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





  EXAMINING OBAMACARE'S HIDDEN MARRIAGE PENALTY AND ITS IMPACT ON THE 
                                DEFICIT

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

                                HEARING

                               before the

                SUBCOMMITTEE ON HEALTH CARE, DISTRICT OF
               COLUMBIA, CENSUS AND THE NATIONAL ARCHIVES

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 27, 2011

                               __________

                           Serial No. 112-86

                               __________

Printed for the use of the Committee on Oversight and Government Reform









         Available via the World Wide Web: http://www.fdsys.gov
                      http://www.house.gov/reform

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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland, 
JOHN L. MICA, Florida                    Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida              JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                     Robert Borden, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

   Subcommittee on Health Care, District of Columbia, Census and the 
                           National Archives

                  TREY GOWDY, South Carolina, Chairman
PAUL A. GOSAR, Arizona, Vice         DANNY K. DAVIS, Illinois, Ranking 
    Chairman                             Minority Member
DAN BURTON, Indiana                  ELEANOR HOLMES NORTON, District of 
JOHN L. MICA, Florida                    Columbia
PATRICK T. McHENRY, North Carolina   WM. LACY CLAY, Missouri
SCOTT DesJARLAIS, Tennessee          CHRISTOPHER S. MURPHY, Connecticut
JOE WALSH, Illinois













                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on October 27, 2011.................................     1
Statement of:
    Holtz-Eakin, Douglas, Ph.D., president, American Action 
      Forum, former CBO Director; Diana Furchtgott-Roth, senior 
      fellow, Manhattan Institute for Policy Research; Richard V. 
      Burkhauser, Ph.D., professor of economics, Cornell 
      University; and Sara R. Collins, Ph.D., vice president, 
      Affordable Health Insurance, the Commonwealth Fund.........    35
        Burkhauser, Richard V., Ph.D.............................    60
        Collins, Sara R., Ph.D...................................    76
        Furchtgott-Roth, Diana...................................    54
        Holtz-Eakin, Douglas, Ph.D...............................    35
Letters, statements, etc., submitted for the record by:
    Burkhauser, Richard V., Ph.D., professor of economics, 
      Cornell University, prepared statement of..................    62
    Collins, Sara R., Ph.D., vice president, Affordable Health 
      Insurance, the Commonwealth Fund, prepared statement of....    78
    Cummings, Hon. Elijah E., a Representative in Congress from 
      the State of Maryland, prepared statement of...............     5
    Furchtgott-Roth, Diana, senior fellow, Manhattan Institute 
      for Policy Research, prepared statement of.................    56
    Gowdy, Hon. Trey, a Representative in Congress from the State 
      of South Carolina, staff report............................    13
    Holtz-Eakin, Douglas, Ph.D., president, American Action 
      Forum, former CBO Director, prepared statement of..........    38

 
  EXAMINING OBAMACARE'S HIDDEN MARRIAGE PENALTY AND ITS IMPACT ON THE 
                                DEFICIT

                              ----------                              


                       THURSDAY, OCTOBER 27, 2011

                  House of Representatives,
Subcommittee on Health Care, District of Columbia, 
                  Census and the National Archives,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:34 a.m., in 
room 2154, Rayburn House Office Building, Hon. Trey Gowdy 
(chairman of the subcommittee) presiding.
    Present: Representatives Gowdy, Gosar, Burton, DesJarlais, 
Davis, and Cummings.
    Staff present: Alexia Ardolina, staff assistant; Brian 
Blase, professional staff member; Robert Borden, general 
counsel; Molly Boyl, parliamentarian; Gwen D'Luzansky, 
assistant clerk; Linda Good, chief clerk; Christopher Hixon, 
deputy chief counsel, oversight; Sery E. Kim and Christine 
Martin, counsels; Mark D. Marin, director of oversight; Laura 
L. Rush, deputy chief clerk; Jaron Bourke, minority director of 
administration; Yvette Cravins, minority counsel; Ashley 
Etienne, minority director of communications; Devon Hill, 
minority staff assistant; Carla Hultberg, minority chief clerk; 
Paul Kincaid, minority press secretary; and Lucinda Lessley, 
minority policy director.
    Mr. Gowdy. The committee will come to order.
    This is a hearing entitled ``Examining Obamacare's Hidden 
Marriage Penalty and Its Impact on the Deficit.''
    I will recognize myself for an opening statement and then 
the gentleman from Illinois, Mr. Davis.
    Over the past several months, this committee has heard from 
job creators regarding the negative impact the President's 
health-care law is having and will continue to have on hiring 
and job growth.
    In addition to the impact on job creators, the new law will 
also negatively impact individuals. The Affordable Care Act 
contains refundable tax subsidies to assist certain people in 
purchasing health insurance. The Congressional Budget Office 
estimates these tax subsidies are the most expensive component 
of the law. The tax subsidies begin in 2014, and by 2017 CBO 
projects the tax subsidies will add $100 billion to the 
national debt each year, with an escalating cost into the 
future. The CBO estimates three-quarters of this cost will be 
new government spending.
    These tax subsidies are available to individuals who do not 
receive health insurance through their place of work. Instead 
of only being available for individuals not receiving employer-
sponsored health care, any individual within a certain income 
range--it would be more effective if the Tax Code did not care 
whether people receive their health insurance at work or 
purchase it in a private market.
    Two households with the same number of children, same 
number of wage-earners, and same combined levels of income are 
otherwise the same except for the source of health insurance. 
These two households should not have tax bills that differ by 
thousands of dollars because of their choice of health care. 
With so many families struggling throughout the country, and 
especially in my home State of South Carolina, we should be 
working toward ensuring families have the tools to invest in 
their health.
    The Joint Committee on Tax has estimated that less than 20 
percent of the beneficiaries of the tax subsidy will be married 
couples and their families. This is partly due to a recent HHS 
rule that prevents families from accessing the tax subsidy if 
either parent has an offer of coverage at work. In other words, 
if a husband is offered health insurance at work for just 
himself, and his wife and children must go purchase health 
insurance in the open market, the cost of covering the wife and 
children would not be eligible for a subsidy.
    This rule was meant to minimize the cost of the subsidy, 
but the collateral damage will be that the Affordable Care Act 
will exacerbate the marriage penalty already in the Tax Code. 
Over time, this act will force couples to choose not to get 
married because of the sizable tax benefit that will only be 
available if they stay unmarried.
    In addition to the penalty against marriage in the act, 
several of the witnesses before us today have conducted 
research that demonstrates the cost of the health-care law will 
likely be much higher than the Congressional Budget Office 
originally projected. From underestimating the cost of the 
long-term-care program, demonstrated by the administration's 
decision to eliminate the program, to the law's likely 
unsustainable Medicare cuts, the tax subsidies in the law will 
be the biggest reason the law will exceed the projected cost. 
Because this biased tax credit will encourage employers to 
discontinue health insurance and employees to decline employer-
sponsored coverage, the cost of the health-care law will 
continue to increase.
    In contrast to CBO's prediction, several surveys predict 
the number of employers who cease to offer health insurance to 
their employees will be much higher than it is now. Just last 
week, it was reported the Nation's largest private employer, 
Wal-Mart, will no longer offer health care to new employees 
working less than 24 hours per week. Additionally, employees 
working 24 to 34 hours per week will not be offered insurance 
for their spouses. This is an example of how government 
mandates and regulations are significantly increasing the price 
of health insurance, and companies must make adjustments to 
compete globally.
    As more and more companies cut back on health insurance 
coverage, the cost of the Affordable Care Act will increase. It 
is essential we explore the unintended costs associated with 
the new health-care law. We need laws that are transparent and 
uniform in their impact on families. As the health-care law is 
implemented, we must examine how we are using taxpayer dollars 
and if government is being a good steward of those dollars.
    One of the President's fiscal commission guiding values was 
to reduce inefficiencies, loopholes, and the complexity in the 
Tax Code in order to lower rates, simplify the Tax Code, and 
bring down the deficit. As demonstrated with problems with the 
tax credits, the Affordable Care Act moves in precisely the 
opposite direction. The act introduces another major inequity 
into the Tax Code, effectively encouraging employers and 
workers to drop employer-sponsored insurance and pass these 
costs to taxpayers. Additionally, the law adds a large marriage 
tax penalty and discourages job growth.
    I look forward to hearing from today's witnesses about what 
they have learned about the health-care law and whether I am 
right to be skeptical about how the law will play out.
    At this point, I would recognize the ranking member of the 
subcommittee, the distinguished gentleman from Illinois, Mr. 
Davis.
    Mr. Davis. Thank you very much, Mr. Chairman. And let me 
thank you for calling this hearing.
    I want to thank our witnesses for coming to participate.
    For many years, I have been an avid supporter and advocate 
of a national health plan. And I have been that because I have 
always believed, since I learned about health, that health care 
ought to be a right and not a privilege. Nor do I believe that 
it can be left to chance, because it is obviously too precious. 
When you think about it, without good health care, students 
cannot concentrate at school, families cannot pursue work and 
other activities that are needed to develop and sustain what we 
call a good life.
    So when the opportunity came to vote on the Patient 
Protection and Affordable Care Act, I was delighted. And I was 
delighted because it has provided various pathways to 
accessible health care for the masses.
    One such path establishes State-based health-care exchanges 
that can be utilized by individuals if they cannot find 
coverage through their large employer. Small businesses are the 
Medicaid expansion. The subsidies vary with income and are 
based upon the Federal poverty level, a similar eligibility 
threshold for numerous government programs. In addition, 
further tax credits will be available to those eligible for 
employer coverage and public assistance coverage but only in 
narrow circumstances.
    The ACA will benefit families and reduce the Federal 
deficit. First of all, the families and individuals impacted by 
crippling medical debt--that is a significant causation of 
personal bankruptcies--will become a thing of the past because 
preventative care and early detection are no longer cost-
prohibitive. Second, the nonpartisan Congressional Budget 
Office found the health-care legislation will reduce deficits 
by $143 billion, further benefiting our Nation's finances.
    As I have previously said, the ACA is progress. And while 
each individual will face unique circumstances and challenges 
under ACA, generally there are significant benefits that result 
in good health for the American public. Every time I think of 
the fact that more than 32 million additional people will have 
the opportunity to purchase, maintain, and make use of health 
insurance, I say that is good for me and I believe that that is 
good for America.
    So I thank our witnesses for coming.
    Again, Mr. Chairman, I thank you for holding the hearing. I 
yield back.
    Mr. Gowdy. I thank the gentleman from Illinois.
    Members may have 7 days to submit opening statements and 
extraneous materials for the record.
    [The prepared statement of Hon. Elijah E. Cummings 
follows:]




    Mr. Gowdy. I would now ask unanimous consent that the staff 
report entitled, ``Uncovering the True Impact of the Obamacare 
Tax Credits'' be included in the record.
    Mr. Davis. Mr. Chairman, I have no objection, but I also 
would like to make sure that the report is reflected as a 
partisan staff report and has not been marked up. So, as long 
as we make sure that that depiction is shown, I would have no 
objection.
    Mr. Gowdy. The distinguished gentleman from Illinois' 
comments are obviously part of the record and can be read in 
conjunction with the report. And, with that----
    Mr. Cummings. Chairman.
    Mr. Gowdy. Yes, sir.
    Mr. Cummings. I just want to be clear. The staff, we got 
the report about 10 minutes ago. And I wondered, is that a 
report of the committee, or is that a report of the Republican 
side of the committee, since we had no input? And I think that 
is what Ranking Member Davis was trying to get to. I mean, we 
haven't even read it.
    Mr. Gowdy. The gentleman from Maryland is correct. It is a 
report of the Republican staff. It is not the committee as a 
whole. The gentleman is correct.
    Mr. Cummings. Thank you, Mr. Chairman.
    Mr. Gowdy. Without objection, so ordered, with the comments 
of the gentleman from Illinois and the gentleman from Maryland.
    [The information referred to follows:]



    Mr. Gowdy. We will now welcome our first panel of 
witnesses. On behalf of all of us, thank you for coming, and 
welcome.
    I will introduce you from my left to right, your right to 
left. And that will be the order in which we would like you to 
give your opening remarks.
    Douglas Holtz-Eakin is president of the American Action 
Forum and former director of the Congressional Budget Office. 
Diana Furchtgott-Roth is a senior fellow at the Manhattan 
Institute for Policy Research. Richard Burkhauser is a 
professor of economics at Cornell University. Sara Collins is 
vice president for affordable health insurance at The 
Commonwealth Fund.
    Pursuant to committee rules, all witnesses will be sworn 
before they testify. So I would ask if you would please rise 
and lift your right hands.
    [Witnesses sworn.]
    Mr. Gowdy. May the record reflect all witnesses answered in 
the affirmative.
    You may be seated.
    The lights--and I know many of you have testified before 
and you are more familiar with the process than I am. So the 
lights mean what they traditionally mean in life: green, go; 
yellow, speed up, try to get under the red light before it 
changes; and red, kind of see if you can start bringing it to a 
conclusion.
    And, with that, we will recognize Mr. Holtz-Eakin.

 STATEMENTS OF DOUGLAS HOLTZ-EAKIN, PH.D., PRESIDENT, AMERICAN 
   ACTION FORUM, FORMER CBO DIRECTOR; DIANA FURCHTGOTT-ROTH, 
SENIOR FELLOW, MANHATTAN INSTITUTE FOR POLICY RESEARCH; RICHARD 
     V. BURKHAUSER, PH.D., PROFESSOR OF ECONOMICS, CORNELL 
    UNIVERSITY; AND SARA R. COLLINS, PH.D., VICE PRESIDENT, 
       AFFORDABLE HEALTH INSURANCE, THE COMMONWEALTH FUND

            STATEMENT OF DOUGLAS HOLTZ-EAKIN, PH.D.

    Mr. Holtz-Eakin. Thank you, Mr. Chairman, Ranking Member 
Davis, and members of the committee. It is a privilege to be 
able to be here today to discuss this important topic.
    There are many perspectives on the Affordable Care Act. In 
mine, I want to focus on some of the economic consequences of 
this legislation.
    Viewed from the perspective of economic policy, I believe 
this is an unwise legislation at this point in our Nation's 
history. And let me spell out a couple of reasons why.
    First and foremost, as the committee is well aware, the 
United States faces a daunting fiscal future in which projected 
debt relative to the economy is, under current law, to spiral 
ever upward and invite a sovereign debt crisis of the type that 
we are watching unfold in Europe at this very moment. In such 
circumstances, the laws, budgetary consequences are of extreme 
importance, and it is my belief that it will exacerbate, not 
improve, the fiscal outlook and, for that reason, is a dramatic 
step in the wrong direction.
    We knew at the time of its passage that the law contained 
many budget gimmicks which disguise its true impact on future 
deficits. We have already seen the unwinding of one of those, 
the so-called CLASS Act, which was used in the first 10 years 
to provide $80 billion worth of revenue and hid all the 
spending past the budget window.
    But there are others, as well. As the chairman mentioned in 
his opening remarks, there are billions of dollars of cuts to 
Medicare which will not be sustainable in the future. The 
business model for Medicare has not changed in a way that will 
allow those cuts to be implemented. A future Congress will be 
faced with the choice between denying seniors access to care or 
restoring those cuts. My expectation is those cuts will be 
restored. The cost of the program will become larger and 
larger.
    And, as one of my fellow witnesses, Dr. Burkhauser, has 
done extensive research on, the serious upside risk of the 
insurance subsidies off of the exchanges being far more 
expensive than the Congressional Budget Office originally 
estimated, there is simply too much subsidy money on the table 
for employers and employees not to take advantage of it. And we 
will see a reworking of many employment contracts so that 
employers no longer offer coverage and the workers go get their 
insurance subsidies.
    So I think, budgetarily, this is very dangerous.
    The second perspective is, from what we know about those 
countries that have huge deficit problems and poor economic 
growth--and the United States is in that position--the playbook 
for success is one which keeps taxes low and reforms them to be 
simpler and more pro-growth and then cut spending. In 
particular, government employment--not a big deal in the United 
States--and transfer programs.
    This legislation goes exactly in the wrong direction, from 
the lessons of economic history. It has, you know, $500 billion 
to $700 billion worth of tax increases, depending on how you 
count it. It makes the Tax Code, as the chairman mentioned, far 
more complex, not simpler and more pro-growth, and so, from a 
tax perspective, goes exactly in the wrong direction.
    And this is additional transfer spending in the United 
States. And expansions of Medicaid, probably our least 
successful entitlement program, the invention of a new 
entitlement in the insurance subsidies--both of those are steps 
in the wrong direction, given the needs that face the United 
States.
    So I think that it is broadly a step that is dangerous to 
our future budgetarily and from a growth perspective.
    And, finally, if you look inside the law at some of the 
incentives, they have perverse anti-growth implications. The 
tax credits available to small businesses, for example, 
penalize those small businesses that actually grow and add 
employees or increase their compensation. The insurance 
subsidies themselves get phased out as people's income rises. 
That is an implicit tax on the success of our low-income 
workers and at odds with our desire to allow them get ahead.
    And, last, I think the labor market consequences of the 
higher insurance market premiums that the law will inevitably 
produce by demanding more benefits get covered and applying 
taxes to all parts of the health supply chain, plus the cost of 
the employer mandate itself, are going to hurt low-wage workers 
in particular, harm the ability of all workers at this point in 
time to get jobs.
    And so, taken as a whole, from the top-level macroeconomics 
to the labor market incentives, I think this is dramatically 
bad economic policy and will, in the end, be something that the 
United States regrets.
    I thank you.
    [The prepared statement of Mr. Holtz-Eakin follows:]



    Mr. Gowdy. Thank you, Dr. Holtz-Eakin.
    Dr. Furchtgott-Roth.

               STATEMENT OF DIANA FURCHTGOTT-ROTH

    Ms. Furchtgott-Roth. Thank you for inviting me to testify 
here today.
    I am a senior fellow at the Manhattan Institute, and I am 
the author of ``Women's Figures: An Illustrated Guide to the 
Economic Progress of Women in America'' that looks at how women 
have moved increasingly into the work force over the past half-
century.
    I fully agree that everybody should have access to health 
care, but the way this bill is structured, there are 
disincentives for women to marry and disincentives for women to 
work. And for a bill that is supposed to make Americans 
healthier, these disincentives are truly startling. Beginning 
in 2014 when the bill takes effect, Americans will find it more 
advantageous to stay single than to marry, even more so than 
under the current Tax Code.
    Marriage penalties from taxes in general and from the new 
health-care law in particular fall into two categories: 
disincentives to marry and disincentives to work. And the way 
the new health-care law is structured, health insurance premium 
credits in the new law are linked not directly to income but to 
the poverty line, resulting in a particularly steep marriage 
penalty for low-income Americans. And this arises because with 
$10,890 as the poverty line for one person and an additional 
$3,820 for a spouse, marriage means less government help with 
health insurance when a couple gets married.
    Since the new qualified benefit plans offered in the health 
insurance exchanges are going to be generous and expensive, 
with no lifetime maximums, no co-payments for preventive 
services, no exclusions for pre-existing conditions, and the 
requirement to accept all applicants, it is going to be 
especially important for low-income individuals to have help 
with their health insurance premiums.
    So here is how the system will work when it is implemented 
in 2014: The new health-care bill will offer refundable, 
advance premium credits to singles and families with incomes of 
between 133 percent and 400 percent of the poverty line. The 
credits can only be used to buy health insurance through the 
exchanges. So if you earn up to 133 percent of the poverty 
line, your premium can only be 2 percent of your income; it 
cannot be more than 2 percent of your income. Moving up, if you 
earn between 150 percent and 200 percent of the poverty line, 
your premium can be 4 percent to 6.3 percent of your income. Up 
to 400 percent of the poverty line, it can only be 9 percent. 
So the more you move up, the higher premium you have to pay.
    So two singles would be able to earn $43,000 and have help 
from the Federal Government with their premiums. But if they 
got married and combined their earnings to $86,000, they would 
be far above the limit because they would be above 400 percent 
of the poverty line. As a married couple, the most they could 
earn and still get government help with health insurance 
premiums would be $58,000, which is a difference of almost 
$30,000 or 32 percent. And this is a substantial disincentive 
to get married.
    Such marriage penalties exist even for couples below the 
poverty line when they are married. So if we look at the 
example of June and Jake, for example, living alone, each one 
earns, say, $21,780, putting them at 200 percent of the poverty 
line. Unmarried, their premium would be about 6.3 percent of 
their income or $2,744 in total. But let's say June and Jake 
were to marry. Their combined income would be $43,560, about 
300 percent of the poverty line for a family of two. That would 
push their premium close to 9.5 percent of the bracket or 
$4,138 out of their combined income. That is a marriage penalty 
equal to about $1,200, which is a substantial disincentive to 
getting married.
    The penalty also exists for single mothers. Say Sally is a 
single mother earning $44,130, putting her and her baby at the 
300 percent of the poverty line. They would be eligible for the 
health insurance premium assistance credit. But what if she 
were to marry Sam, the father of her child, who earns $43,560 
and who is at 400 percent of the poverty line? Their total 
earnings at $87,000 would exceed the 400 percent poverty line 
for a family of three. Married, they would no longer get help 
with their premiums from the government; unmarried, they would.
    So I would argue that even though health care is something 
that every American should have, the way we have structured the 
program provides a disincentive to marry, and when couples are 
married, a disincentive for the woman to work. And this needs 
to be addressed.
    Thank you very much.
    [The prepared statement of Ms. Furchtgott-Roth 
follows:]




    Mr. Gowdy. Thank you, Ms. Furchtgott-Roth.
    Dr. Burkhauser.

           STATEMENT OF RICHARD V. BURKHAUSER, PH.D.

    Mr. Burkhauser. Thank you for the opportunity to submit a 
summary of my research with Sean Lyons and Kosali Simon on the 
Affordable Care Act.
    In a series of proposed rules, the Obama administration 
confirmed what the ACA's supporters have feared: The law's 
requirement that employers must make health insurance coverage 
affordable only applies to single coverage, not family 
coverage.
    Those familiar with all the law's moving parts know exactly 
what this means. Because any offer of single employer coverage, 
if it is considered affordable, blocks access to generous 
subsidies via tax credits in the insurance exchanges, millions 
of families will be stuck in a no man's land without affordable 
coverage through either their employers or the exchanges.
    The law's advocates are pushing the administration to 
change this by requiring employers to make coverage affordable 
for employees and their families. But our new research 
demonstrates why this decision isn't so cut and dried. Using 
this broader ACA definition of ``affordable'' could incent 
millions of employees to willingly shift from an employee plan 
to a government-subsidized insurance exchange at significant 
cost to the taxpayers, even if their employers continue to 
offer coverage.
    How the ACA's provisions will actually impact the insurance 
market depends on the answers to two questions: First, does 
affordable coverage refer to coverage just for employees alone 
or for the employees and their families? We suspect the 
administration's proposed answer to the first question came as 
a surprise to the average Congressperson, who believed, as we 
did at the start of our research, that the law levies a fine if 
a large employer doesn't provide affordable coverage to 
employees and their families. But a close reading of the bill 
shows that the employer fine is only triggered when coverage 
isn't affordable for the employee, not the employee and their 
family.
    That brings us to the second question, which interacts in 
important ways with the administration's answer to the first: 
Will employers keep their current insurance plans but adjust 
them to allow lower- or moderate-income families, up to $89,000 
for a family of four, to qualify for entry into the subsidized 
exchanges? The CBO assumed not. Yet for income-eligible 
employees, subsidy dollars will make exchanges coverage more 
affordable than their current employer plan, even when 
purchased with after-tax dollars. It is also attractive for 
employers, who would pay less in per-employee fines than by 
providing affordable insurance in the first place. By 
increasing pre-tax health insurance premiums, making coverage 
unaffordable for some, employers will free their lower- to 
moderate-income employees to actually obtain subsidized 
exchange coverage and still maintain their plan for higher-
income workers.
    We use Census Bureau data to model the impact of the 
health-care law on the sources of insurance coverage among 
private-sector workers. Assuming the three main insurance 
provisions of the ACA take effect and the administration's 
definition of ``affordable'' sticks and people act as the 
government assumes they will, we find that employer-sponsored 
coverage will rise slightly from its current levels to about 75 
percent and, in response to the ACA mandates, by another 11 
percent via the previously uninsured workers taking advantage 
of the exchanges.
    However, when we alter our model by allowing employees and 
employers to work together to take advantage of exchange 
subsidies, the picture changes. Employer-sponsored coverage 
falls to 70 percent; the number of employees insured in the 
exchanges rises by about 4 million to 16 percent. This all 
occurs despite our very optimistic assumption that all large 
firms actually offer coverage and no small firms drop coverage.
    But if we allow the broader interpretation in the employee 
mandate--that is, where employers must make coverage affordable 
to workers and their families--the changes are even more 
dramatic. Employer-sponsored coverage drops to 63 percent, with 
nearly one-quarter of all workers, over 14.7 million or 23 
percent, receiving their insurance through the exchanges.
    We offer no unique insight on whether the administration's 
proposed single coverage rule will hold, but we do know that 
this unpopular definition and its possible revisions hold 
significant implications for everyone impacted by the law's 
provisions. Either millions of dependents of employees with 
affordable single coverage will be stuck without an offer of 
affordable coverage--we estimate between 7 million and 16 
million--or taxpayers will be stuck with as much as $50 billion 
more per year in gross subsidy costs than originally projected.
    This is a Sophie's choice embedded in the ACA as a 
consequence of the pile of open-ended taxpayer money it leaves 
on the table in the form of exchange subsidies intended for the 
minority 20 percent of workers without affordable coverage that 
will inevitably tempt a significant number of the vast majority 
of employees with affordable coverage to gain access to it.
    Thank you for the opportunity to speak before you today.
    [The prepared statement of Mr. Burkhauser follows:]



    Mr. Gowdy. Thank you, Dr. Burkhauser.
    Dr. Collins.

              STATEMENT OF SARA R. COLLINS, PH.D.

    Ms. Collins. Thank you, Mr. Chairman, for this invitation 
to testify on the premium tax credits that are available to 
families under the Affordable Care Act.
    Recent trends in the numbers of people who are uninsured or 
underinsured demonstrate how critical these premium tax credits 
and the law's related insurance affordability programs and 
reforms will be to ensure both the health and financial 
security of working families.
    The number of people without health insurance climbed to 
nearly 50 million people in 2010, over 13 million more than 
were uninsured a decade ago. Among people who do have health 
insurance, The Commonwealth Fund estimates that, in 2010, 29 
million working-age adults had such high out-of-pocket costs 
relative to their income that they were underinsured. This is 
an increase from 16 million in 2003.
    Both these trends have had serious financial and health 
consequences for families. An estimated 75 million adults under 
age 65, both with and without health insurance, reported a time 
in 2010 when they did not get needed health care because of the 
cost. And 73 million adults said that they had difficulty 
paying medical bills or were paying off debt over time.
    With its array of affordable health insurance programs and 
new consumer protections, the Affordable Care Act will 
substantially reverse these trends, ensuring that all Americans 
will have access to affordable and comprehensive health 
insurance coverage.
    Indeed, the law's new provision that allows children up to 
age 26 to stay on or join their parents' insurance policies 
reversed a decade-long increase in uninsured rates of young 
adults, providing coverage to nearly 800,000 19 to 25-year-olds 
in the past year.
    The law's most significant coverage provisions will begin 
in 2014 with a substantial expansion in Medicaid eligibility 
for adults earning up to 133 percent of poverty, or about 
$29,700 for a family of four, as well as subsidized coverage 
available--private coverage available through new State 
insurance exchanges for families earning up to 400 percent of 
poverty, or $89,400 for a family of four.
    The State insurance exchanges will create a new marketplace 
that will serve as a central portal through which people can 
get coverage if they do not have an affordable employer-based 
health plan. People will fill out one application for all 
insurance affordability programs, including Medicaid, the 
Children's Health Insurance Program, the Basic Health Program, 
or premium tax credits for private plans, which are known as 
qualified health plans, sold in the exchanges.
    Taxpayers eligible for premium credits will make 
contributions to their premiums as a share of their income, 
from 2 percent to 9.5 percent. Those eligible for tax credits 
will have a choice of private plans that will offer an 
essential benefit package. Insurers will offer these plans at 
four levels of cost-sharing: bronze plans, covering an average 
of 60 percent of someone's annual medical costs; silver, 70 
percent of costs; gold, 80 percent of costs; and platinum, 90 
percent of costs.
    The average cost covered by the silver plan will be 
increased for low- and moderate-income families. As an example, 
a family of four with an income of $35,000 would make a premium 
contribution of 4 percent of their income, or $1,400. If the 
policyholder's age is 40, this family's premium for a benchmark 
plan, which would be the second-lowest-cost silver plan offered 
in the family's region of the country, would be about $12,130 
in 2014. Their tax credit would thus be equal to the benchmark 
premium minus their required contribution, or $10,700.
    About 90 percent of legal residents who are currently 
uninsured in the United States right now would gain premium tax 
credits or Medicaid. In addition, if the reforms were 
implemented today, there would be 21 million fewer underinsured 
adults in the United States.
    The Congressional Budget Office estimates that the 
Affordable Care Act will reduce the Federal deficit by $124 
billion over the period 2012 to 2021. Cutler, Davis, and 
Stremikis estimate even greater savings than the Congressional 
Budget Office from the law's health-care delivery system 
reforms. They project an additional $406 billion in savings by 
2019 and, consequently, a much greater net decrease in the 
deficit of about $400 billion.
    In 2009, as health reform was being debated, total national 
health expenditures were projected to reach $4.9 trillion in 
2020. Expenditures are now projected to reach $4.6 trillion in 
2020, 5 percent below original estimates. If scorekeepers were 
to redo the original estimates based on these new projections, 
the deficit reduction generated by health reform would be even 
greater.
    The trends in uninsured and underinsured Americans over the 
last decade really do underscore the need for Federal and State 
policymakers to continue their work implementing the Affordable 
Care Act. When the law is fully implemented, U.S. families will 
have new affordable and comprehensive insurance options, both 
in good economic times and in bad.
    In addition, while much of the recent debate has focused on 
lowering the costs of Medicare and reducing the Federal 
deficit, the same forces that are driving up public program 
costs are also increasing costs for working families. With this 
extensive set of delivery system and insurance market reforms, 
the Affordable Care Act focuses on improving quality and 
affordability throughout the entire health-care system.
    For the 50 million adults and children who were without 
coverage in 2010 and the additional 29 million adults who are 
underinsured, the 2014 reforms cannot come soon enough.
    Thank you.
    [The prepared statement of Ms. Collins follows:]



    Mr. Gowdy. Thank you, Dr. Collins.
    Dr. Holtz-Eakin, recently I was privileged to be on the 
committee where you spoke or testified more globally about the 
state of our fiscal health as a Nation. Can you go back into 
that with specific reference to health-care costs and how the 
cost of health care will impact our fiscal state in the near 
and long-term future?
    Mr. Holtz-Eakin. Well, certainly, if you go back to the 
beginning of this year and look, for example, at the 
administration's budget, it showed we are running a deficit 
this year of about $1.3 trillion. And that is, in and of 
itself, troubling. And our current gross debt relative to GDP 
is over 90 percent. And that is the region in which the 
evidence suggests you pay a growth penalty of 1 percent per 
year, roughly, and have a much higher probability of 
encountering international sovereign debt problems. So, that is 
where we are.
    If you roll the clock forward 10 years in that budget, 
assume that we are not fighting any overseas military 
operations, the financial crisis is in distant memory, we are 
back to full employment, we are growing nicely, the deficit is 
still $1.2 trillion in that budget projection, and $900 billion 
of it is interest on previous borrowings.
    We are spiraling out of control. This is true despite the 
fact that revenues are up to 19.5 percent of GDP, above the 
historic norm. The administration raises all the taxes they 
want in that budget. And that tells you that we have a spending 
problem. And if you look inside that spending problem, it is 
driven by Medicare, Medicaid, and, soon, the Affordable Care 
Act. And that has to be the focus in controlling our future 
debt increase and the threats that it faces the United States 
with.
    Nothing that has happened since that budget really changes 
that picture. The Budget Control Act in August puts 
discretionary spending caps on. They will be as effective as 
future Congresses are effective with living with them. We 
haven't touched any of the mandatory spending programs, which 
are at the heart of that problem. And so I view it as 
inescapable that this committee and the Congress as a whole 
will be back to look at that whole array of Federal health 
programs again and again.
    Mr. Gowdy. Dr. Holtz-Eakin, I know you are going to be 
reluctant to do what I ask you to do because it will make you 
assume that you are a Member of Congress and our public 
approval rating is such----
    Mr. Holtz-Eakin. I must respectfully decline, sir.
    Mr. Gowdy [continuing]. That you will probably not accept 
my invitation. But what should the tax treatment be for health 
care? How would you reform it if you were king for a day?
    Mr. Holtz-Eakin. Well, I have been on record for years as 
removing the exclusion from tax of employer-sponsored health 
insurance. It is a perverse subsidy that, number one, 
diminishes the awareness of consumers of health insurance to 
its real cost. Number two, the subsidy is bigger for higher-
income individuals, so it is at odds with the conventional 
American notions of equity. And I would eliminate that.
    And instead, to the extent that we wanted to support the 
purchase of private health insurance in the United States, I 
would provide low-income support in a fixed credit that didn't 
vary by income and which didn't have this open-ended subsidy 
aspect.
    Mr. Gowdy. Ms. Furchtgott-Roth, I was struck, as I am sure 
all of us up here were unless they had heard it before, about 
the systemic penalty for marriage that is, I am sure, 
inadvertently, unwittingly built into this law, but, 
nonetheless, it is there.
    Were there other examples you could give? I was just struck 
by June and Jack, I believe it was, that their decision to get 
married is going to have a deleterious impact on their bottom 
line. That fact alone is going to cause their health-care costs 
to go up.
    Are there other examples that you would have given had you 
had more than 5 minutes, or were those the most probative?
    Mr. Furchtgott-Roth. Those are the most salient examples. 
But what I was going to say is that it also gives an incentive, 
if the couple gets married, for one of them not to work. And 
usually it is the woman who decides not to go back into the 
labor market. About 80 percent of women have children at some 
point in their lives; they tend to go in and out of the labor 
market. And if there is this big penalty on their earnings--in 
other words, if the family says, ``Okay, June, you go back to 
work, but then we are going to lose government help with our 
health insurance,'' then the big incentive, on top of the extra 
tax penalty, is for the woman to drop out of the labor force 
and not work.
    And with the higher taxes in Europe, we have seen that 
there are lower levels of female labor force participation. 
Here in the United States, we have some of the highest levels 
of female labor force participation. Women have invested in 
their education, they plan to have many years with productive 
jobs, and this marriage penalty would basically throw them for 
a loop.
    Mr. Gowdy. I want to follow the same admonitions I gave 
everyone else, and my time is up. So I would recognize the 
distinguished gentleman from Illinois, the ranking member of 
the subcommittee, Mr. Davis.
    Mr. Davis. Thank you very much Mr. Chairman. You know, I 
always say, you can't lead where you don't go. And so I 
appreciate very much your approach to the timing.
    Dr. Holtz-Eakin, I was somewhat fascinated by your 
testimony. And I was wondering, as I listened to you, if people 
are living longer, using emergency rooms less frequent, using 
tertiary care, which is very expensive, because the state of 
their health has gotten to the point where they need this kind 
of care, I was trying to figure out how those factors would be 
detrimental to our economy and how those would be negatives as 
opposed to positives.
    Could you respond to that?
    Mr. Holtz-Eakin. Well, as in any policy issue, there are 
benefits and costs to the legislation and in the health-care 
issue in general.
    It is certainly the case that we want a high-quality 
health-care system and Americans living in better health and 
longer. No one disagreed with that at the outset of the debate. 
I think the issue is, does this legislation meet the objectives 
we want in terms of delivery system reforms? My judgment would 
be, no, that it will not, in fact, solve some of the problems 
we see in the delivery of American medicine that leads us to 
have a very low-value system. We spend a lot of money with very 
substandard results. We can have a longer discussion about why 
I think that.
    And then the second question is the financing. And in the 
process of financing that consumption of health care, do we do 
it in an efficient fashion that allows us to meet other 
objectives for economic growth and other policy objectives? 
And, again, my judgment is, this approach, which essentially 
wrote, you know, a trillion dollars' worth of checks and raised 
$500 billion of taxes and pretended to cut $500 billion out of 
Medicare isn't going to meet that objective.
    And so I think there was, at the beginning of 2009, a 
shared understanding of the need for health-care reform, a 
shared understanding that the objectives should be higher-
quality care at lower cost and an efficient insurance system. I 
just don't think we met those objectives.
    Mr. Davis. Thank you.
    Ms. Furchtgott-Roth, have you ever known anyone to not get 
married because they were concerned about the cost of health 
care or how it would impact them and, as a result, they would 
decide, ``Well, you know, I am not going to get married because 
this is going to have a negative impact on my being?'' Have you 
ever known anyone to----
    Mr. Furchtgott-Roth. Well, the provisions--the answer to 
your question is no. But the provisions of this health-care act 
have not yet kicked in. Now, say two young people who--first of 
all, they don't have the mandate to have health insurance, they 
are people who are uninsured for short periods of time between 
jobs, you can buy a low-cost health insurance program right now 
with a high deductible and a health savings account and 
catastrophic health care.
    So this hasn't arisen right now, but it will if the 
government mandates expensive health insurance, requires people 
to have it, and gives people subsidies depending on where they 
are in the poverty line. Because the poverty line for one 
person is $10,890, but for two people it is $14,710.
    Mr. Davis. Well, let me ask you, are the marriage rates 
going up or down?
    Mr. Furchtgott-Roth. I would have to check those data and 
get back to you. And I would be happy to do that.
    Mr. Davis. Let me ask you, Dr. Collins, why do you think 
overwhelmingly people feel a need to reform our approach to 
health care and what we have been doing?
    Ms. Collins. I think the major motivation for the 
Affordable Care Act was to cover the 50 million people who are 
without coverage. That number has been growing over time. And 
we also know that rising health-care costs are making it 
increasingly difficult for employers to offer coverage, so more 
employers have dropped coverage, particularly small employers 
have dropped coverage over the last few years.
    In this recession, we know that high employment rates are 
related to people losing their coverage through their jobs. 
About 57 percent of people who lost a job with health benefits 
became uninsured.
    And the other major piece of this is also addressing the 
underlying cost growth in the health-care system. Half of the 
law is really directed at significant delivery system reforms 
that will achieve the kinds of cost savings that Mr. Holtz-
Eakin mentioned that are necessary to bring our deficit under 
control. And, in fact, if you see the Congressional Budget 
Office estimates, it, in fact, over 10 years, does reduce our 
deficit, in large part because of those reforms.
    Mr. Davis. Thank you very much, Mr. Chairman.
    Mr. Gowdy. I thank the gentleman from Illinois.
    The chair would now recognize the gentleman from Tennessee, 
Dr. DesJarlais.
    Mr. DesJarlais. Thank you, Mr. Chairman.
    And thank you, panel, for your testimony today.
    I guess, after listening to the testimony here and prior to 
coming to Congress in January being a practicing primary-care 
physician for 20 years, I will maybe start with Dr. Collins and 
say, what makes the Affordable Health Care Act affordable?
    Ms. Collins. There are several insurance coverage 
expansions that will make coverage far more affordable for 
people than is the case today.
    Most people who try to buy on their own, as was mentioned 
earlier, don't actually end up buying a health plan through the 
individual market because they are underwritten on the basis of 
their health and they actually face the full premium, their 
health-care conditions can be excluded from their coverage. So 
the new Medicaid expansion will dramatically increase coverage 
for people, as well as the premium tax credits increasing 
coverage for people up to 400 percent of the poverty line.
    Jonathan Gruber did an analysis that he published in May 
that looked at whether health care will become more affordable 
for people. And the majority of people in the United States 
would find premiums and their out-of-pocket costs affordable 
under the Affordable Care Act.
    Mr. DesJarlais. Who is going to eat the cost? I mean, it 
isn't free to provide health care. You said 50 million 
uninsured, 70 million uninsured. I think the President talked 
about 30 million uninsured when this came into effect, so I 
guess it has grown by 20 million in the last year and a half.
    Who is going to pay for that? Where is that money going to 
come from? Who are they going to take it from?
    Ms. Collins. Well, there are several offsetting provisions 
in the law that do pay for the expansion completely and, in 
fact, save money over time.
    Mr. DesJarlais. So the taxpayer then? I mean, the 
government doesn't have any revenue other than tax. So the 
taxpayers are going to pay for it?
    Ms. Collins. The provisions in the law require changes to 
the delivery system, changes to Medicare Advantage plans, 
bringing them more in line with regular Medicare----
    Mr. DesJarlais. Do you think health care is going to 
improve, or is the quality of care going to go down?
    Ms. Collins. The quality of care, under the provisions of 
the law, are absolutely expected--is absolutely expected to 
increase. The delivery system----
    Mr. DesJarlais. How so?
    Ms. Collins. The delivery system reforms are actually 
directed not only toward saving money but also improving the 
way in which people receive their care, making the system more 
patient-centered, focusing on coordinating people's care over 
their lifetime and over a disease experience. So, bringing much 
more rationality to the system than is the case today.
    Mr. DesJarlais. Uh-huh.
    Dr. Holtz-Eakin, I think you said Medicare is maybe one of 
the worst examples of the management of an entitlement program.
    Mr. Holtz-Eakin. I certainly think it is a clear fiscal 
problem; we know that. I mean, right now the gap between 
premiums and payroll taxes coming in and spending going out is 
$280 billion a year. It is going to get worse, not better.
    It also promotes a lot of bad medicine. We have a Part A 
for hospitals, a Part B for doctors, a Part C for insurance 
companies, a Part D for pharmaceuticals. It is not integrated 
in any way. It is not coordinated around a beneficiary. You 
know, hospitals are paid a fixed amount for a diagnosis; 
doctors are paid for volume. Doctors practice in hospitals. The 
conflicting incentives are enormous.
    So I think reforming Medicare should have been the top 
priority, not something that was left behind.
    Mr. DesJarlais. Yeah. And right now, as Medicare patients 
will tell you, it is getting harder and harder to find primary-
care doctors. And so I guess you are disagreeing with Dr. 
Collins where she says, we can add more and more people to 
Medicaid and yet we are going to maintain a quality of care and 
somehow we are going to reduce costs.
    Mr. Holtz-Eakin. The Medicaid expansion is the most 
problematic, in my view. Medicaid beneficiaries are in ERs for 
normal care at far higher rates than are the uninsured. And 
they have great difficulty finding primary-care physicians. And 
to expand that program, rather than fix it, I think was an 
enormous mistake.
    And I just want to say, on the affordability issue, there 
is a fundamental problem with a country that spends nearly 20 
percent of its national income on health care and defines care 
to be affordable when it is under 10 percent. That can't add 
up.
    Mr. DesJarlais. And, you know, I don't think people in 
general want to look at it like a Better Homes and Gardens, 
good, better, best health care. I mean, everybody wants the 
best, but the best costs money. And we are saying, this is an 
affordable health care act, but yet we are trying to increase 
the number of participants and we are trying to decrease the 
cost. Someone is going to have to pay for it. Ultimately it is 
going to be taxpayers who will bear the burden.
    You know, physicians, we have an SGR problem right now for 
physicians, where they are trying to cut another 29 percent 
from physician pay. As a primary-care physician, I don't set my 
own fees. That was set by Medicare over a decade ago. We have 
not had an increase in 10 years, and they are proposing a 10-
year freeze. I don't know what the incentive is going to be to 
other physicians to go into medicine to help expand this 
improved quality of care that Dr. Collins spoke of.
    But my time has expired, and I thank you for your input.
    Mr. Gowdy. I thank the gentleman from Tennessee.
    The chair would now recognize the gentleman from Maryland, 
the ranking member of the full committee, Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Dr. Collins, it is not just a question of being affordable; 
it is also a question of being available, is that right? I 
mean, this is what the affordable care law is trying to make 
health care available, because there are so many Americans that 
don't--even if they could afford it, it is not available. I 
have people in my family who could not even get an insurance 
policy if they were willing to spend $50,000 a year because of 
pre-existing conditions. And we talk about women and we look at 
the--I think there was some research done that showed women 
having far more pre-existing conditions than men.
    And then we also found that if a woman has a woman-owned 
firm, she is going to spend a lot more money on women in that 
firm than, say, if a firm were, say, 50/50 male/female, is that 
right?
    Ms. Collins. That is absolutely correct. And right now, if 
a woman goes to the individual insurance market to buy a health 
plan, as was mentioned, if they lose their job or if they are 
between jobs, those plans generally do not come with maternity 
benefits. So insurers will not cover maternity because it is a 
cost to them. So, under the Affordable Care Act, insurance 
plans will be required to offer maternity coverage.
    For small businesses, the law is very much geared toward 
making it much easier for small businesses to offer coverage. 
The requirement on the penalties that was mentioned earlier 
only applies to companies with more than 50 employees. 
Employers can come into the exchanges, have a much broader 
array of health plans to offer their employees at likely lower 
cost.
    So these are very much geared toward both improving women 
who are buying individual coverage on their own and women who 
own small businesses and are trying to do the best thing for 
their employees.
    Mr. Cummings. In my district, in the real world, about 40 
miles away from here, we often see people very sick ending up 
in the emergency rooms, Mr. Holtz-Eakin. And I think one of the 
aims of the Affordable Care Act was to try to zero in on 
wellness as opposed to treating people after they are sick. We 
need a new normal in this country. See, some people think that 
the only time you go to a doctor is when you are sick--or when 
you should go to a doctor is when you are sick. Sometimes you 
need to go so that you can stay well.
    And I think one of the major aims of all of this is to try 
to keep people well. Is that right, Dr. Collins?
    Ms. Collins. Absolutely. And you see that in the provisions 
of the law, one of which went into effect last year. Insurers 
have to cover preventive care with no cost-sharing. Very little 
increase in premiums as a result of this provision, but will 
affect millions of people who get coverage right now. We want 
people to go to the hospital when they are sick or we want 
people to get primary care before they get sick, so the law is 
absolutely directed toward encouraging that.
    It is very, very troubling that, over the recession, people 
who have lost their jobs have gone without insurance coverage. 
Seventy percent, more than 70 percent, have said they didn't 
get needed health care because of cost, including filling a 
prescription because of cost. So we really want to change those 
incentives in the system, making it much more available to 
people.
    Mr. Cummings. Thank you.
    Now, Dr. Holtz-Eakin, your written testimony characterizes 
CBO's conclusion that the PPACA will result in budget savings 
as, ``misleading''--that is page 5--and, ``dubious,'' page 4.
    You were once the director of the CBO. You oversaw scoring 
on many bills. Is it your testimony today that CBO did 
something wrong or violated any of the principles of budgetary 
scoring in coming to this conclusion, that the PPACA would 
generate a budget savings? Is that what you are saying?
    Mr. Holtz-Eakin. Absolutely not.
    Mr. Cummings. Okay. Well, isn't it true that you would have 
likely concluded a budgetary savings given the same facts and 
same bill language had you been CBO director when the PPACA was 
scored?
    Mr. Holtz-Eakin. Had Congress directed me the way they 
directed the currency bill, I would have received the same 
bottom line.
    Mr. Cummings. Dr. Collins, whether we like it or not, we 
have to live by the rules. And the rules of budgetary scoring 
led the CBO to conclude that PPACA would generate budget 
savings.
    Have you heard anything today to cast doubt on the validity 
of the CBO's conclusion that PPACA would result in significant 
budgetary savings?
    Ms. Collins. I have not. And, if anything, Congressional 
Budget Office is very conservative in their estimates. Other 
estimates have actually shown much greater cost-savings as a 
result of delivery system reforms that we talked about earlier. 
David Cutler and colleagues have found an additional $400 
billion in savings as a result of the delivery system reforms. 
So, if anything, the Congressional Budget Office estimates are 
conservative.
    Mr. Cummings. I see my time has expired. Thank you, Mr. 
Chairman.
    Mr. Gowdy. I thank the gentleman from Maryland.
    The chair would now recognize the distinguished gentleman 
from Arizona, the vice chairman of the subcommittee, Dr. Gosar.
    Mr. Gosar. Dr. Holtz-Eakin, what is the current state of 
Medicaid, the Medicaid program? And can it handle an additional 
20 million new individuals coming on to these programs?
    Mr. Holtz-Eakin. At the moment, you could think of Medicaid 
as essentially all deficit-financed at the Federal level, and 
the States are struggling to meet their current obligations in 
Medicaid, given their budgets. And to expand it I think the 
Governors have said quite clearly is something they do not want 
to have to do.
    Mr. Gosar. So, really, when we are talking about this 
health-care system, the biggest problem was the Federal 
Government. Now, I mean, I was a practicing dentist out in a 
very poor area of this country--actually, one of the poorest 
districts in the country.
    And to the ranking member, I do know people that will get a 
divorce to stay together to make the rules work. I do know 
that. And it is all too often. I mean, we are rewarding a bad 
behavior. And I want to address that in a minute.
    But part of the problem is the Federal Government. Because 
I see my colleague over here, who is--all fees and all 
insurance rates were based off of insurance reimbursements by 
the Federal Government. They were part of the problem.
    And I keep bringing up, the group of people that have been 
on government health care the longest are the ones that are 
rebelling the most. It happens to be our Native American 
friends. They can't stand it; they want off. Because what we 
have done is we have institutionalized, away from what Dr. 
Collins said is--and she made reference that when you are sick 
you go to the emergency room. Because what we did is we didn't 
reimburse the primary-care physicians. We distorted these 
numbers.
    Dr. Burkhauser, I think you hit the nail on the head, that 
this plan is based on unplausible applications. It doesn't fit 
the normal dynamics of the way life on Main Street America 
actually works. Commonsense applications were thrown at the 
wall. We have a lot of cost-shifting going on that Dr. Holtz-
Eakin was talking about.
    Do you believe that the government takeover of health care 
will result in millions of additional workers who don't prefer 
ESI and will ask their employer to either drop their ESI or 
make their personal contributions unaffordable?
    Mr. Burkhauser. Yes, that is exactly what will happen. What 
we have is an opportunity for workers who currently have ESI to 
get much cheaper coverage on the exchanges. So this bill really 
is going to dramatically change the way health-care insurance 
is provided in the United States.
    You are going to get some very weird outcomes. Because the 
affordability is based on single coverage, people who are 
employed by firms who were providing them with affordable 
single coverage are going to beg their employers to increase 
the cost of their single coverage so that they can get their 
families onto the exchange. Because, right now, if you have 
affordable single coverage but unaffordable family coverage, 
you are in a no man's land. You neither have affordable 
coverage from your ESI, and you are barred from the exchanges.
    So this is an effort by a bunch of economists, like myself, 
in a little room trying to figure out the way the world works 
and trying to square the circle. They are trying to provide 
affordable care to people who don't have ESI coverage, which is 
about 20 percent of workers, and not affect everybody else. 
That can't be done. And we are going to see dramatic changes in 
the way health insurance is provided because of the perverse 
rules that we have in the system.
    Mr. Gosar. And that would have something to do with the 
recent decision--we see these dynamics playing out with the 
Wal-Mart decision, wouldn't you say that?
    Mr. Burkhauser. Yes, I think the Wal-Mart decision is the 
beginning of a re-evaluation by all large employers on exactly 
how they are going to respond to the new incentives that are 
set into the ACA. So Wal-Mart now realizes that there is no 
reason to provide affordable health care to their part-time 
workers. Part-time workers can go and get large subsidies on 
the exchanges.
    They will probably change their system for all workers and 
actually increase the percentage of the Wal-Mart health care 
that is provided by their workers so that those workers will 
also, therefore, not have affordable coverage and can go to the 
exchange, while at the same time allowing their higher-income 
workers to maintain Wal-Mart health-care insurance.
    Mr. Gosar. Thank you.
    Real quick, Dr. Furchtgott-Roth, there is a ripple effect 
in broken homes and single families, the dysfunctional family. 
And what we are trying to create is the benefit of a broken 
family. There is higher costs associated with dysfunctional 
families.
    Do you think the Tax Code should punish marriage, be 
neutral toward marriage, or encourage marriage?
    Ms. Furchtgott-Roth. I think the Tax Code should encourage 
marriage. And the marriage rate over the past decade has 
actually gone down, from 8.2 per thousand in 2000 to 6.8 per 
thousand in 2009, the latest data available.
    So, with marriage going down, according to the Centers for 
Disease Control, it is even more important to support and 
encourage marriage. That makes healthier families, makes 
smarter children, because it is easier for two parents to 
manage children than one parent to manage children.
    Mr. Gosar. Thank you.
    My time is you up.
    Mr. Gowdy. I thank the gentleman from Arizona.
    The temptation for a second round of questioning is 
enormous, given the talents and acumen of our panelists. 
However, we want to be good stewards of your time, and votes 
are imminent, and we are not going to make you wait on us to 
vote.
    So, with that, on behalf of all of us, thank you for your 
collegiality toward one another, your perspective, your 
expertise.
    And, with that, the committee is adjourned.
    [Whereupon, at 10:34 a.m., the subcommittee was adjourned.]

                                 
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