[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.:]

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    [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
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Former Member, Economic Policy Advisory Board

Jim Capretta
Fellow, Ethics and Public Policy Center
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(OMB)

James D. Mietus, Ph.D.
Independent Economist and Policy Adviser
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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 
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Earl L. Grinols
Distinguished Professor of Economics, Baylor University Former Senior 
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Mark H. Showalter
Professor of Economics, Brigham Young University
Former Senior Economist, White House Council of Economic Advisers (CEA)

Scott Baier
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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
[email protected]
                                 
                          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: [email protected]

Robin Stanton
United States Breastfeeding Committee (USBC)
2025 M Street, NW, Suite 800
Washington, DC 20036-3309
Phone: (202) 367-1132
Email: [email protected]

                                 
                   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
[email protected]

    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.

                                 
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