitting from these tax credits under the Affordable
    Care Act. Over four million small businesses nationwide are
    taking advantage of the tax credits, so they can better afford
    health care coverage for their employees.
        And what's ironic--and, Mr. Olivo, I appreciate your
    testimony here today--but the health insurance exchange that
    we're setting up for small businesses and for family and
    individuals was based on the ``shop act'' that I, in a
    bipartisan fashion, had introduced in previous years that NFIB
    endorsed. The creation of an exchange, so small businesses
    finally have a chance to go and shop with complete
    transparency, so you know what the costs are and what the
    benefits would be, coupled with tax credits, which we did in
    the Affordable Care Act, is something that small businesses
    have been calling for for years. And it's part of this bill
    right now.
        But I think, ultimately, we are going to be judged on
    whether this works or not, depending on whether we have the
    ability to bring costs down.
        And here is another bipartisan idea that's in the bill. We
    have to change the way we pay for health care in this country.
    It's as simple as that. The current fee for service system
    under Medicare is all based on volume payments, regardless of
    results. This is crazy.
        And right now we have an Institute of Medicine study, two-
    year study as part of the reform bill, that calls on them to
    change the fee-for-service system to a fee-for-value
    reimbursement system. They will present an actionable plan to
    the Administration, the IPAB Commission, to implement. And this
    is something that Newt Gingrich has been talking about for
    years, that Dr. Frist is still talking about today. Tommy
    Thompson at HHS told me that if we do one thing with health
    care reform, change the way we pay for it, starting with
    Medicare. Because whatever we do in Medicare is going to drive
    the private health insurance market.
        But it goes even beyond that. Health insurance companies
    from East Coast to West Coast have been calling for payment
    reform for years. Large providers, which are models of health
    care delivery systems, highly integrated, coordinated, patient-
    focused, from Innermountain to Mayo to Geisinger to Cleveland
    Clinic to Gundersen to Marshfield have been calling for this
    very thing that we finally have the tools in health care reform
    to accomplish. We start with accountable care organizations in
    the innovation center, telling providers, ``We want you to be
    creative, we want you to innovate, we want you to deliver high-
    quality care at a better cost.'' This is where we need to drive
    the health care system.
        But ultimately, if we stick with the fee-for-service system
    under Medicare, we will bankrupt our nation, because we will
    never be able to keep up with the cost, all based on volume
    payments, regardless of quality, regardless of outcome. And
    this is crazy. We finally have the ability now to do something
    about it, if we play it through. You don't change the way you
    pay for one-fifth of the U.S. economy overnight. It's not going
    to happen. It's going to have to be transitioned. And we
    instituted that in the reform bill, as well.
        So, I would hope that we will have a chance to come
    together in a bipartisan fashion again, talk about the payment
    reform, which can really lead to cost reduction for everyone,
    so that health care is something that will be affordable to
    businesses large and small, and to individuals throughout this
    country.
        Chairman CAMP. Thank you.
        Mr. KIND. Thank you, Mr.----
        Chairman CAMP. Thank you. Mr. Lee is recognized.
        Mr. LEVIN. We have to vote, don't we?
        Chairman CAMP. Yes.
        Mr. LEE. Thank you, Mr. Chairman, and I want to thank our
    panelists for being here. I can't help but be a little
    skeptical, after hearing the President's State of the Union
    Address, as well as the first panelist, Mr. Goolsbee's
    testimony, when it comes to the reality of this health care
    bill that we're dealing with.
        If you remember last night, the President talked about in
    his speech with the dysfunctionality of our government when he
    used the example of the Interior Department is in charge of
    salmon when it's in fresh water, but when it's in salt water
    it's the Commerce Department, and if it's smoked, God knows
    where.
        Ironically--and I would ask this to Mr. Holtz-Eakin--isn't
    it true that this new health care bill will, in fact, create
    upwards of 160 new agencies, bureaus, and commissions? So, in
    effect, he is actually adding to the problem, rather than
    fixing it?
        Mr. HOLTZ-EAKIN. The exact number has always been hard to
    figure out, but that's a safe guess.
        Mr. LEE. I agree completely. The other point, too, as you
    brought up now, the issue of the 1099. It is very apparent, in
    my eyes, that this was more or less a cash grab. This was put
    into the bill--if you're a small business owner and you do not
    have an accurate tax ID number, you're on the hook, and have to
    withhold 28 percent, as the small business owner.
        Again, these are huge costs on someone who is trying to get
    by day in and day out. And I am learning from both Mr. Womack
    and Olivo, that, in your mind, this health care bill, is it
    more likely or less likely for you to go out and hire people at
    this point?
        Mr. WOMACK. Well, without a doubt, it's created a
    tremendous amount of uncertainty. And it's frozen credit
    markets, as far as restaurants go. Those are just now starting
    to loosen up. But as we get closer to this, and the
    implications become more clear, credit markets are going to
    freeze up, it's going to be harder to borrow money to build new
    restaurants.
        The other thing is that, as I stated earlier, the only way
    to pay for this in our business is to cut costs. And we are a
    lean, mean industry now. We don't have a lot of fat. And the
    things that we can control are payroll, and to minimize the
    impact of these penalties. So that means cutting jobs. It
    doesn't mean adding jobs.
        Mr. LEE. We're getting to the tipping point where risk
    reward no longer makes sense for someone to go out, as a small
    business owner, and take his dream and go out and start a
    business.
        The other--maybe I can bring this back to Mr. Holtz-Eakin,
    with regards to Medicaid, I have the luxury of living in New
    York State, which has, far and away, the highest Medicaid
    expenses. I think if you compare it next to equivalent states
    like Florida and Texas, where their economies are doing
    relatively better, the same number of citizens living in that
    state, but literally twice the Medicaid expenses.
        With the passage of this bill, ultimately, is it going to
    increase or decrease the Medicaid costs that we're seeing in
    New York State?
        Mr. HOLTZ-EAKIN. I think the states are at great risk. They
    are obligated to honor the expansions under the Affordable Care
    Act. They may get additional payments from the Federal
    Government for that, but they have to pay full freight on any
    current eligibles who now show up and take up benefits. And I
    think the real risk is that, in advertising the Affordable Care
    Act, we're going to draw out of the woodwork a lot of existing
    eligibles, and New York State will have to pick up their full
    share of their cost.
        Mr. LEE. At a time where to start a small business in New
    York State, it is a huge obstacle. And, again, I--as someone
    who has run a small business, I just see this as a further
    death knell for the creative side of what made this country
    great.
        And I would say the same thing deals with the medical
    device tax. When we are trying to--I come from manufacturing.
    When we're--the President spoke again, the contradiction of
    talking about in helping businesses thrive, we're going to go
    now and add a tax onto a business.
        Again, Mr. Holtz-Eakin, in your view, is this going to help
    our manufacturers in the health-related device industry
    compete? Is it going to help or hurt them?
        Mr. HOLTZ-EAKIN. This is an additional cost for our device
    manufacturers on the international market. It's going to hurt
    their competitiveness.
        It's also one of many taxes that, if you just look at pure
    macro economics, the evidence is that discretionary tax
    increases--of exactly this type, things that have nothing to do
    with the business cycle, you just do it for other purposes--the
    evidence of Christie Romer, the former chairman of the Council
    of Economic Advisors, is that they are three times more
    detrimental to the economy than equivalent spending changes.
        So, if you look at this act as a whole from that
    perspective, the tax increases' negative impacts far outweigh
    any possible benefits of the spending.
        Mr. LEE. Thank you.
        Mr. HERGER. [Presiding.] The gentleman's time has expired.
    The gentlelady from Tennessee, Ms. Black, will inquire for five
    minutes.
        Mrs. BLACK. Thank you. Thank you again, panel, for being
    here. It looks like I'm the last one here, but the audience
    will still hear this question. And all of you can answer this
    question, but I think, Mr. Womack, you particularly talked
    about health care savings accounts.
        And continuously, the Administration has claimed that the
    health care law is giving Americans more freedom in their
    health care choices. And, in reality, this law is really going
    to force many Americans to buy a product which is a government
    defined health care product. In addition to that, he, President
    Obama, also promised that the American people, if they liked
    their current health care insurance, they would be able to keep
    it.
        But as we see in the law, it will limit the use of health
    care savings accounts. And being in the medical field for a
    number of years--40 years now--I think that one of the things
    that we have seen that has driven the cost of health care up is
    that we have taken the consumer out of the driver's seat, and
    they are not making choices.
        And I was very excited about maybe expanding this product,
    because it would give an opportunity to put somebody back in
    the seat that wants to be in the seat, and it would also give
    more opportunities for different vehicles, rather than a set
    type of insurance that most employers do have and offer to
    their employees.
        Mr. Womack, I think you're the one that mentioned about
    health care savings accounts, and all of you certainly can
    respond about where you feel that this might help companies, if
    they were given that choice, to use those as compared to being
    forced into a certain product or a certain type of care.
        Mr. WOMACK. Thank you. And I am a Knoxvillian, believe it
    or not.
        Mrs. BLACK. Oh, great.
        Mr. WOMACK. Yes, nice to see you. We were faced with huge
    premium increases last year. And I can't remember the number,
    because we were bidding and we saw so many different numbers,
    but it was in the neighborhood of 30 percent. And so, we
    decided to go ahead and look at an HSA, and we did begin to
    offer an HSA as an option to our managers.
        And I have my own HSA story. My wife had an MRI ordered
    recently by the hospital, at a cost of $1,100. And someone
    said, ``You need to shop that around.'' And so we went out and
    into a diagnostic facility, literally just down the road, and
    got the same procedure for $350. Truthfully, I don't know that
    we would have even thought about that, had we not been using an
    HSA, where we were spending the money out of our account,
    ourselves.
        So, it's that type of story that gets told over and over
    and over in HSAs. They're just a huge benefit. When you put the
    individual more in touch with their own spending, they will
    find ways to control it. And they get to keep that money in the
    account and roll it forward. And it's just--it's a beautiful
    plan that should not be impeded. We shouldn't do anything to
    hamper HSAs. Thanks for the question.
        Mr. OLIVO. I would say, very quickly, I have a similar
    story. We put the health savings accounts in six years ago, and
    the first year the employees resisted it, did not like it. But,
    over time, they have grown to appreciate. Those that take care
    of themselves have seen their savings accounts grow.
        And I, too, have seen instances where employees had exams
    or scanning type of tests to be done, and were able to go
    online and literally save a couple thousand dollars because
    they were able to research it themselves, and there was an
    incentive there to do so.
        Mrs. BLACK. Yes, Mr. Holtz-Eakin.
        Mr. HOLTZ-EAKIN. Yes?
        Mrs. BLACK. Do you have a comment?
        Mr. HOLTZ-EAKIN. Oh. Well I don't have the business
    experience of these gentlemen. But certainly in the alternative
    reforms that were envisioned in the debate leading up to the
    Affordable Care Act, one version is to put consumers at the
    centerpiece of this one-fifth of the economy, in the same way
    that they have driven the other four-fifths, to be the largest,
    strongest, economy on the planet. And then, you know, require
    insurers and providers to compete in price and quality. And
    that's a very different vision than what we see in this law.
        Mrs. BLACK. Thank you. I yield back my time.
        Mr. HERGER. The gentlelady yields back. The gentleman from
    New York, Mr. Rangel, is recognized for five minutes.
        Mr. RANGEL. Thank you, Mr. Chairman. And let me thank this
    panel for sharing with us the problems that you're having with
    this legislation, especially those of you who work every day in
    dealing with employees.
        Tell me. Both of you, and certainly the Chamber, advocate
    repeal of the law that the President signed. Is that correct?
        Mr. WOMACK. Yes, it is.
        Mr. RANGEL. And you don't have a plan that you're
    recommending. Do you--strike that.
        You think that we're better off without any changes in the
    law, than to enforce or to amend the existing law?
        Mr. OLIVO. I could say from my vantage point, as a small
    business owner, that for--I look at it as action/reaction. For
    Congress--what Congress has passed, I'm seeing far more
    significant reactions to any positive that this will bring to
    my employees.
        Mr. RANGEL. I can understand that. But my question--and I
    don't have any experience at all in hiring employees--is that,
    as a business man--and I know you can't speak really on this
    issue, Mr. Womack, for the Chamber--but for yourself, with your
    businesses, you would rather see the government just stay out
    of it, rather than to amend or try to correct the existing law.
    Is that your position?
        Mr. WOMACK. Oh, I guess I've gotten used to the government
    being in the middle of things, and I don't say that
    sarcastically. We anticipate some sort of change----
        Mr. RANGEL. Do you have--I'm concerned what happens if we
    just stop this, and--are all of your employees, one way or the
    other, covered by some type of health insurance?
        Mr. WOMACK. I don't believe so. And----
        Mr. RANGEL. So you do have employees that are uninsured
    that you would want to see insured, as anybody would, just--
    right?
        Mr. WOMACK. Absolutely. But the problem is----
        Mr. RANGEL. Do you have any idea as to how you would want
    to insure these people that are uninsured, other than what has
    been recommended and passed by the Congress?
        Mr. WOMACK. No. And the reason is very simple. We're
    talking about more money than is available. We don't have the
    money.
        Mr. RANGEL. And so--listen. The problem we're facing--there
    is sharp differences of opinion here. The National Business
    Group on Health indicates that they don't think they can get a
    better solution to the problem I mentioned during their
    lifetime, during our lifetime. If they get repeal, or gut it,
    we will have to start all over again, and we'll be worse off.
        And so, I think, generally speaking, every nation truly
    believes that access to health care is important for the
    strength and security of the country, and that our workforces
    should be better educated and be exposed to preventative care
    and health care. You want that. You're just saying that you
    can't afford it.
        Mr. WOMACK. Absolutely.
        Mr. RANGEL. Well, our job is to say that, one way or the
    other, the government is going to make certain that it is
    affordable. We consider that as a national obligation and goal.
    All industrialized countries do it, not because of compassion,
    but even in the question of competition we do believe that an
    educated workforce and a healthy workforce is more productive.
        I can understand how you cannot afford to do what basically
    you would like to do. But you just can't leave those people out
    there hanging that have no insurance at all. When we find out
    that personal lives and families are shattered, bankruptcies,
    not because of you, and not because of the employee that faces
    serious illness. So, if you wanted to help them--and I truly
    believe you do--it doesn't help the family to say, ``Hey, my
    boss is great, he just can't afford to help me out in this
    crisis.'' No.
        I believe, and a lot of people disagree, but I truly
    believe we have an obligation to at least give access to health
    care, one way or the other. And if you don't like this way, I
    really believe you have some type of an obligation as business
    people that have the experience that we don't have, generally
    speaking, not just to leave these people out there, hanging.
        And to say that no insurance is better than what we have, I
    don't really think that's a legitimate--I don't think it's fair
    to us to say all the things we've done wrong, and not have any
    positive suggestions that we can take care of those employees
    that you want to take care of.
        Mr. WOMACK. Well, Mr. Rangel--and this is a dilemma that's
    been discussed for years. And so, you know, I don't take any
    offense to your comments. The problem----
        Mr. HERGER. The gentleman's time has expired. If we could
    sum up very quickly.
        Mr. WOMACK. Okay. The problem is that, in a nutshell, the
    only solution--if you ask the employers in our industry--and I
    will just speak for my industry--if you ask for employers from
    my industry to pick up that burden now, it's a crushing,
    complete disruption of our industry, and we can't turn on a
    dime.
        Mr. HERGER. The gentleman's time has expired.
        Mr. WOMACK. Thank you.
        Mr. HERGER. I want to thank Mr. Holtz-Eakin for testifying.
    I understand you have a previous engagement you need to leave
    for.
        Mr. HOLTZ-EAKIN. That's correct, Mr. Chairman.
        Mr. HERGER. And if any of our members have any further
    questions for him, they could submit that in writing, and----
        Mr. HOLTZ-EAKIN. I would be delighted, and apologize for
    having to excuse myself.
        Mr. LEVIN. Mr. Chairman.
        Mr. HERGER. Yes? The gentleman is recognized.
        Mr. LEVIN. Before you go, Dr. Holtz-Eakin, I am going to
    send to you some inquiries about the forum. And I would like
    very much if you could respond.
        Mr. HOLTZ-EAKIN. I would be happy.
        Mr. LEVIN. You're a sister organization, as I understand
    it, of the American Action Network.
        Mr. HOLTZ-EAKIN. That is correct.
        Mr. LEVIN. Let me just finish. I want to tell him what I'm
    sending him. I was told he was going to be here until noon.
        And so, as I said, I think your website and that of the
    network says you're sister organizations.
        Mr. HOLTZ-EAKIN. Yes.
        Mr. LEVIN. And we know the action of the network.
        Mr. HERGER. If the gentleman could conclude----
        Mr. LEVIN. I will conclude very quickly.
        Mr. HERGER [continuing]. Dr. Holtz-Eakin has indicated that
    he will respond by letter, so----
        Mr. LEVIN. I want to let him know in advance.
        Mr. HERGER [continuing]. The gentleman from Michigan will
    have his inquiry answered. So----
        Mr. LEVIN. Okay. So I just want you to know, so it doesn't
    take you by surprise. I am going to ask you if you will reveal
    the sources of the income of the forum. Will you do that?
        Mr. HOLTZ-EAKIN. I will comply with the bylaws with the
    forum and with the U.S. tax laws. And I----
        Mr. LEVIN. I
        Mr. HOLTZ-EAKIN [continuing]. And I will get your
    questions, look at them, and do----
        Mr. HERGER. The gentleman will respond----
        Mr. LEVIN. Will you disclose----
        Mr. HERGER. The gentleman's time has expired. The gentleman
    from Georgia----
        Mr. LEVIN. Why don't you let him finish?
        Mr. HERGER [continuing]. Mr. Price, will inquire for five
    minutes.
        Mr. PRICE. Thank you, Mr. Chairman.
        Mr. RANGEL. Wow.
        Mr. PRICE. And I apologize for not being here earlier. And
    I am sorry that Mr. Holtz-Eakin has to leave, but I wanted to
    just make a comment about some of the taxes in the provision
    that are stifling the innovation.
        The medical device tax, as we all know, when you tax
    something you get less of it. And the medical device tax, I
    believe, and many believe, that that increase in taxation there
    will significantly decrease innovation and affect remarkably
    high-paying jobs that have wonderful benefits to our society.
    And I think that that's a direction that we ought to look at.
    The estimates are that a 2.3 percent increase will be passed on
    to the consumers, either directly or indirectly, also.
        So--but I appreciate Mr. Olivo, Mr. Womack being here, and
    I want to talk a little bit about the consequences. Maybe, Mr.
    Olivo, if you want to just talk about your business itself,
    this bill has all sorts of requirements and stipulations and
    mandates that every single business in this country, employer
    in this country, has to look at.
        What have you--how much time have you spent in trying to
    make certain that you are going to be able to comply? What kind
    of costs have you expended to try to make certain that you will
    be able to comply? And what incentives are--is the bill
    providing you that might not be necessarily beneficial to your
    business, itself?
        Mr. OLIVO. I have personally spent hours of time that I
    could better spend managing my business reading the health care
    bill. I haven't read it in its entirety, but interpreting it
    and using the resources I have with the business organizations
    like NFIB, in trying to interpret how it's going to affect me.
        Your question was as far as exactly what the----
        Mr. PRICE. And what have you determined? How is it going to
    affect you?
        Mr. OLIVO. Just at every level. Just my concern about
    hiring a new employee, the cost that goes into hiring a new
    employee is not just his wage. The health care costs are such
    an integral component of what it costs me. And when that's
    unknown, and when there is all this legislation hanging out
    there, it really makes me more conservative and say, ``Maybe I
    don't need that employee at this point in time.''
        Mr. PRICE. So the continued uncertainty, and the potential
    rules and regulations that will be passed on, leave you less
    able to expand your business or to hire new employees. Is that
    an accurate statement?
        Mr. OLIVO. Without a doubt.
        Mr. PRICE. Great. Mr. Womack, I know that my sense has
    always been that there are some perverse incentives within the
    bill itself that make it so that employers look at the
    situation and they say, ``It's going to cost me more to provide
    health coverage for my employees. Why should I do that?
    Shouldn't I just let them fall into the exchange?''
        Are you hearing that from your members? And I wonder if you
    might expand on whether or not that is an accurate----
        Mr. WOMACK. Oh, absolutely. And, of course, again, we can't
    afford the coverage. So we are absolutely going to have to look
    at the penalties. We have a real concern that our insurance
    companies that we've talked to are not going to allow us to
    continue to offer the coverage to our salaried staff, based on
    rules very similar to 401(k) rules regarding highly-compensated
    employees.
        So, that means that, really, through a whole other avenue,
    we either offer insurance to everyone, or drop it. We have 50
    families on health insurance now in our company, and it's an
    important part of what we offer as a benefit package.
        Mr. PRICE. So the statement that we heard throughout this
    whole discussion, ``If you like what you have you can keep
    it,'' may not necessarily be true in your business. Is that
    accurate?
        Mr. WOMACK. Sure, absolutely.
        Mr. PRICE. Would you expand, or do you have any thoughts on
    the incentives for other businesses, small businesses, to move
    individuals, their employees from the coverage that they
    currently have to the exchange?
        Mr. WOMACK. Well, I measure that penalty, really, at
    $2,800, because $2,000 is not tax deductible. You have to
    account for the taxes you pay on the income to pay the penalty.
    So it's really more like $2,800. I cannot imagine that in the
    board rooms across the U.S., that people are looking at, you
    know, a $15,000 premium for an employee, or $2,800.
        You know, very quickly you do the math, and you're going to
    opt to drop that coverage. And it may not be just that simple
    math, it may be some sort of an event where, you have an issue
    with an insurance company, or you have a 40 percent rate
    increase, and finally--enough is enough.
        Mr. PRICE. In fact, aren't you almost, in the real world,
    obliged to drop that coverage, because your competitors will do
    so and then you're at a competitive disadvantage? Is that an
    accurate statement?
        Mr. WOMACK. I would say that offering insurance is a
    significant benefit that helps make us more competitive. So we
    always want to offer the insurance, and we just can't afford
    it.
        Mr. PRICE. Thank you.
        Mr. HERGER. The gentleman's time has expired. The
    gentlelady from Kansas, Ms. Jenkins, is recognized for five
    minutes.
        Ms. JENKINS. Thank you, Mr. Chairman. Thank you both for
    being here.
        On a panel before you we had the chairman of the Council of
    Economic Advisors, Dr. Goolsbee, testify. And during his
    testimony, I noted that he said this. ``The Affordable Care Act
    has already begun to help small business become more
    competitive by making health insurance more accessible and more
    affordable.''
        Mr. Olivo, you're a small-businessman. Could you give me an
    example of how the act has helped you--has already begun to
    help you become more competitive?
        Mr. OLIVO. Unfortunately, I could not give you an example.
    All I can tell you is that our existing insurance, which the
    employees liked the coverage, is no longer available. And our
    insurance premiums have continued to rise in a double-digit
    percentage for the coming year.
        Ms. JENKINS. Okay. If they haven't, in fact, already begun
    to, can you give me an example of how you will see them--how
    you expect them, in the future, to cause you to have a more
    competitive health insurance and an accessible and affordable
    plan?
        Mr. OLIVO. I don't see how it's going to be--help us offer
    a plan that's more competitive. My concern with the exchange is
    that they're not true exchanges in the form of competition.
    They're still heavily mandated types of policies. So there is
    not real, true competition.
        Living and residing and working in New Jersey, we have
    the--I believe it's the third highest insurance rates in the
    nation. We have had guaranteed access, a community-rated plan
    since 1993. And I can tell you from that point, when that law
    was instituted--I've been running the company since 1988--I
    have seen a direct correlation with our health care cost
    beginning to rise from when that guaranteed access was put into
    place.
        So, I just don't see anything that's going to make the
    premiums less expensive.
        Ms. JENKINS. Okay. Also in Dr. Goolsbee's testimony he said
    this. ``The Affordable Care Act can be a significant benefit to
    the job market, by easing the burden of health care costs on
    small businesses.''
        So, once again, as a small-business man, I was hoping you
    could tell us approximately how many jobs that you will be able
    to create, thanks to the savings that you will incur.
        Mr. OLIVO. And I can say, for my company specifically, at
    45 employees, we are not eligible for any sort of tax credit
    which I believe he was referring to.
        Ms. JENKINS. Okay, thank you. Mr. Womack, I was home in my
    district last week, and visited several major employers who
    have over 50 employees. And there was a consistent message that
    I was receiving this day, that they were frustrated with the
    regulations coming about, due to this bill.
        And one in particular that they mentioned was that they
    were being required to provide lactation rooms if they employed
    more than 50 employees. And several of them were concerned,
    they had multiple locations, one location only had three men
    working at it--if they were required to provide a lactation
    room for those three men, because, overall, their employees had
    totaled more than 50.
        I just wondered if you had any concerns about this
    particular regulation, or others within this bill.
        Mr. WOMACK. Well, I do now. Thank you for informing me of
    that regulation. I wasn't aware of that. And, of course, no
    surprise. There are so many things buried in the law that, you
    know, we don't seem to be aware of. I don't know how to react
    to that one in particular.
        But, this layering on of all these little things, I mean,
    they just go on and on. It creates a tremendous amount of
    uncertainty and, you know, quite frankly, depression amongst
    the business community, just wondering how we're going to keep
    up with it all.
        Ms. JENKINS. Is there any estimated cost for your business
    to meet all of these? I guess you probably can't--if you didn't
    even know about this one, you probably don't know about others
    to really adequately estimate----
        Mr. WOMACK. You know, we're looking at that big bill, and
    we're not counting the small ones right now. The big bill is
    frightening enough.
        Ms. JENKINS. Okay. If the Affordable Act isn't getting it
    done for you, the Republicans had an alternative bill, and we
    had TORT reform, expanded FSAs, HSAs, purchasing across state
    lines, access pools. What other ideas do you have for us?
        Mr. HERGER. The gentlelady's time has expired.
        Ms. JENKINS. Thank you, Mr. Chairman. I yield back.
        Mr. HERGER. I recognize the ranking member, Mr. Levin, for
    five minutes.
        Mr. LEVIN. Thank you very much. And we really appreciate
    your coming. I regret that Dr. Holtz-Eakin had to leave, and I
    am sending him a letter today. And since this was a public
    hearing, I will make that letter public. And I expect him to
    give us an expeditious response.
        But again, I very much respect your different views.
    Everybody brings different experiences, and we need to tap into
    them. So, let me ask you, Mr. Womack, how many employees do you
    have?
        Mr. WOMACK. Approximately 900.
        Mr. LEVIN. And how many of them have insurance?
        Mr. WOMACK. About 50.
        Mr. LEVIN. And all of the 50, are they in a certain
    category or two of work?
        Mr. WOMACK. They are either salaried management people or
    office staff.
        Mr. LEVIN. So, none of your employees who aren't in
    management or in office staff have health insurance through
    their work?
        Mr. WOMACK. That's correct.
        Mr. LEVIN. You would be required to provide health
    insurance under this new law?
        Mr. WOMACK. Correct, or pay the penalty.
        Mr. LEVIN. Or pay the penalty. So your 800 or so are part
    of the 50 million who have no health insurance in this country?
        Mr. WOMACK. That's correct.
        Mr. LEVIN. Have you inquired into what the cost would be to
    insure them?
        Mr. WOMACK. Yes, I have run those numbers many times.
        Mr. LEVIN. And you find it too expensive?
        Mr. WOMACK. It's much more than we earn.
        Mr. LEVIN. And so, therefore, trying to get control of
    health care costs would be potentially helpful to you, in terms
    of having your employees covered?
        Mr. WOMACK. Absolutely. The problem is the number has grown
    to a size where, even if you cut it in half, which is not going
    to happen, but even if you cut that number in half, it's beyond
    our ability to pay.
        Mr. LEVIN. How many of them, do you know, are covered by
    some kind of a public program?
        Mr. WOMACK. I have no idea.
        Mr. LEVIN. You know what percentage are women?
        Mr. WOMACK. Not off the top of my head, no, sir.
        Mr. LEVIN. Just roughly?
        Mr. WOMACK. I'm going to guess roughly half.
        Mr. LEVIN. Do you know what happens when they get ill?
        Mr. WOMACK. They go seek treatment, and you know, at a
    local provider, and they get treatment.
        Mr. LEVIN. How do you know they get treatment?
        Mr. WOMACK. Well, we hear the stories.
        Mr. LEVIN. You don't have any systematic way of knowing?
        Mr. WOMACK. No.
        Mr. LEVIN. They go to emergency rooms?
        Mr. WOMACK. Probably, or their local doctor.
        Mr. LEVIN. And they go to a local doctor who doesn't charge
    them anything?
        Mr. WOMACK. No, they go to a local doctor that does charge
    them something.
        Mr. LEVIN. What's the average wage of your non-salaried,
    non-office employees?
        Mr. WOMACK. It's approximately $9 an hour.
        Mr. LEVIN. Okay. Mr. Olivo, you have a high-deductible
    plan?
        Mr. OLIVO. That is correct.
        Mr. LEVIN. What's the deductible?
        Mr. OLIVO. Well, it varies. I mean--well, I--roughly,
    within $100 I would say. The current deductible for an
    individual is $1,500, and for a family it's $3,000.
        Mr. LEVIN. So they pay the first $1,500----
        Mr. OLIVO. The first----
        Mr. LEVIN [continuing]. Or the first----
        Mr. OLIVO. That's----
        Mr. LEVIN. $3,000?
        Mr. OLIVO. Correct.
        Mr. LEVIN. I have no further questions.
        Mr. HERGER. The gentleman yields back. I now recognize for
    five minutes the gentleman from Minnesota, Mr. Paulsen.
        Mr. PAULSEN. Thank you, Mr. Chairman. And, first of all,
    let me just thank both of you for taking the time to come in
    here and share your small business background and experiences,
    and go through a pretty lengthy hearing.
        I just want to touch on something, because I know Mr.
    Holtz-Eakin had to leave, but you know, last night the
    President said that we do need to be a nation of innovators and
    a nation of leaders. And during this speech he reminded us of
    what it takes to compete for jobs and for industries. And, as
    entrepreneurs, I'm sure you can appreciate that especially.
        But he did say, and I agree, we need to out-innovate, out-
    educate, and out-build the rest of the world. We have to make
    America the best place on earth to do business. And there is
    one American industry I have to mention, because it's a
    Minnesota success story as well, and that's the engine of
    innovation and growth in the health care field. It's medical
    devices.
        And we heard from some other Members earlier about that,
    and the medical technology industry. And that's an industry
    that employs about half-a-million individuals, and routinely
    revolutionizes patient care. And, unfortunately, the health
    care law does include a new $20 billion tax on this innovative
    industry.
        I am going to call out one company in particular, because
    it's a larger company. Boston Scientific, which employs more
    than 5,000 individuals in my home state of Minnesota, has
    estimated that that tax is going to cost the company an
    additional $100 million a year, and up to 2,000 jobs. It's also
    going to cause a substantial cut-back in Boston Scientific's
    research and development budget, which is the origin of where
    all this innovation comes from that the President talked about
    in his speech last night.
        And, you know, knowing that 62 percent of the medical
    technology industry is small businesses, small businesses like
    yourselves, for instance, you took an idea, you took the risk,
    you started it out, I'm just really worried that we're killing
    an industry that it's going to be very difficult to jump-start
    and bring back here. And we can't afford to lose it.
        And so, just knowing we have to keep that innovation here,
    I had to make that comment, because Mr. Goolsbee had mentioned
    earlier that one of the benefits of that tax, as a part of the
    legislation, was going to basically allow about millions of
    patients now to access these device procedures that would not
    normally have had that market before. And I think the reality
    is that we look at it now in Massachusetts, which was the model
    upon which the legislation was built--there was no increase in
    device utilization at all, as was, I think, suggested.
        But I want to follow up real quick with both of you, since
    you're small business people, and the health care savings
    account and the flexible savings account portion, and that's
    because, you know, we know the health care law instituted new
    caps on popular flexible spending accounts, FSAs, that
    individuals use for their health care expenses, and they also
    prohibited the use of FSAs and health care savings accounts for
    purchases of over-the-counter medications without a doctor's
    prescription.
        And you mentioned a little earlier about, as an employer,
    what some of those results would be, or some of the detriments
    of the changes in the law would mean. And knowing that there
    are 10 million Americans that use FSAs, and 35 million
    Americans using FSAs--HSAs and FSAs--would you explain just--I
    mean, give the patient perspective. I mean your employees. As a
    small business that wants to have an additional option, I mean
    from a patient perspective, what does that--offer some ideas
    for your employees, rather than just the employer.
        Mr. OLIVO. Well, as I had said before, we have had the
    health savings account, the high deductible plan, for six
    years. And I have witnessed how it has improved my employees'
    incentive to better manage not only their health, but how they
    choose to go about obtaining health care.
        And as I had said before also, the first year was very
    rough, in the sense that it was an HMO--these people were
    raised on HMOs, and they did not like having to pay $150
    initially to go to a doctor, when before it was $15 at the
    time. But over time, as they see their health savings accounts
    start to build up, and they see, ``If I take better care of
    myself, I could get off this medication and now I save money,''
    it has certainly improved how they go about purchasing the
    health care.
        Mr. PAULSEN. Mr. Womack, you want to comment, as well?
        Mr. WOMACK. Well, I think that any time that you allow
    people to accumulate money in an account like an HSA for the
    purpose of spending on their expenses, it becomes a huge
    incentive for them to really manage all those little costs. And
    sometimes those little hidden costs can be significant. You
    know that when you have the money in your account and you get
    to keep it, you have a very big incentive to manage your costs.
        Mr. PAULSEN. Well, and Mr. Chairman--and thank you for the
    testimony--I just want to comment. I have talked to numerous
    small businesses and their employees that feel like they have
    had the rug pulled out from under them now, as they have gone
    through this adjustment, to take care of their own health care.
    And they are going to have to make a huge adjustment now, as
    the law has been changed.
        And I would rather see us move into the expansion of FSAs
    and HSAs, to allow more flexibility and control costs. So I
    yield back, Mr. Chairman.
        Mr. HERGER. I thank the gentleman. At this point, everyone
    has--at least in the Committee--has gone through inquiring
    once. As long as we have other Members who would like to
    inquire who haven't inquired of this panel, we will leave that
    open. Mr.----
        Mr. THOMPSON. I have not inquired of this panel. Neither
    has Mr.----
        Mr. HERGER. Yes, I am aware. And the gentleman from
    California will be recognized after I inquire.
        Mr. Olivo, you currently indicated you had 45 employees.
    And prior to the recession you had 54 employees. And I assume,
    like most businesses, that you would like to grow your
    business. But under the Democrats' health care law, if you have
    less than 50 employees, you are not subject to the employer
    mandate tax.
        Will that have an impact on your decision to hire more
    workers?
        Mr. OLIVO. Without a doubt, it will. And it will put me in
    the position that--not only questioning whether I should expand
    or slow down the rate at which I expand, and make me seriously
    consider, but it also puts me in the position that once I reach
    that 50 employee mark, and I either need to provide health care
    or pay a penalty, as I had mentioned previously, the penalty
    currently is less than my premiums. And, unfortunately, that is
    a scenario that I will have to look at.
        Mr. HERGER. And I might mention I was talking to an
    employer in my own district, in Redding, California, who is in
    the same situation, that he had about 45 employees, and just
    knowing that made a difference of whether he was going to grow
    or not.
        But you also mentioned in your testimony that you currently
    provide health benefits to your employees, and that you pay 100
    percent of the premium for employees who choose high deductible
    plans. You also contribute to these employees' health savings
    accounts. Could you elaborate further on the benefits of
    pairing a high deductible plan with a health savings account?
        And what would be the impact on you and your employees if
    this kind of coverage is no longer available under Obamacare?
        Mr. OLIVO. Well, yes. That is something--with the savings
    that we have been able to gain with the reduced premiums from
    the health savings account, we have been able to contribute in
    certain years to our employees' accounts, which really helps
    them going towards paying that deductible. So there are some
    years, in effect, that not only are we picking up the cost of
    the premium, but we are picking up approximately two-thirds of
    the cost towards their deductible.
        So, for all intents and purposes, their first $1,000 is
    covered under the plan. I would just say the health savings
    account has just been a huge benefit to us towards managing the
    escalating premium cost. I wouldn't sit here and say that it's
    the sole answer. But, without a doubt, if we did not have the
    ability to offer a health savings account for the past six
    years, I would not be able to pay anywhere close to 100 percent
    of my employees' premiums.
        Mr. HERGER. I thank the gentleman. I now recognize the
    gentleman from California, Mr. Thompson, for five minutes to
    inquire.
        Mr. THOMPSON. Thank you, Mr. Chairman. I just want to point
    out a $9 employee, under best case scenario, is making around
    $15,000 a year. And I don't care where you go for your health
    care on $15,000 a year, chances are you fall into that category
    of uncompensated care. So it's not being paid for out of
    pocket, it's not being provided for free. It's factored in to
    what's driving up the cost for your salaried employees, for
    everyone else who buys a policy, or everyone else who pays out
    of pocket.
        Mr. Chairman, I would like to submit for the record a
    letter that I have that's--I just got a copy of it. It's from
    275 economists from all over the country, including 3 Nobel
    Laureates, 4 Council of Economic Advisors, a former CBO chief,
    and 2 John Bates Clark prize winners. And the letter states
    that----
        Mr. HERGER. Without objection, the letter will be admitted.
        Mr. THOMPSON. Thank you.
        [The information follows: Mr. Thompson, Economists Letter:]

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        Mr. THOMPSON. The letter states--I just want it for the
    folks to know--it says that, ``We write to convey our strong
    conclusion that leaving in place the Patient Protection and
    Affordable Care Act of 2010 will significantly strengthen our
    nation's economy over the long haul, and promote more rapid
    economic recovery in the immediate years ahead.
        Also, Mr. Chairman, I would like to point out a letter that
    the Secretary of Health received from an entity that you're
    very familiar with, and I believe actually get some benefits
    from this, the CalPERS organization in our home state of
    California, which is the nation's largest non-Federal
    Government purchaser of health care. And in the letter they say
    that they believe that ``key elements of the national health
    care reform represent a fundamental and positive shift in the
    way health care will be purchased and delivered in the United
    States. Together, they will dramatically shape the future of
    health care in our country, and ultimately benefit everyone.''
        They say that, more specifically, that the provisions
    regarding retired folks--in 2011, that they will save
    approximately $200 million, based on the reimbursement rate to
    more than 115,000 early retirees, their spouses, and their
    surviving spouses and their dependents.
        They have also submitted written testimony, as well, in
    which they discuss that this year they will spend $6.7 billion
    on health care benefits for 1.3 million active and retired
    state and local government employees and their families.
        They further testify that the overall structure of the law,
    which focuses on constraining the skyrocketing cost of health
    care in our country, while providing quality and ensuring
    health coverage for tens of millions of uninsured, some of
    those, those $9-an-hour employees who can't buy health care,
    who fall into the uncompensated health care cost that the rest
    of us all pay for, is the right policy prescriptions for this
    group, the largest non-Federal Government purchaser of health
    care in the country, its members, and our country at large.
        I would also ask unanimous consent to submit a copy of this
    letter for the record, Mr. Chairman.
        Mr. HERGER. Without objection.
        Mr. THOMPSON. Thank you. And I yield back the balance of my
    time.
        Mr. HERGER. The gentleman yields back. The gentleman from
    Ohio, Mr. Tiberi, is recognized for five minutes.
        Mr. TIBERI. Thank you, Mr. Chairman. And thank you both for
    taking time away from your families and your businesses to come
    here and provide us with perspective from where you sit.
        And your testimony, your verbal testimony earlier, reminded
    me of some discussions I had with local constituents, both
    small businesses and restaurant owners and retailers. In fact,
    a restaurant owner operator said to me, perplexed, ``Where did
    30 hours come from? In federal law, full-time is always 40
    hours, and suddenly it's 30 hours.''
        Mr. Womack, you have 900 employees. I hope that you will
    reconsider and come to Ohio, if we can change this piece of
    legislation. I'm from central Ohio. My first job was at
    McDonald's, so I understand a perspective of the restaurant
    business. When I was working at McDonald's, a number of the
    people that I worked with were under the age of 21, were on
    their parents' policy. I was, as a 16-year-old. And a number of
    the adults were women who had coverage through their spouse.
        So, my question to you is--and I have two--is how many
    employees now do you have that will be impacted by this new
    regulatory framework of 30 hours as full-time? If you could,
    answer that.
        And how many--and I'm sure it's a guess at this point,
    since you don't have the figures in front of you--employees do
    you have are teenagers at your restaurant, or college-aged
    students, who have coverage through their parents, or maybe a
    spouse who has coverage through another spouse?
        Mr. WOMACK. I think my best guess--and this is purely a
    guess, as we've not run the numbers--but my best guess is about
    20, 25 percent of our staff are under the age of 20 or 21, and
    a substantial number of our employees are people who are second
    earners, bringing a second income into the family. And we know,
    just anecdotally, especially a lot of our service staff,
    they're the second earner, and their spouse has coverage
    elsewhere.
        Mr. TIBERI. So--and correct me if I'm wrong--so you have a
    number of people who are already covered, whether they be
    teenagers working their first job, or a spouse with insurance,
    and there is a second earner. These costs, additional cost onto
    your business, will create a situation where at some point in
    time you're going to have to choose whether or not a person
    gets a raise, whether or not they get other benefits, or
    whether or not you hire somebody?
        Mr. WOMACK. Sure, absolutely.
        Mr. TIBERI. How many people could you hire in Ohio if this
    law hadn't been passed? What was the projection that you had
    before this law became--this bill became a law?
        Mr. WOMACK. Well, our plan from here is to open 12, 13 more
    restaurants in Ohio, in central Ohio.
        Mr. TIBERI. In central Ohio.
        Mr. WOMACK. And----
        Mr. TIBERI. Thanks for the good news.
        Mr. WOMACK. Yes. And we think that, if we have to cease
    development, if there are no changes and we have to stop
    development, you're looking at 260 to 300 full-time jobs, and
    hundreds of part-time jobs. And then there is also,
    construction and all the other things outside of our company.
        Mr. TIBERI. Mr. Olivo, your testimony brought home a call I
    got right after the election from a constituent. He was on his
    cell phone screaming at me regarding a meeting that he just
    came out of with his tax lawyer and his tax accountant. He had
    51 employees, and they were giving him a briefing on the new
    health care law and some other regulations.
        And the gist of the meeting was, ``If you can, figure out
    over the next year how to get under 50 to not have to comply
    with this new regulation, or our recommendation is to put all
    your employees, if you are still over 50, into the government
    exchange, rather than continue to provide the health care you
    provide today,'' which, obviously, goes against the premise of
    the debate, which, if you like what you have, you can keep it.
    Or, that this isn't a bill that disincentivizes entrepreneurs
    from creating more jobs.
        And why he was yelling at me was, with Ohio's unemployment
    above 10 percent, he is getting advice from his legal
    professional that he should not hire more people, but figure
    out how to hire less people. Or, the alternative is to put
    people into the government exchange, which he didn't want to
    do.
        But from a competitiveness perspective, and cost of doing
    business, and trying to survive his business--I know you've
    talked about it already, but can you share with us, as an
    entrepreneur, how frustrating it is for you, whether it's a
    state regulation or a federal regulation, inhibits your ability
    to project long-term growth, and how to grow your business,
    rather than figuring out how to abide by all these new rules,
    what that does to your spirit, as an entrepreneur?
        Mr. OLIVO. Well, not just spirit. I mean, just to give you
    an idea, we purchase a new piece of equipment, they are fixed
    payments. I don't have the luxury of going back to my bank and
    saying, ``Well, geez, my expenses are a little more, my health
    care costs were more than expected.'' I have to make those
    payments. So I have to leave myself a margin in which that--my
    calculations may not be exact.
        When there is this much unknown regarding the health care
    law, it really causes me to be much more conservative. And it's
    affecting how much I am willing to invest into the company and
    grow it----
        Mr. TIBERI. All right.
        Mr. OLIVO [continuing]. Until I get a better understanding
    of what's happening.
        Mr. TIBERI. Thank you----
        Chairman CAMP. Thank you very much----
        Mr. TIBERI. Mr. Chairman, I would like to submit for the
    record, if I may----
        Chairman CAMP. Yes.
        Mr. TIBERI [continuing]. A letter dated January 18, 2011
    from 239 economists. And they write, just one sentence, ``We
    believe the Patient Protection and Affordable Care Act is a
    threat to U.S. businesses, and will place a crushing debt
    burden on future generations of Americans.''
        Chairman CAMP. All right. Without objection.
        [The information follows: Mr. Tiberi, Economist Letter:]
                                   Economist
    January 18, 2011

    The Honorable John Boehner           The Honorable Harry Reid
    Speaker of the House                 Senate Majority Leader
    Washington, DC 20515                 Washington, DC 20515

    The Honorable Nancy Pelosi           The Honorable Mitch McConnell
    House Minority Leader                Senate Minority Leader
    Washington, DC 20515                 Washington, DC 20515

    Dear Speaker Boehner, Minority Leader Pelosi, Majority Leader Reid, and
    Minority Leader McConnell:

        To promote job growth and help to restore the Federal Government to
    fiscal balance, we, the undersigned, feel that it would be beneficial
    to repeal and replace the Patient Protection and Affordable Care Act
    (P.L. 111-148). Too many Americans remain unemployed and the United
    States faces a daunting budgetary outlook. We believe the Patient
    Protection and Affordable Care Act is a threat to U.S. businesses and
    will place a crushing debt burden on future generations of Americans.
        A Barrier to Job Growth: The Patient Protection and Affordable Care
    Act contains expensive mandates and penalties that create major
    barriers to stronger job growth. The mandates will compete for the
    scarce business resources used for hiring and firm expansion. The law
    also levies roughly $500 billion in new taxes that will enter the
    supply chain for medical services, raising the cost of medical
    services. At the same time that businesses juggle the potential for
    higher interest rates or higher taxes, these medical costs will
    translate to higher insurance premiums, further increasing the cost of
    operating a business in the United States.
        A Massive Spending Increase and a Crushing Debt Burden: The Patient
    Protection and Affordable Care Act is fiscally dangerous at a moment
    when the United States is already facing a sea of red ink. It creates a
    massive new entitlement at a time when the budget is already buckling
    under the weight of existing entitlements. At a minimum, it will add $1
    trillion to government spending over the next decade. Assertions that
    these costs are paid for are based on omitted costs, budgetary
    gimmicks, shifted premiums from other entitlements, and unsustainable
    spending cuts and revenue increases. A more comprehensive and realistic
    projection suggests that the Affordable Care Act could potentially
    raise the federal budget deficit by more than $500 billion during the
    first ten years and by nearly $1.5 trillion in the following decade.
        The Patient Protection and Affordable Care Act does not constitute
    real health care reform. The first step is to remove barriers to
    stronger job growth and to help restore fiscal balance to the nation's
    budget by protecting taxpayers, American business, seniors, families,
    workers, and health care consumers from the damage that the Patient
    Protection and Affordable Care Act will cause.
        Congress should start with a clean sheet of paper and adopt
    initiatives that would encourage providers to offer higher-quality care
    at lower costs; reduce the cost pressures that threaten to bankrupt
    Medicare and Medicaid; and give every American access to more options
    for quality insurance.

    Respectfully,
    [Affiliations shown for purposes of identification and do not
    constitute institutional endorsement.]

    Douglas Holtz-Eakin
    President, American Action Forum
    Former Director, Congressional Budget Office (CBO)

    June O'Neill
    Professor of Economics, Baruch College
    Former Director, Congressional Budget Office (CBO)
    First Chair, Board of Scientific Counselors, National Center for Health
    Statistics

    Joseph Antos
    Wilson H. Taylor Scholar in Health Care and Retirement Policy American
    Enterprise Institute
    Former Assistant Director, Congressional Budget Office (CBO)

    Arlene Holen
    Senior Fellow, Technology Policy Institute Former Associate Director
    Congressional Budget Office (CBO)
    Former Associate Director White House Office of Management and Budget
    (OMB)

    Brian S. Wesbury
    Chief Economist, First Trust Portfolios LP
    Former Chief Economist, Joint Economic Committee of the U.S. Congress

    Arthur B. Laffer
    Chairman, Laffer Associates
    First Chief Economist, Office of Management and Budget (OMB)
    Former Member, Economic Policy Advisory Board

    Jim Capretta
    Fellow, Ethics and Public Policy Center
    Former Associate Director, White House Office of Management and Budget
    (OMB)

    James D. Mietus, Ph.D.
    Independent Economist and Policy Adviser
    Former Economist, Office of Management and Budget (OMB)

    Michael Boskin
    Professor of Economics, Stanford University
    Former Chairman, White House Council of Economic Advisers (CEA)

    William Niskanen
    Former Action Chairman and Member, White House Council of Economic
    Advisers (CEA)
    Chairman Emeritus, Cato Institute

    Earl L. Grinols
    Distinguished Professor of Economics, Baylor University Former Senior
    Economist, White House Council of Economic Advisers (CEA)

    Mark H. Showalter
    Professor of Economics, Brigham Young University
    Former Senior Economist, White House Council of Economic Advisers (CEA)

    Scott Baier
    Associate Professor of Economics, Clemson University
    Former Senior Economist, White House Council of Economic Advisers (CEA)

    Larry Lindsey
    President, The Lindsey Group
    Former Director, National Economic Council (NEC)

    Todd G. Buchholz
    Managing Director, Two Oceans Management
    Former Senior Economic Adviser, The White House Fellow, Cambridge
    University

    Edward C. Prescott
    W.P. Carey Chaired Professor of Economics, Arizona State University
    Economist, Federal Reserve Bank of Minneapolis
    Nobel Laureate in Economics

    William Poole
    Distinguished Scholar in Residence, University of Delaware
    Senior Fellow, Cato Institute
    Former President, Federal Reserve Bank of St. Louis

    Kevin Hassett
    Director, Economic Policy Studies, American Enterprise Institute (AEI)
    Former Economist, Federal Reserve Board of Governors

    Mario J. Crucini, Ph.D.
    Research Associate, National Bureau of Economic Research (NBER)
    Senior Fellow, Globalization and Monetary Policy Institute, Federal
    Reserve Bank of Dallas

    Stephen J. Entin President and Executive Director Institute for
    Research on the Economics of Taxation Former Deputy Assistant Secretary
    for Economic Policy, Department of the Treasury

    Kathleen B. Cooper, Ph.D.
    Senior Fellow at the Tower Center for Political Studies, Southern
    Methodist University
    Former Undersecretary for Economic Affairs, Commerce Department

    Diana Furchtgott-Roth
    Director, Center for Employment Policy
    Senior Fellow, Hudson Institute Former Chief Economist, U.S. Department
    of Labor

    Carl J. Dahlman
    Senior Economist, RAND Corporation
    Former Deputy Assistant Secretary, Department of Defense
    Former Deputy Assistant Secretary, Department of Health and Human
    Services

    David Malpass
    President, Encima Global
    Former Deputy Assistant Secretary, Treasury Department
    Former Deputy Assistant Secretary, State Department

    Thomas R. Saving
    Jeff Montgomery Professor of Economics, Texas A&M University
    Senior Fellow, National Center for Policy Analysis
    Former Public Trustee, Social Security and Medicare Trust Funds

    Timothy Perri
    Professor of Economics Appalachian State University

    Allan DeSerpa
    Professor of Economics
    Arizona State University

    Nancy Roberts
    Professor of Economics
    Arizona State University

    Clarence R. Deitsch
    Professor of Economics and Labor Relations
    Ball State University

    Courtenay C. Stone
    Professor of Economics
    Ball State University

    John Bethune, Ph.D.
    Kennedy Chair of Business
    Barton College

    E.S. Savas, Ph.D. Presidential Professor School of Public Affairs
    Baruch College/CUNY

    David VanHoose
    Professor of Economics
    Baylor University

    Kenneth V. Greene
    Distinguished Professor of Economics
    Binghamton University

    E.F. Stephenson
    Professor of Economics
    Chair, Department of Economics
    Berry College

    David E. Spencer
    Professor of Economics
    Brigham Young University

    Michael L. Marlow
    Professor of Economics
    Cal Poly

    Donald J. Oswald
    Professor of Economics (Retired)
    California State University, Bakersfield

    Cathleen J. Coolidge
    Associate Professor of Economics
    California State University, Chico

    Charles W. Baird Ph.D. Professor of Economics, Emeritus California
    State University, East Bay

    Alan Rufus Waters, Ph.D Professor Emeritus of International Business
    California State University, Fresno

    G. Michael Phillips, Ph.D. Professor of Finance, Real Estate, and
    Insurance California State University, Northridge

    Allan Meltzer
    Professor of Political Economy
    Carnegie Mellon University

    Yuri N. Maltsev, PhD Professor of Economics Carthage College

    Jason E. Taylor
    Professor of Economics
    Central Michigan University

    Dr. Lawrence Brunner
    Associate Professor, Economics
    Central Michigan University

    Arthur T. Denzau
    Professor of Economics
    Claremont Graduate University

    Marc D. Weidenmier
    William F. Podlich Associate Professor of Economics
    Research Associate, National Bureau of Economic Research (NBER)
    Claremont McKenna College

    Robert Tamura
    Professor of Economics
    Clemson University

    Phoebus J. Dhrymes Edwin W. Rickert Professor of Economics Columbia
    University

    Charles W. Calomiris
    Henry Kaufman Professor of Financial Institutions, Columbia Business
    School
    Columbia University

    Richard V. Burkhauser
    Sarah Gibson Blanding Professor of Policy Analysis
    Cornell University

    Antony Davies
    Associate Professor of Economics
    Duquesne University

    Richard E. Ericson
    Professor and Chair of Economics
    East Carolina University

    Minh Q. Dao
    Professor of Economics
    Eastern Illinois University

    Paul H. Rubin Samuel Candler Dobbs Professor of Economics Emory
    University

    Richard F. Muth
    Fuller E. Callaway Professor of Economics, Emeritus
    Emory University

    Ronnie Davis
    Graduate Faculty--Economics
    Florida Institute of Technology and Averett University

    Henry G. Manne
    Dean Emeritus George Mason University School of Law

    Dr. Anthony B. Sanders Distinguished Professor of Finance George Mason
    University

    James Burnham
    Distinguished Service Professor
    Duquesne University
    Former Staff Director, President's Council of Economic Advisers

    Douglas, C. Frechtling
    Professor of Tourism Studies
    George Washington University

    Richard J. Sweeney
    Professor of International Finance
    McDonough School of Business
    Georgetown University

    W. Ken Farr
    Chair & Professor of Economics, Department of Economics & Finance
    Georgia College & State University

    Christine Ries
    Professor of Economics
    Georgia Institute of Technology

    Gerald Gay
    Professor of Finance
    Georgia State University
    Former Chief Economist, Commodity Futures Trading Commission

    Christopher R. Inama
    Senior Adjunct Professor
    Golden Gate University

    Charles N. Steele, Ph.D.
    Associate Professor
    Hillsdale College

    Gary Wolfram
    Professor of Economics
    Hillsdale College

    Ivan Pongracic, Jr.
    Associate Professor
    Hillsdale College

    Nikolai G. Wenzel, Ph.D.
    Assistant Professor of Economics
    Hillsdale College

    John Lunn
    Robert W. Haack Professor of Economics
    Hope College

    John A. Tatom
    Director of Research, Networks Financial Institute
    Scott College of Business, Indiana State University

    Tom Lehman
    Professor of Economics
    Indiana Wesleyan University

    Richard J. Cebula
    Davis College of Business
    Walker/Wells Fargo Endowed Chair in Finance
    Jacksonville University

    Timothy Mathews
    Assistant Professor of Economics
    Kennesaw State University

    W. Mark Crain
    William E. Simon Professor of Political Economy
    Lafayette College

    Nicole V. Crain
    Professor of Economics
    Lafayette College

    James L. Huffman
    Erskine Wood Sr. Professor of Law
    Lewis & Clark Law School

    Richard J. Grant, Ph.D. Professor of Finance & Economics, College of
    Business, Lipscomb University

    Don M. Chance
    James C. Flores Endowed Chair of MBA Studies and Professor of Finance
    Louisiana State University

    W. Douglas McMillin
    Mack Hornbeak Endowed Professor in Economics
    Louisiana State University

    Otis W. Gilley Distinguished Professor of Economics Louisiana Tech
    University

    Frank Spreng, Ph.D. Professor of Economics and Director of the MBA
    Program McKendree University

    John P. Cochran
    Dean, School of Business
    Professor of Economics
    Metropolitan State College of Denver

    William R. Hart
    Professor of Economics
    Miami University (Oxford, OH)

    F. Owen Irvine
    Professor of Economics
    Michigan State University

    Michael C. Davis
    Associate Professor of Economics
    Missouri University of Science and Technology

    Richard E. La Near, Ph.D.
    Professor of Economics and Finance

    Emeritus J.R. Kuhn Professor of Finance
    Missouri Southern State University

    Stephen A. Tolbert, Jr. Lecturer, Economics Montgomery County Community
    College

    Micha Gisser
    Professor Emeritus of Economics
    University of New Mexico

    James B. Ramsey
    Professor, Department of Economics
    New York University

    R. Morris Coats
    Professor of Economics
    Nicholls State University

    Barry K. Goodwin
    William Neal Reynolds Distinguished Professor Economics
    North Carolina State University

    John Seater Professor of Economics
    North Carolina State University
    Michael Wohlgenant William Neal Reynolds Distinguished Professor North
    Carolina State University

    Gerald R. Jensen, PhD, CFA Professor of Finance Northern Illinois
    University

    Joseph M. Jadlow, Ph.D.
    Professor of Economics
    Oklahoma State University

    Douglas K. Adie Professor of Economics Ohio University

    Richard Vedder Distinguished Professor of Economics, Ohio University
    Adjunct Scholar, American Enterprise Institute

    Paul Evans
    Professor of Economics
    Ohio State University

    Frank Wykoff
    Eldon Smith Professor of Economics, Emeritus
    Pomona College

    David A. Brat
    Professor and Chair, Department of Economics and Business
    Randolph-Macon College

    Fred E. Foldvary
    Director, Civil Society Institute
    Santa Clara University

    David R. Henderson
    Research Fellow, Hoover Institution
    Stanford University

    Dino Falaschetti
    Gleed Endowed Chair, Seattle University
    Associate Professor of Law and Economics, Florida State University

    Norman Lefton, PhD Adjunct Associate Professor at the School of
    Business Southern Illinois University, Edwardsville

    Lawrence J. Belcher, Ph.D.
    Professor of Finance
    Stetson University

    David G. Tuerck
    Professor of Economics
    Suffolk University

    Edgar K. Browning
    Professor of Economics
    Texas A&M University

    Frank Egan
    Associate Professor of Economics
    Trinity College

    Dorla A. Evans, Ph.D.
    Professor of Finance, Department of Accounting and Finance
    University of Alabama in Huntsville

    Larry L. Ross
    Professor of Economics
    University of Alaska Anchorage

    Lawrence Southwick
    University Research Scholar, Finance and Managerial Economics
    Department
    University at Buffalo

    Leon Wegge
    Professor of Economics Emeritus
    University of California, Davis

    Avanidhar Subrahmanyam
    Goldyne and Irwin Hearsh Chair in Finance, Anderson School of
    Management
    University of California, Los Angeles (UCLA)

    Lee E. Ohanian
    Professor of Economics
    University of California, Los Angeles (UCLA)

    Richard Roll
    Professor of Finance, Anderson School of Management
    University of California, Los Angeles (UCLA)

    Professor Richard L. Smith
    Philip L. Boyd Chair and Professor of Finance
    University of California, Riverside

    A. Edward Day, Ph.D. Associate Professor of Economics (retired)
    University of Central Florida

    Steven N. Kaplan
    Neubauer Family Professor of Entrepreneurship and Finance, Booth School
    of Business
    University of Chicago

    Eugen F. Fama
    Robert R. McCormick Distinguished Service Professor of Finance, Booth
    School of Business
    University of Chicago

    Robert E. Lucas, Jr.
    John Dewey Distinguished Service Professor of Economics, Department of
    Economics
    University of Chicago

    Barry W. Poulson
    Professor of Economics (retired)
    University of Colorado at Boulder

    Jane H. Lillydahl
    Professor Emerita, Department of Economics
    University of Colorado at Boulder

    Sanjai Bhagat
    Professor of Finance
    University of Colorado at Boulder

    Michael Cosgrove Professor, University of Dallas Principle, Econoclast

    Eleanor D. Craig
    Associate Chair & Professor of Economics
    University of Delaware

    Richard Agnello
    Associate Professor of Economics
    University of Delaware

    Stacie E. Beck
    Associate Professor of Economics
    University of Delaware

    James B. O'Neill
    Professor of Economics
    Director, Center for Economic Education and Entrepreneurship
    University of Delaware

    C. Thomas Howard, Ph.D.
    Professor, Reiman School of Finance
    University of Denver

    Ronald W. Ward
    Emeritus Professor
    University of Florida

    Jeffrey H. Dorfman
    Professor, Department of Agricultural and Applied Economics
    The University of Georgia

    James Moncur Professor Emeritus of Economics
    University of Hawaii at Manoa

    Paul R. Gregory
    Cullen Professor of Economics
    University of Houston

    Roy J. Ruffin
    M.D. Anderson Professor of Economics
    University of Houston

    R. Ashley Lyman
    Professor Emeritus of Economics and Statistics
    University of Idaho

    Peter F. Colwell Professor Emeritus, Department of Finance
    University of Illinois at Urbana-Champaign

    William P. Albrecht Professor of Economics
    University of Iowa

    Michael R. Montgomery
    Associate Professor of Economics
    University of Maine

    Jon Reisman
    Associate Professor of Economics and Public Policy
    University of Maine at Machias

    Richard E. Just Distinguished University Professor University of
    Maryland--College Park

    Ronald. L. Promboin, Ph.D. Adjunct Professor University of Maryland--
    University College Coldwell Daniel, III
    Professor Emeritus
    University of Memphis

    Michael Connolly
    Professor of Economics, University of Miami
    Professor of Finance, Hunan University

    Christopher Douglas, Ph.D.
    Assistant Professor of Economics
    University of Michigan-Flint

    Mark J. Perry, Ph.D.
    Visiting Scholar at the American Enterprise Institute (AEI)
    Professor of Finance and Business Economics
    University of Michigan-Flint

    Stephen Parente, Ph.D.
    Minnesota Insurance Industry Professor of Healthcare Finance
    Director, Medical Industry Leadership Institute (MILI)
    University of Minnesota

    William F. Shughart II
    F.A.P. Barnard Distinguished Professor of Economics
    The University of Mississippi

    Joseph Haslag
    Professor and Kenneth Lay Chair in Economics
    University of Missouri-Columbia

    Susan Feigenbaum
    Professor of Economics
    University of Missouri at St. Louis

    Arthur M. Diamond, Jr. Professor of Economics University of Nebraska at
    Omaha

    Robert E. Chatfield Professor of Finance University of Nevada--Las
    Vegas (UNLV)

    Evangelos Otto Simos
    Professor of Economics, University of New Hampshire
    Editor, Journal of Business Forecasting
    Chief Economist, e-forecasting.com

    Jim F. Couch
    Professor of Economics
    University of North Alabama

    Alan C. Shapiro
    Ivadelle and Theodore Johnson Professor of Banking and Finance Emeritus
    Marshall School of Business
    University of Southern California

    Joel W. Hay, PhD Professor, Schaeffer Center for Health Policy and
    Economics University of Southern California

    John G. Matsusaka
    Professor of Finance and Business Economics
    Charles F. Sexton Chair in American Enterprise
    University of Southern California

    Joseph Zoric
    Associate Professor of Economics and MBA Director
    Franciscan University of Steubenville

    Roger Meiners
    Professor of Economics
    University of Texas at Arlington

    Barry J. Seldon, Ph.D.
    Professor of Economics and Political Economy
    University of Texas at Dallas

    Nathan J. Ashby
    Assistant Professor of Economics
    University of Texas at El Paso

    Timothy P. Roth, PhD
    A.B. Templeton Professor and Chairman, Department of Economics and
    Finance
    University of Texas at El Paso

    Robert Collinge Professor of Economics University of Texas at San
    Antonio

    John E. Murray Professor, Department of Economics University of Toledo
    Author, Origins of American Health Insurance

    Richard T. Selden
    Carter Glass Professor of Economics Emeritus
    The University of Virginia

    David L. Kendall, Ph.D.
    Professor of Economics and Finance
    Chair, Department of Business and Economics
    University of Virginia's College at Wise

    Luke M. Froeb
    Associate Professor of Entrepreneurship and Free Enterprise
    Vanderbilt University

    Larry Van Horn
    Associate Professor of Healthcare Management
    Executive Director of Health Affairs, Owen Graduate School of
    Management
    Vanderbilt University

    Floyd H. Duncan, Ph.D. Roberts Professor of Free Enterprise Economics
    Chairman, Department of Economics and Business Virginia Military
    Institute
    Robert J. Rossana
    Professor of Economics
    Wayne State University

    Glenn MacDonald
    Distinguished Professor of Economics and Strategy
    Senior Associate Dean, Olin School of Business
    Washington University in St. Louis

    William N. Trumbull, Ph.D.
    Professor of Economics West Virginia University

    Robert D. Seeley
    Associate Professor of Economics
    Wilkes University

    Dr. Jim Clark Associate Dean Associate Professor of Economics Wichita
    State University

    John McArthur
    Professor and Chair of Economics
    Wofford College

    Lawrence W. Lovik, Ph.D.
    Senior Fellow
    Alabama Policy Institute

    Michael Ramlet
    Coordinator--Operation Healthcare Choice
    American Action Forum

    Aparna Mathur
    Resident Scholar
    American Enterprise Institute

    Philip I. Levy
    Resident Scholar
    American Enterprise Institute

    Judy Shelton
    Senior Fellow and Co-Director of the Sound Money Project
    Atlas Economic Research Foundation

    Warren Coats
    Monetary Policy Advisory, Central Banks of Afghanistan, Iraq,
    Kazakhstan, Kenya, and Zimbabwe
    Currency Director, Cayman Island Monetary Authority

    Grace-Marie Turner
    President
    Galen Institute

    Richard W. Rahn,
    Chairman
    Institute for Global Economic Growth

    Merrill Matthews
    Resident Scholar
    Institute for Policy Innovation

    John W. Diamond
    Edward A. and Hermena Hancock Kelly Fellow in Public Finance
    James A. Baker III Institute for Public Policy
    Chief Executive Officer, Tax Policy Advisors, LLC

    Mike Schuyler Senior Economist Institute for Research on the Economics
    of Taxation (IRET)

    Paul Howard, Ph.D
    Senior Scholar
    Manhattan Institute

    Daniel R. Feenberg
    Research Associate
    National Bureau of Economic Research (NBER)

    John C. Goodman
    President, CEO and Kellye Wright Fellow
    National Center for Policy Analysis

    Benjamin Zycher Senior Fellow
    Pacific Research Institute

    John R. Graham,
    Director, Health Care Studies
    Pacific Research Institute

    Carlos Bonilla
    Partner, Airline Forecasts
    Former Special Assistant for Economic Policy, President George W. Bush

    Robert Genetski
    President
    classicalprinciples.com

    James F. Smith
    Chief Economist
    EconForecaster.com

    Dorsey D. Farr, Ph.D., CFA
    Co-Founder French Wolf & Farr

    R. David Ranson
    President and Director of Research H. C. Wainwright & Co. Economics
    Inc.

    Donald L. Luskin
    Chief Investment Officer
    TrendMacro

    Robert D. Niehaus
    President and Principal Economist
    Robert D. Niehaus, Inc.

        Chairman CAMP. I just want to ask a simple question of both
    of you. We have heard a lot of testimony today. There has been,
    some of it, very technical.
        Just on balance, does this health care legislation help you
    create jobs and help you grow your businesses, or does it make
    it harder for you to grow jobs and expand your businesses?
        Mr. OLIVO. From my point of view, what my concern is, is
    that I know many on this committee want to provide health care
    coverage for everybody, and would say, ``How would I explain to
    somebody that I would not provide health care coverage for
    them?''
        My fear, as an employer, is going to an employee saying,
    ``I have to eliminate your position, because not only can I not
    afford your health care, I can't afford your position any
    more.'' And that's what my concern is.
        Chairman CAMP. All right. Mr. Womack.
        Mr. WOMACK. Well, the reality is that this just scares
    business people to death. And any time you have this level of
    fear and uncertainty, we quit growing, we tighten up. We have
    to have a reserve. We can't go out to the edge financially, and
    then suddenly have $5 gasoline or commodity prices go through
    the roof and have no margin, no cushion to survive. So it just
    makes us more and more conservative, and that means trimming,
    pure and simple.
        Chairman CAMP. All right. Thank you. Thank you both. I
    think at this time all Members present have had a chance to
    inquire of this panel. And I want to thank you both very much
    for your thoughtful testimony, and for the efforts you put in
    to providing livelihoods and prosperity of the employees that
    you have. And I know the difficult responsibility that is that
    you carry around every day.
        So, I want to thank you for taking the time away from those
    endeavors to be here, and help enlighten this committee. And
    with that, this hearing is adjourned.
        [Whereupon, at 12:10 p.m., the committee was adjourned.]
        [Submissions for the Record follow:]

                               Rep. Jim McDermott
        Statement for the House Ways and Means Committee Hearing on the
              ``Effect of Health Reform on Jobs and the Economy''
                                January 25, 2011

        Mr. Chairman, this hearing is really just a press event for the
    Republicans to twist the facts of the health care law and attempt to
    further scare and polarize the American public. It won't work, but
    we're still going to waste time with this political theater.
        I am very sorry to see Doug Holtz-Eakin, the former Director of the
    Congressional Budget Office, testifying before our committee today.
    He's here to beat up on his former agency whose conclusions he no
    longer likes. Railing against the very institution he formerly
    directed, one that is so essential to our work, does a disservice to
    the Budget Office, the whole Congress and the American people.
        Republicans, like Mr. Holtz-Eakin, have taken to dismissing any
    non-partisan assessments they don't like. These days, in the eyes of
    Republicans, CBO is only right when they release reports that validate
    Republican political rhetoric.
        As for the other witnesses who are testifying, I am sorry you
    believe the new health care law is bad for your businesses. However,
    there are countless other small, medium and large businesses that like
    the health care law and believe repealing it is an awful idea.
        You don't have to take my word for it. The National Business Group
    on Health, a collection of nearly 500 big employers, opposes repeal.
    Helen Darling, the group's President and a former Republican Senate
    Staffer, has said the following about the health care law: ``I don't
    think we'll get a better solution in the U.S. in our lifetime. If it
    gets repealed or gutted, we'll have to start over and we'll be worse
    off.''
        As for the impact on small businesses, PolitiFact looked into a
    U.S. Chamber of Commerce campaign ad that said the health care law was
    bad for small businesses and said the claims were ``perplexing because
    small businesses can actually qualify for tax credits under the new
    health care law.''
        PolitiFact went on to say:

              ``A vast majority of U.S. firms are smaller than 50 employees
            and are exempt from the health insurance requirements. The
            chamber's ad is sweeping, and doesn't account for any of the
            positive provisions that don't `crush' small business but
            actually help them.''

        It is my hope that we can move beyond Republicans' political
    theatrics and focus on getting the economy back on track.

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                      Campaign to End Obesity Action Fund
        The Campaign to End Obesity Action Fund is dedicated to reversing
    one of America's costliest diseases. Today, two-thirds of U.S. adults
    and nearly one in three children struggle with overweight or obesity.
    Taxpayers, governments and businesses spend billions on obesity-related
    conditions, including an estimated $168 billion in medical costs every
    year. The trends for obesity--and the costs associated with it--are
    ominous: as recently as 1990 not a single state had an obesity rate
    greater than 15 percent; today 49 states have obesity rates greater
    than 20 percent, with 9 of those topping 30 percent.
        Ending the epidemic requires change--in individuals, institutions
    and communities. The Campaign convenes leaders from industry, academia,
    public health and associations to speak with one voice for federal
    policies to reverse the obesity epidemic and promote healthy weight in
    children and adults. From changes to nutrition policy, education
    policy, health policy, to environment and transportation policy, the
    Campaign promotes measures that support and facilitate obesity
    prevention and treatment for all Americans.

    Spending on Obesity and Chronic Diseases Linked to Obesity is
            Unsustainable
        From a purely economic standpoint, the cost of addressing the
    obesity epidemic is staggering and will only become worse unless quick,
    aggressive action is taken to address obesity. The fact is obesity is
    one of America's costliest diseases: nearly one of every five dollars
    spent on healthcare in the United States will be attributable to
    obesity and obesity-related conditions within the next decade.
        Without serious efforts to reverse this epidemic, American
    taxpayers will incur ever-increasing costs as obesity is linked to a
    number of chronic diseases, including diabetes, heart disease,
    hypertension and others that require expensive treatments. Currently,
    Medicare pays out approximately $45 billion for Medicare patients
    suffering from diabetes and its complications. However, given the
    dramatic projected growth in diabetes, Medicare's spending on diabetes-
    related treatments
    is projected to skyrocket to $75 billion by 2019 and $170 billion by
    2034 (www.nmqf.org/presentations/10HuangEJCP3.pdf).
        According to the Centers for Disease Control and Prevention, ``the
    cost of cardiovascular diseases in the United States, including health
    care expenditures and lost productivity . . . is estimated to be more
    than $503 billion in 2010'' (http://www.cdc.gov/chronicdisease/
    resources/publications/AAG/dhdsp.htm). Medicare spending in 2006
    totaled $24 billion; Medicaid figures for that year were only slightly
    lower, and the projections for Medicare and Medicaid spending on heart
    disease are also expected to rise dramatically.
        These two examples illustrate that trends in spending for chronic
    conditions related to obesity are unsustainable. Taxpayers have a real
    stake in addressing_and combating_these chronic diseases before they
    occur.

    The Obesity Epidemic Threatens our Economic Prosperity
        Congress is rightly focused on the economy and jobs. One of the
    most effective ways to increase the productivity of Americans and lower
    costs to U.S. businesses--both of which would contribute to job
    growth--would be to reverse the devastating economic impact obesity has
    on the nation's economy. Simply put, healthy workers are more
    productive workers and American workers are increasingly unhealthy. The
    Centers for Disease Control estimates that medical expenses for obese
    employees are 42 percent higher than for a person with a healthy
    weight.
        In 2005, the cost of the obesity epidemic was estimated to have
    cost American private sector businesses an estimated $142 billion,
    including $76 billion in medical costs and another $66 billion in lost
    productivity. By way of comparison, in 1994, private sector medical
    costs associated with obesity were only $13 billion.
        Every year, American workers lose more and more time on the job due
    to obesity and related conditions: Obesity is associated with 39
    million lost work days, 239 million restricted activity days, 90
    million bed days and 63 million physical visits. This dramatic level of
    lost productivity is a serious drag on the economy and negatively
    impacts America's ability to compete in a highly competitive global
    marketplace. It is vital to America's economy that the obesity epidemic
    is reserved; our Nation's future economic well-being is at stake.

    The Obesity Epidemic Threatens our Children's Future and Military
            Readiness
        For the first time in our nation's history, the current generation
    of children faces the likelihood of living shorter life spans than
    their parents, due in significant part to the complications they face
    from overweight and obesity.
        The obesity epidemic has brought other tolls for our children who
    suffer from a growing list of emotional disorders associated with
    obesity, such as depression, social stigmatization and poor academic
    performance. We must work to curtail this troubling trend. Among
    minority and underserved populations, the data is even more dire: 23.4
    percent of Hispanic children and 23.8 percent of black children have
    obesity, compared with 12.9 percent of Caucasian children. (Child and
    Adolescent Health Measurement Initiative. 2007 National Survey of
    Children's Health, Data Resource Center for Child and Adolescent Health
    website. Retrieved 12-14-09 from www.nschdata.org)
        The nation's overweight and obesity epidemic even threatens our
    military readiness--a 2010 report noted that nearly nine million
    potential recruits are too heavy to serve; becoming overweight is one
    of the leading causes of medical discharges of active duty personnel.
    (http://www.missionreadiness.org)

    Health Care Reform Marked a Beginning
        The Campaign to End Obesity supported enactment of the Patient
    Protection and Affordable Care Act, which made important strides in
    bolstering the array of available obesity prevention and treatment
    options for adults and children. Broadly speaking, the Affordable Care
    Act created the first statutory imperative for measuring and tracking
    ``body mass index'' (BMI) as a way to prevent obesity. More
    specifically, some of the most important anti-obesity provisions of the
    Affordable Care Act are:

              Section 2713--Coverage of Preventive Health Services.
              Section 4004--Education and Outreach Campaign
            Regarding Preventive Benefits.
              Section 4103--Medicare Coverage of Annual Wellness
            Visit Providing a Personalized Prevention Plan, including BMI
            Screening.
              Section 4106--Improving Access to Preventive
            Services, including BMI Screening, for Eligible Adults in
            Medicaid.
              Section 4306--Funding for Childhood Obesity
            Demonstration Project

    More is Needed
        Given the alarming trends in taxpayer-provided funding of obesity
    related chronic diseases and in order to optimize the benefits of the
    new policies of the Affordable Care Act, the Campaign urges Members of
    the Committee to advance a number of additional policy changes,
    including:
        1.  Recognize Obesity as a Disease
              One of the most important steps that federal policymakers--
            both in Congress and at the Centers for Medicare and Medicaid
            Services (``CMS'')--can take is to recognize obesity as the
            disease that it is. Doing so will facilitate needed prevention
            and treatment options for children and adults with obesity or
            at risk of having obesity. Not only is obesity a disease, but
            it is in fact one of America's costliest medical condition.
            Until our policies reflect this fact, clinicians will be
            discouraged from diagnosing cases in children and adults that
            must be recognized in the doctor/patient/family dialogue before
            the disease prompts the onset of other, dangerous conditions.
            In fact, today there is a perverse disincentive for doctors to
            address obesity with their patients since there is no
            reimbursement for such services/treatment. Thus, many doctors
            wait until their patients become very sick--often with
            devastating and costly diseases like diabetes, heart disease,
            etc.--because there is no reimbursement for treating a major
            contributing factor: the patients' obesity.
        2.  Expand Medicaid's EPSDT to Cover BMI Screening for Children
              As noted above, the Campaign is pleased by the inclusion of
            BMI screening in Medicare Annual Wellness visits and for
            eligible adults under Medicaid. Coupled with Section 4004's
            language, that should provide improvement in one vital area:
            education about being overweight or obese. The fact is most
            Americans do not know whether they or their children are at a
            healthy weight, and thus many do little or nothing to fight the
            disease they have or may soon have. The more information
            parents and children have early on, the better their chances of
            making improvements. That is why every opportunity to conduct a
            simple BMI screening should be supported by federal programs.
            As noted, minority children are most at risk when it comes to
            being overweight or obese. Thus, the Campaign would encourage
            Medicaid to also cover BMI screenings for children because the
            tragic fact is obese children typically grow into obese adults.
            This could be done by adding a BMI screening to the Early
            Periodic Screening, Diagnosis and Treatment guidelines issued
            by HHS.
        3.  Expand Coverage for Treatment Options
              While the Affordable Care Act made solid progress in
            authorizing new obesity education, prevention and treatment
            options, the Campaign would urge coverage for a greater number
            of treatment options. Obesity is a complex disease that is
            caused by many different factors. Given that, there is no
            ``one-size-fits-all'' treatment solution for obesity. The
            Campaign urges Congress to direct Medicare and Medicaid to
            cover a broad range of accepted treatment options.
            Specifically, upon a diagnosis of a BMI level of 30 (obese) or
            a level of 25 (overweight), when accompanied by other chronic
            conditions, coverage would be triggered for treatment benefits.
            Treatment would include services in medical nutrition therapy
            services, physical therapy or exercise training, behavioral
            health counseling as determined by a National Coverage
            Determination Process and CMS-deemed appropriate medical
            interventions, including both pharmacological and surgical
            options.
        4.  Improve CMS Communication to States Concerning Obesity
            Prevention and Treatment Options
              Currently, CMS issues guidelines to States to inform them of
            the existing opportunities for covering child obesity
            prevention and treatment services under the Early Periodic
            Screening, Diagnosis, and Treatment (EPSDT) guidelines and
            offering them model guidance to State providers. As noted
            above, the Campaign believes adding a BMI screening for all
            children under the EPSDT would be beneficial. CMS has, up to
            now, insufficiently communicated to States that the screening
            and treatment services proposed in the standard benefit package
            can already be provided and reimbursed under EPSDT services.
            There is wide variation between States as to the degree to
            which they have offered specific guidance to providers on the
            coverage and how to bill for these services. The most
            successful States have issued provider guidance specifically on
            pediatric obesity services.

        The Campaign strongly recommends that CMS issue national guidance
    clarifying that obesity prevention and treatment services are currently
    covered for pediatric populations under Medicaid. CMS should also issue
    model guidelines that State Medicaid programs can issue to providers.
    Finally within two years of issuance of the CMS national guidance, CMS
    should release a list of those States that have and have not issued
    their own guidelines to practitioners. These critical actions can be
    achieved by CMS without any legislative action by Congress.

    5.  Fully Fund Anti-Obesity Initiatives Included in the Affordable Care
            Act

        While Congress is under pressure to cut spending and reduce costs
    in the coming months, there is no denying that the cost of America's
    obesity epidemic is extremely high and some predict that it will become
    much worse. Just a year ago, a comprehensive the UnitedHealth
    Foundation, the American Public Health Association and the Partnership
    for Prevention (``America's Healthy Rankings'') predicted that if
    current trends continue, the nation will spend an estimated $344
    billion in obesity-related health care costs by 2018. More needs to be
    done in the area of obesity education, prevention and treatment if this
    alarming figure is to be rolled back in any meaningful way. Thus, the
    Campaign strongly urges Congress to fully fund the key obesity related
    programs included in the Affordable Care Act.
        The Campaign to End Obesity Action Fund stands ready to work with
    the Committee and Congress to advance these and similar efforts that
    are designed to help more Americans achieve and remain at a healthy
    weight, but also to help reduce the enormous economic, social and
    physical toll obesity currently takes on our nation and our
    communities. We appreciate the opportunity to share our views and
    welcome the opportunity to engage further on this important subject.

                                 James T. Lette

        It appears that the 500 billion taken from medicare to fund
    Medicaid is wrong and to take away our paid for benefits is wrong.
        Please exempt medicare from Obamacare and repeal it and start all
    over

    Thanks

    JAMES T. LETTE

                                    LumaCorp
    February 2, 2011

    Dear Congressman Johnson;

        You have invited employers within your district to ``weigh in'' on
    the new healthcare law and I am writing in response to your invitation.
    The focus of the reform should be on the development of strategies to
    allow for coverage to affordable for employers while at the same time
    allowing for quality of care. We all agree the cost of the care is too
    high and each year it continues to increase.
        While employers struggle to stay competitive in their respective
    markets, healthcare costs make up a very large portion of their overall
    cost of doing business. Healthcare costs have a direct bearing on the
    local, state and national economies. At the same time in our very own
    district the quality of medical care can vary widely by provider.
    Unfortunately, because our current system is designed to serve the
    health care system rather than the end user (the consumer paying for
    the service), the system is based on volume versus outcome. We have an
    epidemic of lifestyle related chronic diseases being treated by
    quantity, not quality.
        My consultant often speaks of an example in her enrollment meetings
    of how employees purchase their cars. Consumers have access to plenty
    of data on the quality and reputation of autos they might purchase. No
    one goes out to spend $20,000 to $40,000 without ``shopping around''
    and having done their homework up front. Yet when it comes to our own
    healthcare, how many of our employees ask how much a surgical procedure
    or an office visit is going to cost before the procedure is performed?
    This lack of information results in very little competition in the
    medical profession based on cost or quality. This is no surprise when
    the end consumer is typically so poorly informed.
        One of the other issues that we have to face is recognizing that we
    have been our own worst enemies as a result of creating ``first dollar
    benefits''. Under the healthcare reform package, in order to be
    ``grandfathered'' an employer plan cannot have a significant change in
    its current benefits or it will lose its ``grandfathered'' status. If
    an employer currently has doctor office co-pay or an RX co-pay, and he
    needs to remove that feature from the plan in order for the plan to
    survive economically, he is unable to do so. The new law going forward
    will not allow employers' plans to have higher than a $2,000 deductible
    in the year beginning 2014! If we had all been better stewards of our
    healthcare plans and had not bent to competition, we would have kept
    our employees involved in their health care costs by having them share
    in smaller medical expenses. This could have been done through employee
    participation in ``up front'' deductibles. If properly incented,
    employees would make it their business to know exactly what doctors
    were charging for doctor office visits and what pharmacies charges for
    prescription drugs. We would have a better educated consumer and they
    would be more involved in the decision making process. As it stands now
    we have to make decisions based on whether or not to stay
    ``grandfathered'' versus putting our employees in a position to be
    better stewards of their benefit dollars. If an employer makes the
    decision to remove the upfront doctor office co-pay, the largest
    deductible that he can have moving forward beyond 2014 is $2,000. Who
    will be able to afford a $2,000 deductible in the year 2014 when we
    will have to pay for all of the preventative benefits slated to take
    effect if we are not grandfathered at 100% with no co-pay?
        The combination of increasing obesity and sedentary lifestyle cause
    much of the chronic disease in our country, and it is reaching epidemic
    proportions. It is one of the factors driving our costs, and of course
    the employees understandable want to have everything covered at little
    or no cost to them. When we combine that with the way we have our
    system structured we have a perfect storm or escalating costs. Our
    doctors and hospitals have to treat based on a defensive medicine
    mentality. It is clear this results in unnecessary care and higher
    costs. At the same time, it does not guarantee high quality, just more
    procedures. It just shields the provider from fiscal responsibility and
    increases demand and results in higher delivery of medical care and
    continued cost escalation.
        What we really need is the flexibility to design our own plans,
    suited to our own needs, the needs of each and every group of
    employees. It is not relevant what the government thinks is best for
    us, but rather what we can afford as employers. Let the free market
    system work. Allow us to provide services in the marketplace to our
    employees such as patient advocates--services where by the employee can
    glean critical information about the cost of a procedure beforehand and
    actually have incentives to do so through plan design. Let us give the
    empowerment back to the consumer. Put the competition back where it
    belongs, and make medical providers compete for patients based on cost
    and quality like any other efficient good or service. For a true
    transformation to really happen, consumers have to have information
    about the services being offered to them. They have to know how much
    procedures cost and know the quality of the care being given to them.
    There are programs available that deliver just that (knowledge up
    front). Using them will create better health care consumers while
    promoting cost reductions and improved quality.
        Let us truly use the word transparency in our medical plans and
    make information available for the employees to use. The only way to
    get them involved is to allow for redesigning benefit plans to remove
    doctor office co-pays without being penalized. Let us truly have what
    was promised. Allow us to have OUR health care plans, not ones run by
    the government. All of the health reform legislation you can throw at
    us will not work at obtaining better outcomes in the long run if you do
    not recognize the actual impediments to those better outcomes. We have
    to shift our benefits to reward good outcomes, and to truly do that we
    must give individuals the tools to better manage their health and their
    care, and make them responsible for each.

    Thank you,

    Sherry Jordan
    Regional Supervisor
    sjordan@lumacorp.com

                              Main Street Alliance
    Statement for the Record
    J. Kelly Conklin & David Borris
    On behalf of the Main Street Alliance

    House Committee on Ways & Means
    Hearing on Health Law's Impacts on Jobs, Employers, and the Economy
    January 26, 2011

    Statement for the Record, Committee on Ways & Means Hearing on Health
    Law Impacts
    J. Kelly Conklin and David Borris, Main Street Alliance Executive
    Committee
    January 26, 2011

    Chairman CAMP. and Members of the Committee,

        We appreciate this opportunity to provide written testimony on
    behalf of the business owners in the Main Street Alliance network for
    the January 26 hearing on the health care law's impact on jobs and the
    economy.
        The Main Street Alliance is a national network of small businesses
    dedicated to ensuring that small business owners have the opportunity
    to speak for themselves on issues that impact their businesses, their
    employees, and their local economies. In 2009, we both had the
    opportunity to testify before the Committee on Ways & Means on the
    topic of health care, sharing our personal stories and speaking about
    the urgency of reforming health care to make it work for small
    businesses.
        The January 26 hearing was called to explore the impact of the new
    health care law on economic growth and job creation. From our
    perspective, this impact is clear and positive: from the new small
    business tax credits to new protections like rate review and a value
    for premiums requirement, the health law is already throwing a lifeline
    to small businesses and creating opportunities for businesses to offer
    health coverage, save money on premiums, and plow those savings back
    into business investment and job creation.
        While some may raise concerns about the employer responsibility
    requirement for businesses with more than 50 workers, the fact remains
    that 95 percent of our nation's businesses have less than 50 workers
    (and so would not be subject to this requirement), and 95 percent of
    businesses with more than 50 workers already offer health coverage.
    Indeed, this provision only reinforces what the vast majority of larger
    employers already do, and ensures that responsible employers who offer
    good-paying jobs with health benefits aren't undercut by competitors
    who shun these responsibilities.
        A much bigger issue--indeed, a true threat to small businesses and
    our ability to create jobs--is runaway health insurance rates. For
    example, in early 2010 (before the health care law was passed), one of
    us received a letter from our insurer offering to renew our current
    coverage at an increase of 124 percent. The escalation of health
    insurance rate increases is simply not sustainable for small
    businesses. Thankfully, the health care law includes a series of
    provisions that will begin to rein in these increases and cut costs for
    small businesses like ours. These provisions include:

        Small Employer Health Premium Tax Credits
              Business owners in our network from Portland, Maine to
            Portland, Oregon are already benefiting from the new tax
            credits effective for tax year 2010. Jim Houser, owner of
            Hawthorne Auto Clinic in Portland, Oregon with 15 employees,
            expects to receive a credit of over $10,000 on his health
            insurance bill. That's serious savings for a small business.
            Jim has described the tax credit as a ``time machine,'' turning
            the clock back on his insurance rates.
        Premium Rate Review
              After years of enduring double-digit rate increases with no
            recourse, small businesses like ours are encouraged that our
            states have new tools and new resources to review insurance
            rates and require insurers to provide justification for
            unreasonable rate increases. This is one of the most direct
            ways to protect small businesses and help us do our part to
            create jobs and grow the economy. There is a high level of
            market concentration in the health insurance industry and true
            competition--competition based on consumer value rather than
            competition based on cherry-picking risk pools--is largely
            absent. That is why we need robust rate review--to ensure that
            we're getting a fair shake.
        Medical Loss Ratio Requirements
              As small business people, we understand that the most
            important thing about a business is the value you provide to
            your customers. Yet the insurance industry has lost sight of
            that. The new minimum medical loss ratio requirements will
            restore a focus on providing us with value for our premium
            dollars. And if insurers fail to meet this basic standard,
            insurance customers like us will receive cash rebates starting
            next year--potentially to the tune of hundreds of millions of
            dollars.
        State Insurance Exchanges
              The state insurance exchanges due to come online in 2014 will
            level the playing field for small businesses. By creating a
            mechanism whereby we can band together and shop for coverage in
            one large pool, the exchanges will give us bargaining power,
            risk pooling, and greater choice.

        The repeal of the health law or the undermining of its core
    provisions would cause serious harm to small businesses (see attached
    fact sheet). Certainly, there are improvements that can and must be
    made to the law. For example, the 1099 reporting provisions and the
    paperwork burden they would create demand immediate attention. We were
    heartened that a majority of House members voted to fix this problem
    last summer (HR 5982, 7/30/2010), and we are confident that the current
    Congress will get this problem fixed with appropriate speed. We are
    also confident these types of improvements can be made without
    undermining the core cost containment provisions and other protections
    contained in the Affordable Care Act.
        The year 2010 saw a dramatic uptick in the percentage of small
    businesses offering health coverage: among businesses with 3-199
    employees, the offer rate increased by 9 percentage points; among those
    with 3-9 employees, the offer rate increased 13 points, from 46 percent
    to 59 percent. This is a promising trend, and we need to keep forging
    ahead, not return to the flawed health care system of the past.
        With proper implementation of the health care law, we can truly
    level the playing field for small businesses like ours. The law
    promises to benefit small businesses and the American economy by
    stabilizing our health insurance costs and allowing us to focus on what
    we do best: creating jobs and providing important goods and services to
    communities across America.

    Thank you,

    J. Kelly Conklin                     David Borris
    Owner, Foley-Waite Associates, Inc.  Owner, Hel's Kitchen Catering
    Bloomfield, NJ                       Northbrook, IL

    Bad for the Bottom Line: How Rolling Back the Affordable Care Act Would
            Harm Small Businesses
    Small Businesses are Moving Forward on Health Care
        The percentage of small businesses offering health coverage to
    their employees rose significantly in 2010. For businesses with 3-199
    employees, the health insurance offer rate increased 9 percentage
    points. This increase was driven by an even greater spike among the
    smallest businesses: the offer rate among businesses with 3-9 workers
    rose 13 percentage points, from 46 percent to 59 percent.
    Repeal of the Affordable Care Act Would Harm America's Small Businesses
        Attempts to cast repeal of the Affordable Care Act (ACA) as ``good
    for small businesses'' obscure what repeal would actually do. Here are
    the facts:
        Repeal would raise taxes for small businesses that qualify for the
    new premium tax credits.
        Starting for tax year 2010, small businesses may be eligible for
    health premium tax credits valued at $38 billion over a ten year
    period. As many as 4 million businesses may qualify for a credit, and
    about 1.2 million businesses could qualify for the maximum credit of 35
    percent of their insurance contributions (increasing to 50 percent in
    2014).
        Up to 16.6 million people are employees of small businesses that
    will be eligible for the credit between 2010-2013.
        Repeal would leave small businesses vulnerable to continuing price
    gouging by insurers.
        The ACA gives states new tools and resources to require insurers to
    justify their rate increases.
        Without robust rate review, insurers will continue to raise rates
    at their whim. The most recent example: Blue Shield of California,
    which recently announced combined rate hikes of up to 59 percent, and
    then thumbed its nose at the state's insurance commissioner when he
    attempted to delay the hikes.
        Repeal would eliminate the guarantee of a basic standard of value
    for premium dollars.
        Under the ACA, if insurers fail to meet new minimum medical loss
    ratios (MLR), they'll owe a rebate to customers.
        Projections for the small group market give a mid range estimate of
    $226 million in rebates, or about $312 per person receiving a rebate,
    for 2011. Individual market estimates add another $521 million.
        Repeal would gut consumer protections for small business owners,
    employees, and their families.
        The ACA puts in place important consumer protections: for example,
    a ban on pre-existing condition exclusions, new limits on insurance
    caps, and the ability to keep children covered up to age 26. These
    protections directly benefit health insurance customers in the small
    group and individual markets where small businesses get coverage.
        Repeal would renege on the promise of choice, bargaining power, and
    risk pooling in insurance exchanges.
        Starting in 2014, small businesses with up to 50 employees (100 in
    some states) and self-employed people will be able to band together to
    shop for coverage in state insurance exchanges, gaining bargaining
    power and leveling the playing field with insurers. An estimated 29
    million people will get coverage through the exchanges by 2019 (5
    million in small businesses that buy in as a group, and 24 million more
    buying in on their own).
        Repeal would be bad for our national bottom line.
        The Congressional Budget Office estimated the repeal bill would add
    $230 billion to the federal deficit over 10 years, and much more over
    the following decade.
        The final word on health care repeal: It's bad business for small
    business.

    Contact Information

    J. Kelly Conklin
    Foley-Waite Associates, Inc.
    225 Belleville Avenue
    Bloomfield, NJ 07003-3666
    (973) 743-0700

    David Borris
    Hel's Kitchen Catering
    3027 Commercial Avenue
    Northbrook, IL 60062
    (847) 205-5125

    The Main Street Alliance
    3518 S. Edmunds St.
    Seattle, WA 98118
    (603) 831-1835

                     The National Business Group on Health

        Chairman Camp, Ranking Member Levin and Members of the Committee,
    thank you for the opportunity to submit testimony for the record on the
    large employers' perspective on the impact that the Patient Protection
    and Affordable Care Act (Affordable Care Act) will have on the U.S.
    economy and employers' ability to hire new workers and retain existing
    employees.
        The National Business Group on Health (Business Group) is a member
    organization representing 314 mostly large employers--including 65 of
    the Fortune 100--that provide coverage to more than 55 million U.S.
    workers, retirees and their families. The Business Group is the
    nation's only non-profit organization devoted exclusively to finding
    innovative and forward-thinking solutions to large employers' most
    important health care and related benefits issues.

    Employers are Currently Implementing the Employer Provisions of the
            Affordable Care Act
        Employers are currently implementing provisions of the Affordable
    Care Act that take effect now and planning for future provisions as
    much as they can given the uncertainty. They have already implemented a
    number of the early provisions required under the health care law,
    including accounting for retiree drug subsidy (RDS) taxes; deciding
    whether or not plans should maintain their grandfathered status;
    eliminating lifetime limits; applying for the early retiree reinsurance
    program; adding adult dependent coverage; implementing health account
    changes for over-the-counter drugs; and providing break times and
    accommodations for nursing mothers. The Federal Government has also
    begun to implement a number of the health care payment and delivery
    reforms. The health care law's big changes--the employer mandate, the
    employee vouchers, the exchanges, tax credits, and the ``Cadillac''
    tax--don't come on line for several years. Nevertheless, employers are
    reviewing the comprehensiveness and affordability of their benefits,
    but also assuring that benefits are not too rich so they do not trigger
    the 40% excise tax on amounts above specified thresholds in 2018.
        More immediately, employers are preparing for a number of upcoming
    requirements, including reporting the aggregate value of health
    benefits on all employees' W-2 forms, the automatic enrollment of new
    full-time employees in health plans, and the new plan summary and
    benefits requirements.

    Employers Health Care Costs Continue to Increase
        U.S. employers continue to face the challenge of the rising cost of
    health care for their employees.

              National average health care spending for a family of
            four in 2010 was $18,074--up 7.8% from 2009.\1\
    ---------------------------------------------------------------------------
        \1\ 2010 Milliman Medical Index. Available at: http://
    publications.milliman.com/periodicals/mmi/pdfs/milliman-medical-index-
    2010.pdf.
    ---------------------------------------------------------------------------
              Overall employers' health care costs grew an
            estimated 6.9% in 2010. Large employers, those with 500 or more
            employees, experienced a sharper cost increase than smaller
            employers, growing at 8.5%. Self-insured employers experienced
            higher growth in costs because of increased utilization and
            actual costs that exceeded predicted costs. Employers
            attributed roughly 2% of this increase due the recent changes
            mandated by the Accountable Care Act in 2010 and 2011.\2\
    ---------------------------------------------------------------------------
        \2\ Mercer. Health benefit cost growth accelerates to 6.9% in 2010.
    November 17, 2010.
    Available at: http://www.mercer.com/
    print.htm?indContentType=100&idContent=1400235&indBo
    dyType=D&reference=.
    ---------------------------------------------------------------------------
              Employers expect high cost increases again in 2011.
            With no changes to their plans and benefits, employers expected
            costs to increase 10%. They plan to hold their actual cost
            increases to 6.4% by making changes to plan design or changing
            plan vendors.\3\
    ---------------------------------------------------------------------------
        \3\ Ibid.

    Employers Made a Variety of Changes in Plans and Benefits to Reduce
            Costs in 2010
        Employers continued to shift away from more traditional plan
    offerings to consumer-directed health plans (CHDPs)--increasingly fully
    replacing traditional plans with CDHPs. Employers also reduced retiree
    medical plan offerings. More employers also provided financial
    incentives to employees to take better care of their health. Most
    common among these were incentives for taking health risk assessments
    (offered by 69% of large employers), enrolling in disease management
    programs (73%), and participating in lifestyle modification programs
    (50%).\4\
    ---------------------------------------------------------------------------
        \4\ Ibid.
    ---------------------------------------------------------------------------
        Responding to the uncertainty of the impact of the Affordable Care
    Act, employers stated a recent Towers Watson survey that if the health
    care law increases plan costs:

              88% would pass on the increase to employees;
              74% would reduce health benefits and programs;
              33% would absorb cost into their business;
              20% would pass on the increase to consumers;
              12% would eliminate or reduce wellness/health
            promotion programs;
              12% would reduce employment;
              11% would reduce employer contributions to retirement
            plans; and
              7% would reduce salaries/direct compensations.\5\
    ---------------------------------------------------------------------------
        \5\ Towers Watson, Health Care Reform: Looming fears mask
    unprecedented employer opportunities to mitigate costs, risks and reset
    total rewards, 2010.

        Smaller employers are more likely than larger employers to reduce
    employment positions or shift employees to part-time positions if the
    Affordable Care Act increases their costs because they have fewer
    options and less leeway among the options listed.
        In our own National Business Group on Health survey of members, 53%
    of respondents continued making planned changes to reduce health care
    costs and provide effective, affordable coverage to their employees
    despite the loss of grandfathered plan status.\6\
    ---------------------------------------------------------------------------
        \6\ National Business Group on Health, Large Employers' 2011 Health
    Plan Design Changes, August 2010.
    ---------------------------------------------------------------------------
        In the Towers Watson survey, 88% of employers expected to continue
    to offer health care coverage when the free rider assessment takes
    effect in 2014 while only 3% are planning to pay the new penalty.\7\
    43% (18% very likely, 25% somewhat likely) of plans believe they will
    be subject to the ``Cadillac'' tax in 2018, which could force them to
    make additional changes to their plans and further delay hiring of
    additional employees.\8\
    ---------------------------------------------------------------------------
        \7\ Towers Watson, Health Care Reform: Looming fears mask
    unprecedented employer opportunities to mitigate costs, risks and reset
    total rewards, 2010.
        \8\ Ibid.
    ---------------------------------------------------------------------------
    Clearer ``Rules of the Road'' for Employer Provisions in the Affordable
            Care Act Will Reassure Employers Who Want to Resume Hiring
        Uncertainty or the lack of clarification regarding ``the rules of
    the road'' and the true total costs to implement the law has led many
    employers to hold off on hiring new employees and to reduce the amount
    of full-time positions. One of the key sources of confusion is the fact
    that many of the provisions were designed for the individual and small
    group health insurance market, but the law applies them to large
    employer and self-funded health plans as well. For example, the law's
    rescissions provision created confusion and conflicted with employer
    requirements under COBRA. In some cases where COBRA requires
    retroactive termination of plan participants who are no longer eligible
    for employer coverage, employers were confused about whether or not
    they could adhere to COBRA rules without running afoul of the
    Affordable Care Act's new prohibition on rescissions of coverage.
    Fortunately, the Department of Labor (DoL) later issued clarifications
    that plans should follow COBRA rules and the DoL would not consider
    plans' retroactive termination of coverage as rescissions. We are
    encouraged and pleased that in recent months, the Administration and
    the Departments have reached out to employer plans and sought to
    address some of the unintended consequences and clarify rules. For
    example, we have provided recommendations on the upcoming requirements
    to auto-enroll new hires into health plans and to report the value of
    health benefits on employees' W-2 forms.

    Employers are Concerned the Affordable Care Act Does Not Address Their
            Chief Concerns
        Going into the health care reform debate and for many years
    earlier, employers emphasized the need for us as a nation to radically
    change the way we pay for and deliver care. Without fundamentally
    changing these, expansion of access will be illusory as we cannot long
    sustain the increases in overall costs for care that is often
    ineffective and provided inefficiently. A survey by Towers Watson of
    650 mid- to senior-level benefit professionals provides an early
    snapshot of how employers think the Affordable Care Act will achieve
    the goals that are most important to them.
        Specifically:

              Only 14% of respondents think health care reform will
            help contain health care costs;
              Only 25% think health care reform will encourage
            healthier lifestyles; and
              Only 20% believe health care reform will improve the
            quality of care.\9\
    ---------------------------------------------------------------------------
        \9\ Towers Watson, Health Care Reform: Looming fears mask
    unprecedented employer opportunities to mitigate costs, risks and reset
    total rewards, 2010.

    The Federal Government Should Aggressively Adopt Fundamental Changes in
            the Way We Pay for and Deliver Health Care
        In addition to clarifying regulations going forward, employers
    believe that it is vitally important for the long-term health of the
    economy that the Federal Government aggressively adopt changes in the
    way it pays for and delivers health care in Medicare, Medicaid, and
    other government programs in ways that do not merely shift costs to the
    private sector, but rather take costs out of the system. Reforms should
    reward improvements in primary and preventive care, the effectiveness
    and quality of care, efficiency of care delivery, and appropriate
    utilization. Congress and the Department of Health and Human Services
    (HHS) need to build off of the positive developments in the Affordable
    Care Act to achieve these goals, including:

              Creating effective Accountable Care Organizations
            (ACOs) that significantly improve quality and efficiency and
            employ payment reforms based on performance, not volume,
            without creating undue market power;
              Enabling providers, patients and plans to effectively
            incorporate the findings of the Patient Centered Outcomes
            Research Institute in their decisions to assure that care
            reflects the latest medical evidence,
              Determining an ``essential health benefits'' package
            for the exchange, individual, and small group markets that not
            only provides comprehensive coverage, but also promotes
            evidence-based, effective care and the triple financial goals
            of assuring people affordable coverage, protecting them from
            catastrophic financial losses when faced with serious illness
            and helping them to avoid unnecessary costs; and
              Establishing efficient state health insurance
            exchanges that adopt national standards and uniform processes
            wherever state-by-state variation would add costs and
            complexity without adding significant incremental value in
            order to offer affordable health choices to employers and
            employees.

    Employer Recommendations as the Government Embarks on a Significant
            Expansion of Access to Coverage in Medicaid and Subsidized
            Exchange Plans
        Aggressive cost management, consumerist strategies and attention to
    health improvement have had the most successful impact on employers'
    bottom line. Health care, unlike most other industries, is too often
    driven by perverse financial incentives in which consumers and
    physicians decide what health care might be needed or wanted and
    totally separate party--the employer, insurer or government agency--
    pays for that care after the fact. The health care reform debate has
    distracted us from remembering that costs rise because Americans are
    using more and more services at ever rising prices.
        Unfortunately in the U.S., health care consumers believe that:

              More health care is better than less care;
              The more expensive, the better it must be;
              There are no trade-offs in health care;
              Consumers only pay 20% and don't care that other
            payers have to pay 80%;
              Nor do they understand that all benefits are foregone
            wages or other benefits; and
              Tax costs are ``hidden''.

        There is also substantial evidence over many years that somewhere
    around 20-30%, of care, conservatively, is either not clinically
    appropriate, not effective, and may even be downright harmful for over
    $1.2 trillion in identified waste, including behavioral (obesity/
    overweight, smoking non-adherence, alcohol abuse), clinical (defensive
    medicine, preventable hospital admissions, poorly managed diabetes,
    medical errors, unnecessary emergency room visits, treatment
    variations, hospital acquired infections, over-prescribed antibiotics)
    and operational (claims processing, ineffective use of IT, staffing
    turnover, paper prescriptions).\10\ As a nation, we have to have a
    constant process of evidence generation, and feedback to care
    management and benefit design to be sure that all patients are
    protected from wasteful and some downright harmful practices. A
    properly structured learning health care system will enable such
    continuous assessment of actual effects on patients.
    ---------------------------------------------------------------------------
        \10\ PricewaterhouseCoopers, 2010
    ---------------------------------------------------------------------------
        The Federal Government and employers have to use all of the tools
    and resources available to us to help consumers understand, ``It's all
    about what's in it for them.'' To improve quality and control costs, we
    must work to ensure that Medicare and the Affordable Care Act's
    Medicaid expansion and exchange plans change the health care delivery
    system by ensuring:

              A culture of quality and patient safety throughout
            health care system;
              Payment systems that reward outcomes not just
            utilization;
              Payment systems that support primary care and care
            coordination;
              Transparency of health care costs and quality
            information;
              Comparative effectiveness research of health care
            interventions (including information garnered from the new
            Patient Centered Outcomes Research Institute);
              Evidence-based medicine whenever possible, and
            patients who make informed decisions with help of their
            doctors;
              A secure, nationwide electronic health information
            network;
              Portable, personal health records for all;
              Systems that support evidence-based preventive care;
              Capital spending only where truly needed;
              Personal responsibility for health and engagement in
            care decisions; and
              Comprehensive reform of the health care legal system.

    Conclusion
        Thank you again for this opportunity to share the National Business
    Group on Health's views for the record on the employers' perspective on
    the impact the Affordable Care Act will have on the U.S. economy and
    employers' ability to hire new workers and retain existing employees.
        Employers look forward to continuing to working with Congress to
    clarify the Affordable Care Act's provisions to reduce the
    administrative burdens on American employers and aid them as they look
    expand their businesses and potentially hire new employees. Our
    economic future and prosperity depends upon Congress' focusing on real
    health care payment and delivery reforms that take costs out of the
    system for all people and all payers and significantly improvement the
    quality and effectiveness of care.

                   National Partnership for Women & Families
    Supportive Workplace Policies Are Critical for Nursing Mothers

    Written Statement of
    Debra L. Ness, President
    National Partnership for Women & Families

    and

    Robin W. Stanton, Chair
    United States Breastfeeding Committee

    for ``Hearing on Health Care Law's Impact on Jobs, Employers, and the
    Economy''

    Committee on Ways and Means
    U.S. House of Representatives
    January 26, 2011

        The Affordable Care Act (ACA) gives millions of nursing moms the
    support and protection they need. The law is an important step in
    making sure the nation's workplaces meet the needs of working women and
    their families. The National Partnership for Women & Families and the
    United States Breastfeeding Committee would like to clarify the scope
    of this important new provision in the law and address some
    misconceptions expressed during the Ways and Means Committee hearing.
        Every year roughly four million women give birth in the United
    States, and more than 75 percent of them choose to breastfeed. Study
    after study has shown that breastfeeding has tremendous value in
    protecting both mothers and children from a number of acute and chronic
    diseases and conditions. And research shows that employer support--
    which could include breastfeeding education, counseling, private
    lactation rooms, and breast pumps--makes a tremendous difference in a
    woman's ability to breastfeed. According to one study, such supports
    helped as many as 98 percent of working mothers start breastfeeding,
    and 58 percent continued for six months or longer. There is no question
    that these policies work.
        Unfortunately, a lack of supportive workplace policies and laws has
    forced too many nursing mothers to quit breastfeeding (or never start).
    Some new mothers have found their employers to be outright hostile,
    while others simply face work environments that offer nowhere private
    or sanitary to express breast milk.
        Congress and the Obama administration have taken a key first step
    to improve workplace laws for nursing mothers. For the first time,
    federal law now explicitly protects nursing mothers in the workplace.
    Section 4207 of the Patient Protection and Affordable Care Act gives
    covered female employees the right to reasonable break times and a
    private location, other than a bathroom, to express milk at work. This
    means that employers must provide nursing mothers a reasonable amount
    of break time and functional space to express milk. This provision
    applies to employers of all sizes but, in certain limited instances,
    those with fewer than 50 total employees may not have to comply with
    the law if they face undue hardship in meeting these basic
    requirements. The Department of Labor (DOL) is in the process of
    developing guidance on this issue and has published a Request for
    Information.
        Although we cannot know the exact contours of the requirements set
    by this provision of the law until that guidance is completed, we
    believe that the overwhelming majority of employers will have
    absolutely no difficulty complying. Indeed, the provision simply builds
    on the laws that several states have already established--laws that are
    familiar to employers. Fourteen states and the District of Columbia
    already require private employers to provide nursing employees with
    reasonable break time and/or a place other than a bathroom to express
    milk at work. In addition, employers with FLSA-covered employees should
    already have policies in place regarding break times.
        Unfortunately, there is a substantial amount of misinformation
    about the scope and application of the provision. For example, at the
    Ways and Means Committee hearing, Representative Lynn Jenkins expressed
    concern that an employer would have to provide a lactation room if it
    had only three male employees at a worksite and no nursing mother. The
    DOL has already clearly indicated that it does not intend to impose
    this requirement on employers. In fact, in the Frequently Asked
    Questions the DOL has provided to the public about the law, it
    specifically addresses this issue:

            Do employers have to provide a lactation space even if they
            don't have any nursing mother employees?

              ANSWER: No. The statute requires employers to provide a space
            for a nursing employee ``each time such employee has need to
            express the milk.'' If there is no employee with a need to
            express breast milk, then the employer would not have an
            obligation to provide a space.

        The National Partnership for Women & Families and the United States
    Breastfeeding Committee strongly support workplace policies that allow
    women to continue breastfeeding, and we applaud Congress and the
    President for adopting language in the ACA to promote breastfeeding.
    Workplace breastfeeding support is a ``win-win-win'' for employers,
    mothers and babies. Employers that support nursing mothers not only
    help their employees transition back to work, but also reduce turnover,
    absenteeism and health care costs, and increase employee satisfaction,
    loyalty and productivity.
        When new mothers' needs are met, they are better able to meet the
    dual demands of work and motherhood. Those who choose to breastfeed
    need break time and a private space to express milk when they return to
    work. For the thousands of working mothers who have had to rush to
    their cars during a lunch break, hide in a bathroom stall or closet, or
    negotiate for break time with an unsympathetic employer, the new
    protections are life-changing and long overdue. We hope that
    Representative Jenkins and all members of the Ways and Means Committee
    will stand up for new mothers who choose to breastfeed and voice their
    support for this new provision and all protections like it that make it
    easier for mothers to be both good caregivers and family breadwinners.

    Contact Information

    Debra L. Ness
    National Partnership for Women & Families
    1875 Connecticut Avenue, NW Suite 650
    Washington, DC 20009
    Phone: 202.986.2600
    Email: rlyons@nationalpartnership.org

    Robin Stanton
    United States Breastfeeding Committee (USBC)
    2025 M Street, NW, Suite 800
    Washington, DC 20036-3309
    Phone: (202) 367-1132
    Email: mrenner@usbreastfeeding.org

                       National Private Duty Association
    Statement of the National Private Duty Association
    in connection with Hearing on

    Health Care Law's Impact on Jobs, Employers and the Economy
    January 26, 2011

    Committee on Ways & Means
    U.S. House of Representatives
    Washington, DC

    Submitted By

    Sheila McMackin
    President
    National Private Duty Association
    941 East 86th Street, Suite 270
    Indianapolis, IN 46240
    317 663 3637
    sheila@homecarechicago.com

        The National Private Duty Association, a trade association
    representing over 1,200 companies with 250,000+ employees throughout
    the United States, thanks the U.S. House Ways & Means Committee for
    holding a hearing on the impact of the Patient Protection and
    Affordable Care Act (PPACA) on jobs, employers and the economy. The
    PPACA will impose a substantial new cost burden on employers in low-
    margin, labor-intensive industries such as private duty home care. It
    will likely force NPDA member companies to shift to part-time
    employees, raise our clients' costs, and/or, in some cases, cease
    operation altogether.
        This in turn will give many clients--primarily elderly and/or
    people with disabilities--no alternative but to give up their struggles
    to remain independent in their own homes for as long as possible.
    Instead, they will have to move into institutionalized and far more
    expensive care.
        Private duty home care may be medical or non-medical care. When
    providing non-medical care, caregivers keep their clients company, take
    them to doctors' appointments, run errands such as grocery shopping or
    pick-up of prescriptions, assist with light housekeeping, prepare and
    serve meals, help with personal tasks such as dressing or bathing, and
    generally make sure that a senior individual can age in place, at home,
    in dignity and comfort. This is crucial to the emotional and often
    physical well-being of our older citizens. It is also considerably more
    cost-effective than the alternative--institutionalized care often paid
    for through Medicaid or some other government program.
        NPDA members are companies who employ these caregivers. NPDA
    members pay wages, usually above but always at least at the federal
    minimum wage level. Our member companies absorb the cost of
    employment--they withhold and pay income taxes, pay workers
    compensation, and pay FICA taxes for their workers. Often there are
    benefits such as vacation and/or sick time. While many home care
    agencies provide ``mini-med'' plans for their employees, the PPACA's
    benefits package mandates and discrimination rules will invalidate many
    of these existing employer-provided health insurance plans.
        Our member companies work hard to establish and maintain important
    industry standards. NPDA identifies and disseminates information on
    ``best practices'' within the home care industry. It develops core
    training and education programs for caregivers, resulting in caregivers
    who are professional, caring and knowledgeable about the specialized
    needs of those who are aging or disabled. NPDA also educates the public
    about the benefits to seniors who seek in home companion care about
    receiving that care through caregivers who are trained as well as
    compassionate, and whose work lives are protected by employment laws.
        Whether these in-home services are paid for by the seniors
    themselves or by their families, the service recipients are the
    beneficiaries of a company that can and will provide substitute quality
    care when a primary caregiver gets sick or takes vacation. This is very
    important because, as you know, a senior citizen's need for help with
    the tasks of daily living do not stop when the person who is assisting
    the senior needs to take time off.
        Private duty home care is a labor-intensive, low-margin industry.
    The expense of a companion caregiver is almost always borne in its
    entirety by the service recipient and/or his or her family. While there
    is no such thing as a ``typical'' rate charged to service recipients--
    it varies geographically as well as by whether any live-in or sleep-
    over time is required, an illustrative charge for a senior seeking
    regular but not full-time assistance is $20/hour, for a three or four
    hour minimum service block, plus the cost of traveling to the service
    recipient's home. Accordingly, even a minimum service contract can and
    often does run into $1000 or more every month. And for many of our
    clients, the costs are even higher because the senior citizen in need
    of care requires more than the minimum time block, or needs it on a
    daily or more frequent basis. Many of our member companies provide
    their clients with competent, caring, professional caregivers who are
    on premises 24 hours each day. This is a huge expense for the senior.
    Most simply cannot afford a significant increase in the cost. The
    result will be having to give up hours of help and relying on family
    members, friends and neighbors--or worse, sitting alone without the
    assistance they need. The alternative--which is anathema to many aging
    Americans--is being forced into institutionalized care.
        Of course, institutional care may take less from an individual
    senior's limited pocketbook, but its cost to society and the U.S.
    government is significantly higher. Even without taking into account
    the crucially important emotional health and dignity that comes from
    finding a way to let a senior citizen age in place in his or her own
    home, the cost to society to forcing institutionalization as the only
    alternative is very high. Medicaid and other government programs absorb
    the bulk of these costs. At these times of State and federal budgets
    stretched to and beyond their outer limits, this is a result that is
    not good for anyone.
        The PPACA, while laudable in its goal--we all support the notion of
    affordable health care coverage for all Americans--it will have a
    seriously adverse impact on jobs in the private duty sector, and on the
    very people--the caregivers themselves--whom it is crafted to help. The
    additional cost to either providing health insurance or paying fines
    for failure to do so will cripple the industry. It will result in jobs
    downsizing to part-time status, and/or jobs lost due to clients no
    longer able to afford the services NPDA companies offer.
        NPDA does not have empirical data on this, but we do have anecdotal
    evidence of the deleterious impact of the PPACA. Our companies--from
    Michigan, California, Illinois and other states--tell us uniformly that
    they will be forced to raise prices, reduce their employees' hours to
    part-time status, and in some cases they project having to go out of
    business altogether.
        NPDA companies are usually not ``small'' as defined by most ``small
    business'' measures. Therefore the small business tax credit and other
    small business special rules in the PPACA do not mitigate the situation
    for them. Most of our companies have revenue in the millions, with
    employee rosters of 100 or more. Typically their profits are less than
    $50,000 in any given year. Our member companies are projecting--with
    inadequate cost data currently available--that the cost of compliance
    with the PPACA will be 10 percent or greater. This of course translates
    into the potential for an increase of 10 percent or more in what they
    charge their clients. As clients find they cannot afford these
    additional costs, they will cease doing business with NPDA member
    companies, thus accelerating the job loss that will come as a result of
    lost business, and threatening the existence of these low-margin high
    labor cost businesses.
        There are very specific and difficult problems arising from the
    PPACA, as well as the more general concerns described above. Under the
    employer responsibility rules of the health reform law, by 2014
    employers will have to choose between offering a mandated package of
    health insurance benefits or paying a fine. Employers cannot calculate
    either the cost of the fines--they are based on whether a worker
    qualifies for a federal subsidy, or ``affordability.'' Both the subsidy
    and ``affordability'' are calculated by measuring an as yet known cost
    of insurance (and employer contribution to that cost) against an
    individual's household income. The employer has no way of knowing an
    individual's household income--which includes spouse's and children's
    income. This is something no employer can know with respect to any
    individual employee. And thus no employer can ever know, in advance,
    whether it will be liable for fines or whether its contribution to the
    cost of employer-provided health care will be enough for the insurance
    to be ``affordable'' as defined under the PPACA.
        Likewise, at this stage the cost of the mandated package of health
    insurance benefits is not only unknown, it is also at this point
    unknowable. Insurers are adjusting prices to reflect the cost of new
    mandatory benefits and compliance responsibilities. The actual package
    of benefits is still under development by relevant federal agencies.
    Therefore the actual benefits package--and its consequent cost--cannot
    be calculated. As a result, no employer can make plans to meet the cost
    of insurance, or is potential liability for assessments for not
    offering health insurance at all, or for not offering it on what the
    government decides is an ``affordable'' basis.
        Given the historical cost of health insurance, it is likely many
    employers will simply choose to pay fines. An employer can calculate
    its maximum potential exposure to fines, but not its actual exposure,
    since it will have no way of knowing whether one of its employees will
    qualify for a federal subsidy--the trigger for fine liability. One
    resulting option open to an employer that has little to no profit
    margin to spare will be to reduce its workforce to minimize the
    potential for liability for fines.
        Of course, reducing a work force means reducing the ability to
    provide services, and that means losing business. This will drive a
    private duty company out of business even faster than the significantly
    large new cost of health insurance or fines. Accordingly, many
    companies will instead shift to hiring employees who will not trigger
    assessments. This can be done by restricting an employees work hours to
    no more than 29 hours per week (30 hours per week is the hours worked
    measure that triggers fine liability). Although ``part time
    equivalence'' will assure that companies with part-time workers are
    subject to the employer responsibility rules, fines are assessed only
    on full-time workers (assuming at least one is eligible for a federal
    subsidy for purchasing individual health insurance through an
    exchange). This acts as a powerful incentive to companies facing a huge
    new cost that its slim profit margins simply cannot absorb to hire
    employees to work fewer than 30 hours per week. This will drive up a
    company's administrative costs, and it will diminish the jobs available
    in the industry. But the cost of using full-time employees will, in
    many instances, simply be prohibitive. This loss of full-time jobs with
    benefits will hurt caregivers as well as the service recipients we
    serve.
        Another no doubt unintended consequence of the PPACA's employer
    responsibility rules is the fact that they will encourage a shift away
    from home care provided by trained, professional caregivers who are
    employees of a private duty company to a system of referrals of
    individuals who are working on their own--without benefit of training,
    supervision or back-up. These ``independent contractors'' frequently
    have no idea about how to pay their taxes and they have no protection
    from workers compensation, unemployment insurance or paid sick or
    vacation time. The seniors and their families who hire them also have
    no idea of their responsibilities as employers of these caregivers. The
    result is an anticompetitive underground business that ultimately hurts
    the U.S. economy as well as the workers and the service recipients they
    serve. This could not possibly be a result that is tolerable to those
    who crafted the PPACA.
        In summary, early indications from NPDA members (and other
    employers in other industries) suggest that many employers are
    exploring whether to drop or decline to offer health insurance when the
    employer responsibility rules take effect in 2014. This is because of
    the interaction of two primary factors: (1) individual workers will
    have access (often subsidized by the government) to health insurance
    through the new law's exchanges, thus relieving employers of their
    sense of responsibility for providing coverage to their workers; and
    (2) the cost of assessments for not providing coverage may be
    significantly lower than the cost of providing health insurance, and
    will certainly be more predictable. Predictability of expense is a
    serious issue for private sector companies. An equally serious problem
    unique to industries like private-pay non-medical in-home companion
    care is the fact that the employer responsibility rules may prove to be
    an incentive to companies to use a workforce comprised of independent
    contractors rather than employees. This will be adverse to the
    interests of both workers and the companies that hire them--and
    potentially also to the seniors and people with disabilities who are
    served by private-pay non-medical in-home companion care companies.
        NPDA seeks Congressional help in crafting a solution to the serious
    economic and policy-based problems posed by the current employer
    responsibility rules. We want to work together with lawmakers to
    develop alternative approaches that will result in expanded coverage,
    without driving up the cost of in-home companion care to a level that
    is unaffordable for our clients, and that threatens our continued
    ability to stay in business. An alternative approach is crucial to
    prevent severe limitation on jobs growth and possibly even the
    continued viability of the private duty industry
        In short, the PPACA's employer responsibility rules are likely to
    cause significant job loss in the private duty industry. This in turn
    will force many service recipients into more costly (and less
    emotionally healthy) institutional care. It will cause a shift to use
    of part-time employers. It will encourage a caregiver to look at self-
    employment, without knowledge of the legal responsibilities such a
    choice brings both to the caregiver and to the person who hires that
    caregiver. It could drive some private duty companies out of business.
        NPDA encourages Congress to revisit the PPACA's employer
    responsibility rules. Repeal of those rules, or modification of them to
    accommodate low-margin, labor-intensive industries such as ours is
    imperative to avoid yet more jobs loss (or jobs diminishment) along
    with loss of an important option for aging in place, in dignity and
    comfort.
        NPDA extends our thanks to the Ways & Means Committee for its
    willingness to explore this difficult issue. We are happy to provide
    any expertise the committee may seek as it works through this problem.