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





EXAMINING THE LACK OF TRANSPARENCY AND CONSUMER-DRIVEN MARKET FORCES IN 
                            U.S. HEALTH CARE

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

                                HEARING

                               before the

                     SUBCOMMITTEE ON ENERGY POLICY,
                      HEALTH CARE AND ENTITLEMENTS

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 25, 2013

                               __________

                           Serial No. 113-20

                               __________

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





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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee          MATTHEW A. CARTWRIGHT, 
TREY GOWDY, South Carolina               Pennsylvania
BLAKE FARENTHOLD, Texas              MARK POCAN, Wisconsin
DOC HASTINGS, Washington             TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming           ROBIN L. KELLY, Illinois
ROB WOODALL, Georgia                 DANNY K. DAVIS, Illinois
THOMAS MASSIE, Kentucky              PETER WELCH, Vermont
DOUG COLLINS, Georgia                TONY CARDENAS, California
MARK MEADOWS, North Carolina         STEVEN A. HORSFORD, Nevada
KERRY L. BENTIVOLIO, Michigan        MICHELLE LUJAN GRISHAM, New Mexico
RON DeSANTIS, Florida

                   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 Energy Policy, Health Care and Entitlements

                   JAMES LANKFORD, Oklahoma, Chairman
PATRICK T. McHENRY, North Carolina   JACKIE SPEIER, California, Ranking 
PAUL GOSAR, Arizona                      Minority Member
JIM JORDAN, Ohio                     ELEANOR HOLMES NORTON, District of 
JASON CHAFFETZ, Utah                     Columbia
TIM WALBERG, Michigan                JIM COOPER, Tennessee
PATRICK MEEHAN, Pennsylvania         MATTHEW CARTWRIGHT, Pennsylvania
SCOTT DesJARLAIS, Tennessee          TAMMY DUCKWORTH, Illinois
BLAKE FARENTHOLD, Texas              DANNY K. DAVIS, Illinois
DOC HASTINGS, Washington             TONY CARDENAS, California
ROB WOODALL, Georgia                 STEVEN A. HORSFORD, Nevada
THOMAS MASSIE, Kentucky              MICHELLE LUJAN GRISHAM, New Mexico














                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on April 25, 2013...................................     1

                               WITNESSES

Mr. Marty Makary, M.D., M.P.H., F.A.C.S., Surgeon, Johns Hopkins 
  Hospital, Health Policy Professor, Johns Hopkins Bloomberg 
  School of Public Health
    Oral Statement...............................................     6
    Written Statement............................................     8
Mr. John Goodman, Ph.D., President and Chief Executive Officer, 
  National Center for Policy Analysis
    Oral Statement...............................................    11
    Written Statement............................................    13
Ms. Lynn Quincy, Senior Health Policy Analyst, Consumers Union
    Oral Statement...............................................    30
    Written Statement............................................    32

                                APPENDIX

Letter from the Surgery Center of Oklahoma to the Honorable James 
  Lankford, a Member of Congress from the State of Oklahoma......    57
Special Report in Time Magazine, Why Medical Bills Are Killing Us    61

 
EXAMINING THE LACK OF TRANSPARENCY AND CONSUMER-DRIVEN MARKET FORCES IN 
                            U.S. HEALTH CARE

                              ----------                              


                       Thursday, April 25, 2013,

                  House of Representatives,
      Subcommittee on Energy Policy, Health Care & 
                                      Entitlements,
              Committee on Oversight and Government Reform,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 10:34 a.m., in 
Room 2247, Rayburn House Office Building, Hon. James Lankford 
[chairman of the subcommittee] presiding.
    Present: Representatives Lankford, Gosar, McHenry, Walberg, 
Woodall, Speier, Horsford, Lujan Grisham, and Cummings.
    Staff Present: Ali Ahmad, Majority Communications Advisor; 
Brian Blase, Majority Senior Professional Staff Member; Daniel 
Bucheli, Majority Assistant Clerk; Michael R. Kiko, Majority 
Staff Assistant; Scott Schmidt, Majority Deputy Director of 
Digital Strategy; Jaron Bourke, Minority Director of 
Administration; Nicholas Kamau, Minority Counsel; Adam Koshkin, 
Minority Research Assistant; and Safiya Simmons, Minority Press 
Secretary.
    Mr. Lankford. The committee will come to order.
    I would like to begin this hearing by stating the Oversight 
mission statement. We exist to secure two fundamental 
principles: first, that Americans have the right to know the 
money Washington takes from them is well spent; and, second, 
Americans deserve an efficient, effective Government that works 
for them.
    Our duty on the Oversight and Government Reform Committee 
is to protect these rights. Our solemn responsibility is to 
hold Government accountable to taxpayers, because taxpayers 
have a right to know what they get from their Government. We 
will work tirelessly in partnership with citizen watchdogs to 
deliver the facts to the American people to bring genuine 
reform to the Federal bureaucracy. This is the mission of 
Oversight and Government Reform.
    Today's hearing will explore the problems that result from 
the lack of transparency, consumer-driven market forces, and 
our health care system. Today's hearing features the testimony 
of two of the witnesses that are here--Ms. Quincy is also 
coming, as well--who last year wrote important thought-
provoking books about the U.S. health care system. Both paint a 
picture where doctors, nurses, and patients are trapped in a 
system filled perverse incentives. When providers and patients 
act upon these incentives, abundant waste and abuse result.
    According to a report last year from the Institute of 
Medicine, 30 percent of U.S. health care spending, an amount 
that exceeds $750 billion, was wasted in 2009. Over the past 
decade, the growth in health care costs almost entirely 
eliminated income growth for average families. Additionally, 
medical errors and hospital-acquired infections are a major 
problem. According to Dr. Makary's testimony, if medical 
mistakes and preventable infections together were a disease, it 
would rank as the number three most common cause of death in 
the U.S., after heart disease and cancer.
    Today's hearing will take a close look at the perverse 
incentives that lead to rampant waste and inappropriate and 
harmful medical treatment in the United States health care 
system. Nearly 90 percent of payment of health care services 
comes directly from third parties. Third-party payment 
separates the payer of the care from the patient and provides a 
strong incentive for a doctor to serve the payer of the care 
rather than serve the patient. The system has also produced a 
massive bureaucracy focused on claims processing and the 
creation of management of cumbersome rules. This bureaucracy 
adds to the expensive health care services and creates 
frustration among health care practitioners and patients.
    A 2009 study in the Archives of Internal Medicine found 
that 31 percent of doctors are burned out and 51 percent of 
doctors wouldn't recommend the profession to one of their 
children.
    I look forward to hearing Dr. Goodman's testimony on the 
implications of the failure of the health care providers to 
compete on price. I also look forward to hearing about segments 
of the health care system where there is competition and 
transparency, and how we can move public policy more in that 
direction.
    Dr. Makary has done service to the Country by speaking up 
about problems within his profession. Unaccountable, his book, 
also deals with perverse incentives at the core of the health 
care system, but is focused on how these incentives lead to 
substandard care for far too many U.S. hospitals. Here are some 
examples from his book, and I hope I am not stealing your 
thunder on this:
    In about half the hospitals in the U.S., fewer than half 
the employees at that hospital would feel comfortable having 
their own care performed in the unit within which they work.
    Twenty-five percent of all hospital patients experience a 
preventable medical error.
    Hospitals make roughly $30,000 more from patients who 
suffer at least one complication than they do from patients 
whose procedures go smoothly.
    Dr. Makary argues that hospitals and doctors fail to 
compete on quality because the public does not have the 
information to be able to separate high quality hospitals from 
low quality hospitals for various treatments.
    I received a letter yesterday from Dr. Keith Smith, which I 
would like to enter into the record, a physician at the Surgery 
Center of Oklahoma in Oklahoma City. This hospital is the only 
place in the Nation where all prices are listed online, and 
competition has driven up quality and driven down price.
    I ask unanimous consent to enter his letter into the 
record. Without objection, so ordered.
    Mr. Lankford. Independent experts believe that the 
Affordable Care Act, despite its name, might very well increase 
what Americans spend on health care, both in terms of money and 
in time. Moreover, Obama Care increases Federal Government 
control over U.S. health care system, increases the third-party 
payment problem, and reduces consumer choice.
    The health care system needs real reform, and the ideal 
reform would aim to address the two primary concerns 
highlighted by today's witnesses: reducing the amount of third-
party payment in health care and providing patients with 
additional information related to health care quality. The 
health care system has to be reoriented toward value and better 
outcomes, and away from increased utilization and waste.
    I now recognize the distinguished ranking member, the 
gentlelady from California, Ms. Speier, for her opening 
statement.
    Ms. Speier. Mr. Chairman, thank you and the witnesses for 
being here today on a topic that should be front and center 
because the cost of health care in this Country is one of the 
huge drivers for personal budgets and for the public budget as 
well.
    We spend a great deal of time talking about who should pay 
health care bills: the consumer, the insurance company, or the 
Government. Another question that could be asked is why are 
health care costs so high.
    Mr. Chairman, I want to submit for the record this Time 
magazine piece, Why Medical Bills Are Killing Us, by Steven 
Brill, and I am hopeful that we can invite Mr. Brill to come 
and speak to us here, because he has done an exhaustive study 
on why the cost of health care is so expensive.
    Mr. Lankford. Without objection.
    Ms. Speier. The majority has suggested that shifting more 
health care onto consumers, what one of the witnesses will call 
skin in the game, will lead to lower health care costs in the 
marketplace.
    As seen by one of the graphics we are about to put up, 
consumers already have a great deal of skin in the game. Sixty-
two percent of bankruptcies are related to illness or medical 
bills. Sixty-nine percent of those who have experienced 
medical-related bankruptcies were insured at the time of their 
filing.
    Health care is not a buyer's market, it is a seller's 
market. It certainly is not a free market. When you have to go 
to the emergency room, you can't shop around for the best deal 
like you would for a new TV, cell phone, or car. When the 
doctor tells you you need an x-ray and a CAT scan, you don't 
ask how much it will cost; all you want to know is what is 
wrong and get a good diagnosis.
    The medical economy is clearly a different world than we 
face in any other parts of our lives. In February, Time 
magazine ran the story by Steven Brill, The Bitter Pill. Brill 
undertook an exhaustive examination of the medical bills and 
the actual hospital costs for eight patients across the United 
States. The results are shocking and clearly demonstrate how 
broken our health care delivery system is.
    For example, a patient was charged $283 for a single x-ray 
that would only cost $20.44 if covered by Medicare. The patient 
was 64 and unable to buy insurance. If he had been one year 
older, he would have qualified for Medicare. That nonprofit 
hospital, and I underscore the fact that it is a nonprofit 
hospital, has a profit margin of 26 percent and paid its 
president $1.8 million plus what he earned consulting for 
pharmaceutical companies last year.
    A patient at another hospital was charged $199 for a blood 
test, for which Medicare would have paid $13.94.
    In yet another case, a patient was billed $7,997 for a 
stress test using radioactive dye that cost Medicare $554.
    The bottom line: our system ensures that those least able 
to pay, those with the most skin in the game, are the ones 
singled out to pay the highest rates.
    You have each been provided a copy of the article and I 
have already requested unanimous consent.
    As seen in the next slide, the cost of health care also 
bears little connection to the quality of the care that is 
provided. Annual health care spending per person in the United 
States was higher in 2010 than it was in Australia, Denmark, 
Japan, Spain and the United Kingdom. But our life expectancy 
rate ranked at the bottom. So something is fundamentally wrong. 
We pay the most and we get the least, and the condition of 
those is reduced.
    As Dr. Makary notes in his testimony today, the Institute 
of Medicine has reported that up to $750 billion, 30 percent of 
the total health care spending, may be going to over-treatment, 
unnecessary tests, and/or wasteful spending. In fact, we 
provide perverse financial incentives to medical providers to 
provide more services and order more tests under a fee for 
service system. The more they order, the more they are paid. 
Increasingly, they have direct financial stakes in CAT scans, 
MRI, or pathology services they order.
    The in-office ancillary service exception and stark 
prohibition on self-referral has now swallowed the rule. 
Doctors are encouraged to buy CT and MRI machines, and are 
instructed by the manufacturers on how many scans they need to 
provide a break even, and then how many tests they need to 
order to generate a healthy profit.
    Last November, the GAO issued a report on advanced imaging 
showing a direct correlation between self-referral and higher 
utilization, costing Medicare at least $109 million in 2010; 
and that is a very conservative figure. The same problem exists 
in pathology, radiation, physical therapy, and the GAO will 
have a similar report coming out on those. I will soon be 
introducing legislation to close this truck-size loophole and 
save Medicare billions.
    Requiring consumers to have more skin in the game would 
also do little to address the quality of care patients receive. 
Medical errors and preventable infections are among the leading 
causes of death in the United States. This has been one of the 
dirty little secrets in the health care industry.
    The issue of health care transparency is not a new one. I 
actually carried legislation in California in 2000 that 
requires general acute care hospitals to adopt a formal plan to 
eliminate or substantially reduce medication-related errors. I 
introduced this bill because I had learned that medication 
errors increase the cost of a hospital stay by an average of 
$4,700.
    Some in Congress do not like to admit it, but the 
Affordable Care Act has already gotten the Nation moving in the 
direction of increased transparency, lower costs, and better 
outcomes. The Summary of Benefits program created an 
unprecedented standardized method of communicating health plan 
information to over 170 million consumers enrolling in private 
health coverage. The SBC requires providers to give consumers 
information about health care plans in a uniform layout and in 
terms they can actually understand.
    I realize I am 56 seconds over, but let me just finish with 
this.
    A new study from the Kaiser Family Foundation demonstrates 
that the slowdown in costs could cut half a trillion dollars in 
health care costs over the next decade. Larry Levitt, from 
Kaiser Family Foundation, says, ``The run-up to the Affordable 
Care Act and the initiatives put in place by the law are 
absolutely having an effect, and that providers and payers see 
health care reforms coming and they want to get ready to lower 
their costs.''
    So we have much to do and I thank the chairman for 
initiating this hearing so that we can get to the business of 
making it more affordable for consumers to access health care. 
I yield back.
    Mr. Lankford. Thank you.
    Members will have seven days to submit opening statements 
for the record.
    We will now recognize our panel today.
    Dr. Marty Makary is the Director of Surgical Quality and 
Safety at Johns Hopkins Hospital and Associate Professor of 
Health Policy at Johns Hopkins Bloomberg School of Public 
Health; Dr. John Goodman is the President of the National 
Center for Policy Analysis; and Ms. Lynn Quincy is the Senior 
Health Policy Analyst at Consumers Union.
    Pursuant to committee rules, all witnesses are sworn in 
before they testify, so if you would please stand and raise 
your right hand.
    Do you solemnly swear or affirm the testimony you are about 
to give will be the truth, the whole truth, and nothing but the 
truth, so help you God?
    [Witnesses respond in the affirmative.]
    Mr. Lankford. Thank you.
    Let the record reflect that the witnesses answered in the 
affirmative.
    You may be seated.
    In order to allow time for discussion, please limit your 
testimony to five minutes. Your entire written statement will 
be made part of the record, as all of you have submitted 
written testimony as well. When we conclude this portion of it, 
we will have questions from all the different members that are 
here and we will have some interaction at that time.
    Dr. Makary, you are our first witness and we would be 
honored to receive your oral testimony now.

                       WITNESS STATEMENTS

       STATEMENT OF MARTY MAKARY, M.D., M.P.H., F.A.C.S.

    Dr. Makary. Thank you, Mr. Chairman. Thank you, Ranking 
Member Speier. Thank you, members of the subcommittee for 
having me, and staff. My name is Marty Makary. I am a surgeon 
at Johns Hopkins Hospital and I am an associate professor of 
health policy at the Johns Hopkins Bloomberg School of Public 
Health.
    When I recently asked one of my patients why did you come 
to this hospital, their answer was because of the parking. That 
answer embodies what is wrong with American health care. Today 
we have one-fifth of the U.S. economy, a marketplace of 
products with no way for consumers to evaluate those products.
    While some successful innovations are advancing the science 
of medicine and the way we deliver care, one problem remains 
endemic and more costly than ever. It is the wide variation in 
medical quality in the United States. The Institute of 
Medicine, as we said, estimates that up to $750 billion, or 30 
percent of everything we do, tests, procedures, studies, may be 
unnecessary, a form of waste.
    The cost of the problem is not theoretical or deferred; it 
is real and immediate. Americans are paying hundreds more for 
their health insurance this year and they are getting hit with 
escalating co-pays of $100 to $500 per encounter. I have 
patients complain about co-pays.
    American businesses now cite health care costs as the 
leading reason they have trouble competing with businesses 
overseas. And when I talk with business leaders, they 
consistently tell me that they are frustrated paying more and 
more for health care without any metrics of performance. Every 
other contractor they have has some way to measure their 
performance.
    Now, every proposed solution to this unsustainable 
financial trajectory calls for measuring hospital performance 
by tracking patient outcomes. So where are these outcomes? 
Well, much of it lives in federally funded registries with 
little or no access to the taxpayers that pay for them. In my 
field of surgery, the national Pancreas Islet Transplant 
registry, funded by the NIH, tracks patient outcomes. When I do 
an operation and remove a patient's pancreas, we send it to the 
laboratory, it is then re-infused into the patient's liver. 
That transplant operation has many variables that are collected 
and reported to the national registry.
    Now, when I tried to get access to this registry, even as a 
researcher with resources, I wasn't able to. Yet, this registry 
is funded by taxpayer dollars. If we had access, we could find 
out which centers have good outcomes and which centers have bad 
outcomes. But this data is not available to the public. Similar 
barriers exist for Medicare and other federally funded 
registries.
    After a lot of work, my research team accessed one 
Government-funded database, but under the condition that the 
hospital names are removed. We looked to see whether hospitals 
are performing common surgical procedures using the minimally 
invasive, or laparoscopic, method in situations where it has 
been well established to result in lower wound infection rates, 
less pain for the patient, and better functional outcomes 
compared to open surgery.
    Here is what we found: Despite lots of evidence, including 
an extensive Cochrane review in the medical literature, to 
support lower complication rates of laparoscopy, its use at 
U.S. hospitals varied widely. In this figure, each dot 
represents one U.S. hospital, and we graft the variation.
    So if you go to a hospital on the left side of the chart, 
it is highly unlikely that they will use the laparoscopic 
approach, even though it is associated with lower infections 
and better outcomes. And if you go to a hospital on the right 
side of the graph, 80, 90, 100 percent chance, maybe, that you 
will get that operation using the better method. This wide 
variation embodies the problem with a system that is not 
transparent.
    The same variation was true of some of the most common 
procedures in medicine: hysterectomy, colon surgery and others. 
Patients make choices in a free market where competition exists 
all right, but the competition exists at the wrong level; it 
exists at the level of valet parking and billboards, leaving 
patients uninformed about these differences and outcomes.
    Imagine if you, as a patient, were looking for a hospital 
to have an appendix removed, one of the most common procedures 
in America, and you could look up a hospital's outcomes, you 
could look up the complication rate, and you could look up the 
percent likelihood that that hospital does laparoscopic 
surgery. You would likely know where to go. It would likely 
create competition around patient-centered outcomes, not just 
volume, and drive the entire marketplace towards good value.
    Making Government-funded databases open to researchers 
where hospitals can be identified as over-or under-performing 
centers is one simple step that could be meaningful and allow 
the free market to work with the competition at the right 
level.
    My team has compiled a registry of national registries to 
look at every database out there looking at patient outcomes. 
There have been no standards and no coordination of registries. 
We found that there are over 150 national registries that track 
patient outcomes. One-quarter are taxpayer-funded, yet only 
three make their data available to the public.
    Making public access a condition of taxpayer funding is one 
simple reform that would allow the market to cut waste. 
Transparency also needs to be applied to medical errors, 
sentinel events like never events, retained sponges. This 
information is being tracked, but it is not public information. 
If it were, it would allow the market to work.
    Finally, transparency can inform patients seeking medical 
care, create competition, and cut waste in health care. 
Rewarding hospitals for participation in national registries, 
public reporting, creating public access to Medicare and ARC 
databases are important reforms that can realign incentives to 
focus on what is right.
    [Prepared statement of Dr. Makary follows:]



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    Mr. Lankford. Dr. Makary, thank you.
    Dr. Goodman.



                STATEMENT OF JOHN GOODMAN, PH.D.

    Mr. Goodman. Thank you, Mr. Chairman, members of the 
committee. Good morning.
    If something goes wrong with my iPhone, there are a dozen 
places in Dallas, Texas that I can go to without any 
appointment and get high-quality, low-cost care. There are 
places that will send someone to my condo to repair this iPhone 
in my home. There is a national repair chain that is called 
iHospital and the employees are called iDoctors.
    But if something happens to my body, the average wait in 
the United States for a patient to see a new doctor is three 
weeks. In Boston, where we are told we have universal coverage, 
the average wait for a patient to see a new doctor is two 
months. And, amazingly, one out of every five patients that 
enters a hospital emergency room leaves without ever seeing a 
doctor because they get tired of waiting.
    Now, why is the market so kind to my iPhone and so mean to 
me? I believe the answer is that this iPhone is produced and 
sold and repaired in a real market with real prices, where 
entrepreneurs know they can make millions of dollars if they 
solve our problems; where over in health care we have so 
completely suppressed the market for year after year, decade 
after decade, that no one ever sees a real price for anything, 
no patient, no doctor, no employee, no employer.
    Basically, we like to think in the United States we are 
different from other countries. That is a myth both on the left 
and the right. In the United States, we mainly pay for care the 
way they pay for it in Canada and Britain; we pay with time, 
and not with money. In Canada you visit a doctor, it is free; 
in the United States it is almost free. Every time we spend a 
dollar in the doctor's office, only $0.10 is coming out of our 
own pocket; $0.90 is coming from a third-party payer, an 
employer, an insurance company, or Government.
    What we have overlooked is that when you suppress the 
marketplace, when you suppress prices, you elevate the 
importance of non-price barriers to care. And what are those 
non-price barriers? Well, how long does it take you on the 
telephone to get an appointment with a doctor? How many days do 
you have to wait before you get to see that doctor? How long 
does it take you to get from your home or office to the 
doctor's office and back again? And once you are there, how 
long do you have to wait before you get treated?
    There is lots and lots of evidence that those non-price 
barriers to care are a greater deterrent to people getting care 
than the fee that the doctor charges. And this isn't just true 
for middle-class patients, it is also true for low-income 
patients.
    Now, can the market work in health care? My answer is you 
show me any part of the health care system where the third-
party payers aren't, show me a part of health care where there 
is no Blue Cross, no Medicare, and no employer, and I will show 
you markets probably working pretty well. In cosmetic surgery 
there is no problem with transparency; patients get a package 
price covering the doctor, the nurse, anesthetist, the 
facility. They know exactly what they are going to pay in 
advance.
    There is price competition. Over the last 15 years the real 
price of cosmetic surgery has gone down as the real price of 
every other kind of surgery has gone up, and this is in the 
face of an incredible increase in demand, all kinds of 
technological change of the type that we are told increases 
prices across everywhere else.
    Similarly, in the market for Lasik surgery, you have 
complete transparency, you have price competition, you have 
quality competition. Over the last 10 years, the real price of 
Lasik surgery has come down 25 percent even as other kinds of 
surgery is going up. Again, huge increase in demand; all kinds 
of technological change.
    In the international market for medical tourism, you can 
get a package, transparent price for almost every kind of 
elective surgery. Hospitals in India and Thailand and Singapore 
not only compete on price, they post their quality ratings; and 
the kind of information that Dr. Makary said we can't get in 
American hospitals, Indian hospitals put up on the Internet and 
they say here is our infection rate, here is our mortality 
rate, here is our readmission rate, and, by the way, here is 
what it is at the Cleveland Clinic and the Mayo Clinic. When a 
hospital does that, you know they are competing on quality.
    And then what is not very well known is that we have a 
domestic market for medical tourism because hospitals don't 
like to tell us that, so some of the very hospitals that Steven 
Brill was writing about might very well go to Canada and tell 
the patients coming down here for a knee replacement or a hip 
replacement, we not only give you a package price, but it is 
going to be half of what Blue Cross pays; it is going to be 
lower than what Medicare pays.
    So this is going on. Hospitals can compete for patients; 
they are competing for patients. So this is not the patients 
that live near the hospital, it is for foreigners coming to the 
United States, often to get care that they cannot get in a 
timely way in their own country.
    So, Mr. Chairman, I think that our problems arise because 
we have suppressed the marketplace, and if we want to solve 
these problems, we have to allow the market to exist and get 
the incentives right.
    [Prepared statement of Mr. Goodman follows:]



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Lankford. Thank you, Dr. Goodman.
    Ms. Quincy.



                    STATEMENT OF LYNN QUINCY

    Ms. Quincy. Thank you. Chairman Lankford, Ranking Member 
Speier, and members of the subcommittee, thank you for the 
opportunity to testify today. My name is Lynn Quincy. I am a 
senior health policy analyst with Consumer Reports and I have 
personally led a number of research efforts designed to test 
consumer disclosures.
    I would like to start off with a profound apology for being 
late; there was asymmetrical information in the marketplace and 
I did not realize I would need 15 minutes to get from the curb 
into this room. So sorry about that.
    It is really a pleasure to be here today because improving 
transparency of quality and prices in the health care 
marketplace is an issue that we can all get behind. Better 
transparency is likely to mean greater consumer engagement, 
empowerment, confidence, and better health from improved 
practice patterns by providers and better informed consumers.
    However, I want to offer two cautions as part of my 
testimony today. One is we can all point to consumer 
information or a disclosure that has confused more than helped. 
So I will give you, as an example, HIPAA privacy notices have 
not proven to move the market very much, but those mile per 
gallon stickers on cars are fabulous.
    So when we talk about transparency, I want us to talk about 
getting it right.
    Can I have my next slide?
    [Slide.]
    Ms. Quincy. One of the barriers to getting transparency 
right is that the information is too dense. As an April Fool's 
joke, an online retailer changed their terms and conditions 
text so that people who clicked yes would be selling their 
immortal souls.
    Click the next one, please.
    [Slide.]
    Ms. Quincy. Eighty-eight percent of the people at this 
shopping site wanted to get on with their shopping and they 
agreed to sell their souls.
    So I think that is not the outcome we are looking for. 
There are other problems.
    May I have the next slide, please?
    [Slide.]
    Ms. Quincy. Which is if you have transparency, but you 
don't know which bit of transparency to believe, you have not 
yet been helped as a consumer. I borrowed this slide from an 
excellent presentation by Kaiser Health News and, as you can 
see, there are myriad outfits out there, including Consumer 
Reports, measuring hospital quality.
    Next slide, please.
    [Slide.]
    Ms. Quincy. They may not agree on the quality of a 
hospital, so, again, we have not yet helped consumers.
    In my written testimony I provide much more detailed 
examples of how we go about getting transparency right, and I 
hope that will be part of the focus of this subcommittee.
    But the good news is this is achievable. We have lots and 
lots of information about how to do transparency right by 
consumer testing, other things that I won't get into, and we 
know that the benefits of doing it far outweigh the costs. So 
there is actually no reason not to do more with transparency in 
all these realms. So that is great news.
    Let me move on. The one thing I want to be careful about, 
though, is to not overstate what we get when we improve 
transparency, and I specifically want to talk about price 
transparency. We do have a market where there is no third-party 
payer for health care in the United States, and that is our 50 
million uninsured. And they would sit here and tell you that 
the market is not working right for them. So there are two 
lessons we can extract from this: one, better price 
transparency by itself is not going to fix our problems; we 
need to do more than just make prices more transparent.
    Let me stop, because I am running out of time.
    In my testimony, I talk about some of the reasons why price 
transparency alone isn't going to achieve all the policy goals 
that we wish it would. A key one is that right now consumers 
actually associate higher prices with better quality. So they 
are inclined, if they were given price information and that was 
the main determination of how they were making their choice, 
they might actually choose the higher price services, driving 
up health care costs, which is the outcome that we don't want.
    Again, we have a ready solution, which is to do that 
original fundamental research which says how do we talk about 
prices with consumers? Perhaps we really don't want the price, 
but instead we want the value; we need to put value measures in 
front of them so that they don't assume that higher price is a 
signal for higher quality but, instead, we really told them 
something about the quality of the services that they are 
shopping for.
    We also have to keep in mind that many services are not 
shoppable. The opening statement by Ms. Speier told us that 
there are lots of services out there for which you really have 
to rely on your physician to navigate those treatment choices.
    I will stop here, and I really look forward to the 
discussion. Thank you.
    [Prepared statement of Ms. Quincy follows:]



[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Mr. Lankford. Thank you, and thanks to all of you.
    Dr. Makary, let me ask you a little bit about the Federal 
registries. You bring up a unique issue in health care right 
now, and that is the transparency side that all of us have 
talked about. Why? Why aren't the Federal registries public? 
Why can't a researcher get those and have comparables? I 
understand why the patient's name is not connected; that is 
obvious.
    But the ability to be able to compare hospital to hospital, 
procedure to procedure; and I have even dealt with some 
researchers that want to just study across a particular 
effectiveness of a certain procedure that happens and wants the 
mortality rate, and they are not able to be able to research 
that as well. Why?
    Dr. Makary. I honestly think there are no villains in this 
game; it is just that historically we have had very raw and 
unsophisticated metrics that run the risk of punishing those 
that take on the high-risk cases and rewarding those that 
discriminate against them. I appreciate that as a pancreas 
surgeon that takes on some of the most high-risk cases that no 
other surgeon in the Country will touch. I appreciate the need 
for risk adjustment.
    But the databases have matured now. We can give good 
patient outcome results using physician-authored formulas that 
come from the American College of Surgeons that appropriately 
account for a patient being obese or diabetic or elderly, or 
having other risk factors, and come up with a composite score 
or a performance level.
    And that makes this an exciting time because if we handle 
the data appropriately, which many groups can, we can learn a 
lot from these databases. If you are going to deliver a baby, 
you want to know which hospital has a 40 percent C-section rate 
in Washington, D.C. and which one has an 8 percent C-section 
rate? I think fundamentally, as this data is being tracked and 
we can, in a mature way, come up with outcomes for each 
hospital, we, as a society, are faced with the dilemma do we 
believe the public has a right to know about the quality of 
their hospital. I think they do.
    Mr. Lankford. Dr. Goodman, you have wrote extensively and 
talked extensively about HSAs and about some of the funding 
mechanisms of individuals engaging into their own health care 
choices. You talked, as well, about medical tourism. The 
hospital that I mentioned earlier in Oklahoma City that is a 
flat-rate price, that lists their prices and puts them out 
there, when I spoke to the physician there, first thing he said 
was, when we opened and put our prices online, we were 
surprised to the know the Canadians showed up first; and their 
hospital was flooded with Canadians coming because they saw the 
price online and made the flight to save the time to be able to 
do it.
    Obviously, those are wealthier individuals that are able to 
make that transition, but the medical tourism of moving around, 
once people saw the price, does affect things. But they also 
want to know the quality. It is not just the price, but it is 
the quality.
    So engaging in the price aspect of it and the individual 
being involved, what have you done in your research on that?
    Mr. Goodman. I think the most important change we can make 
in our health care system to encourage price competition and 
quality competition would be to allow everybody to have a 
flexible health savings account. And before there were health 
savings accounts, basically the tax law encouraged us to give 
all our money to the insurance company, because all that could 
be paid by employer with pretax dollars, and any money we put 
in a bank account got taxed.
    Now, we do have the health savings accounts and 27 million 
Americans have them, but those rules are very restrictive. We 
should have a very flexible account that wraps around any 
third-party plan and then let the market determine how much 
should be paid by the patient and how much by the third-party 
payer. And I think that most primary care and most diagnostic 
testing, along with some other services, ought to be paid for 
by patients from an account which they own and control. That 
would radically change the market for primary care overnight. 
You would see the number of walk-in clinics would triple and 
quadruple just within weeks if people could go in those clinics 
and pay the market price. And that is the best way, by the way, 
to control costs in Medicare and Medicaid.
    Mr. Lankford. I have a friend of mine who told me, about a 
week ago, that she went in for a diagnostic test. They started 
the procedure, it was a routine thing for her. She has not been 
to the doctor at all this year, so asked about what the price 
would be, and they said, we don't know what the price would be, 
and went through the whole rigamarole, figured out what it 
would be with her insurance, and said she would pay $1,600 
because she hasn't met her deductible yet. She said, well, what 
if I just pay cash and we don't file this with the insurance at 
all? They said, oh, that price we can give you, it is $600. And 
it was this incredible shift that has occurred in the way the 
prices work, and we have to find some way to be able to get 
plain prices out there so that people can engage with that.
    With that, I would like to yield to the ranking member, Ms. 
Speier.
    Ms. Speier. Thank you, Mr. Chairman.
    In Mr. Brill's article, he spends a lot of time talking 
about this foreign object called a charge master which every 
hospital has. It is a book of fiction that only applies to 
people who come into the hospital who don't have insurance; who 
aren't Medicare, who aren't Medicaid, and they get slapped with 
these exorbitant prices for services that are rendered, much 
like the example you just used, Mr. Chairman.
    So I guess I am interested in knowing what your opinions 
are about these charge masters. Should we just get rid of them? 
They only penalize those who are uninsured; those who are 
working poor; those who aren't eligible for Medicaid, aren't 
eligible for Medicare, and don't have health insurance. Any 
comments?
    Mr. Goodman. Well, yes, they are fiction, and they are a 
holdover from the old cost-plus system where all those prices 
figure into how the hospital gets reimbursed one way or another 
by Medicare and Medicaid, and then by the private insurers. No, 
it would be much better if hospitals competed on price and 
competed on quality. Right now, all they are doing is 
maximizing against reimbursement formulas; and everything they 
do on their charge master is designed, there is some computer 
program helping them use that to maximize against the third-
party payer formulas. So it is a very inefficient system and 
the uninsured patient who gets caught up in it is confronted 
with that bill and thinks those are real prices. They are not 
real prices and nobody should pay them, quite frankly.
    Ms. Speier. Dr. Makary, you put up a slide that I thought 
was quite informative on laparoscopic surgery and how those 
that still use open surgery versus those who use laparoscopic. 
Is there any distinction being made between rural and urban? 
Are you seeing more laparoscopic in urban and less in rural 
areas?
    Dr. Makary. Interestingly, we don't see a difference in 
rural versus urban areas. We don't see a difference in large 
academic versus smaller hospitals. It tends to be a regional 
variation. It tends to be the way somebody is trained. It tends 
to be a preference of the individual provider. Even within an 
institution some providers may do it open and some 
laparoscopic.
    Ms. Speier. Older physicians using open versus 
laparoscopic?
    Dr. Makary. We didn't study the age of physicians, but we 
know that younger folks, especially those who grew up with 
Nintendo and video games, are a little more skilled with 
laparoscopic surgery.
    Ms. Speier. Okay. None of you really kind of focused on 
this issue of ancillary medical services in which a physician 
has an interest and then refers patients to them. I think Atul 
Gawande did a piece called The Cost Conundrum some years ago 
and looked at El Paso, Texas and McAllen, Texas, and the 
Medicare patient in McAllen, Texas, more than $14,000 was being 
spent per year on them; only $7,000 a year on an El Paso 
Medicare patient. And when he really dug down, he found out 
that it was the physicians who own the hospitals in McAllen, 
Texas and the home health services and the other ancillary 
medical services that was causing this twofold cost 
differential in Medicare.
    Do any of you have comments on self-referral or the fact 
that physician ownership of these services has an impact?
    Mr. Goodman. Well, I think Gawande sort of missed the boat 
on comparing those two cities, because while it is true that 
Medicare spends a lot more in McAllen than it does in El Paso, 
it is also true the private sector spends a lot less in McAllen 
than in El Paso. And what I think is going on is that almost 
everybody in McAllen doesn't have any private insurance, and 
Medicaid in Texas pays very little. So I think what they are 
doing is they are just shifting every cost they can to 
Medicare. Bad for us as Federal taxpayers; probably good for 
them locally.
    The whole issue of what does the doctor own and what can he 
use, I think the incentives are very perverse. I don't really 
think the best answer is to tell the doctor he can't have that 
kind of equipment or he can't own it. I think the best answer 
is to encourage a real market and let competition determine 
what services he is going to offer and what services he is not.
    Ms. Speier. I am running out of time.
    Ms. Quincy?
    Ms. Quincy. I think there are a number of studies that 
confirm what he found, which is that when you have physician 
ownership, you do see more tests. You see that ancillary 
service used much more often. It could go up by like 200 
percent, the usage, and it does cost more. The Affordable Care 
Act does include a transparency provision that says that 
doctors, if they are self-referring, they have to reveal that. 
But I suspect that will be necessary, but insufficient in this 
case; that we need more than just transparency.
    Ms. Speier. Sort of like selling your soul online, right?
    Ms. Quincy. Well, if this subcommittee would just require 
testing of that disclosure.
    Ms. Speier. Thank you. My time has been depleted.
    Mr. Lankford. Thank you.
    Dr. Gosar.
    Mr. Gosar. Thank you very, very much.
    Dr. Makary, just to let you know, I am a dentist. Very 
different parameters versus physicians in cost escalation. 
Definitely a little expensive to provide, but very different 
tracks, medicine versus dentistry. I am also from Arizona, a 
very aggressive State dental board versus a very lenient 
medical board. So I think you know where I am going to go on 
this.
    You have seen patients that have seen and are going to see 
an inferior doctor. There seems to be some type of aspect in 
which we are protecting bad doctors. Can you elaborate on that?
    Dr. Makary. Right now, if you lose your license in a State, 
the common next step is that the physician will jump to another 
State and apply to get a medical license. Now, the State can 
inquire with the National Practitioner Data Bank whether or not 
there has been a prior action, but in doing the research for 
the book Unaccountable, I learned that some States don't want 
to pay the fee, even though it is less than $10 to run the 
inquiry. They argue they can't afford it for all their doctors.
    So about half of all physicians who lose their license 
because of some atrocious immediate suspension because of a 
category called immediate harm to the public, they go to 
another State and set up their shop; and it is probably one of 
those things where if we just had more coordination of care we 
could prevent those thousands of patients that are seeing these 
doctors from the risk.
    Mr. Gosar. And isn't there a timely factor here? I mean, it 
almost has to be an outrageous, egregious action to even get it 
on to the medical or into the public, isn't that true?
    Dr. Makary. Absolutely. And most of us will be sued at one 
point in our careers. Being sued is certainly not a marker of 
quality, even though it is reported to the data bank. But the 
category immediate loss of license because of a threat to the 
public, that is something I think should have coordination, 
just as the FAA does for pilots.
    Mr. Gosar. I agree. You argue that doctors spend very 
little time, now, with patients, so it is almost what they call 
a patient shuffle, a turning mechanism, so to speak. Can you 
tell us, from the perspective of docs, I talk to a lot of them, 
they are burned out based upon the way the parameters are being 
compensated. Because then I am going to come back to you, Mr. 
Goodman, because I want some follow-up questions in regards to 
that.
    Can you tell me a little bit about that mechanism and the 
way physicians are burning out?
    Dr. Makary. Forty-six percent of us are burned out 
according to a national Mayo Clinic trial that just came out 
last year. Now, what drives doctors to burn out is not the 
patient care; they love the patient care. We love the patient 
care. It is the quotas that we get harassed with by emails on a 
monthly basis; it is the targets; it is the pressure to see 15 
patients in a two hour window. This is not the type of medicine 
that my father practiced in his career, and it is the sort of 
thing that is resulting in many doctors not recommending the 
profession to their offspring.
    Mr. Gosar. So, Dr. Goodman, we have talked about market 
factors, and something that has not been put out here is the 
Government is part of those market factors, because since the 
conception of rates from HHS and CMS, we have an artificial 
market; and I think the Government plays a part in it, because 
all we are doing is cost-shifting. Because when you look at our 
medical aspects, we have lots of specialties; no primary care 
docs because there is no reimbursement mechanism, we have 
priced them out of the aspects.
    Part of that aspect is sharing of information, particularly 
with our third-party payers. I think they are part of the 
solution, but right now they are part of the problem. They 
share our information. Can you address maybe looking at the 
true cost of medicine and looking at insurers not being able to 
use collaborative actuarials?
    Mr. Goodman. Yes, I think that is bad and I think your 
premise is correct. The reason the market has been suppressed 
is because of government action, much of it at the State level, 
going back for decades. The answer is to find ways to liberate 
the marketplace. And I think the walk-in clinics, for example, 
perfect example. In Dallas, Texas, if you have an earache or 
sore throat, you walk into the Minute Clinic, there is a posted 
transparent price, it is $75. But Medicaid only pays half that, 
so none of the Medicaid patients can go to the walk-in clinic; 
they all have to go to the emergency room or to the community 
health center, where they will wait a long time for care.
    So I think a very good thing to do in Medicare and in 
Medicaid is let those patients pay the market price, whatever 
it is, and reimburse at that market price, because it is a lot 
cheaper than what the doctor is charging or the emergency room, 
and we would, overnight, greatly improve access to care for the 
low income population.
    Mr. Gosar. Okay, I am running out of time. I will wait 
until my second round.
    Mr. Lankford. Thank you.
    Very distinguished ranking member of the full committee, 
Mr. Cummings.
    Mr. Cummings. Thank you very much.
    Dr. Makary, I listened to what you said a moment ago, what 
one of your patients said about the parking. Let me tell you 
something, as a resident of Baltimore for 62 years and as one 
whose family member just had surgery at Hopkins, people come to 
Hopkins for more reasons than parking. It is the greatest 
hospital, in my mind, in the world. So you come from a very 
prestigious hospital, and I am very familiar with Hopkins; it 
is smack dab in the middle of my district.
    I was trying to size up your testimony with Ms. Quincy's, 
because she said something that was very interesting. You talk 
about transparency, but I think about the people that come to 
my office, and I could give them data, but I want to make sure 
they are not so overwhelmed with data or they even know how to 
read the data. There are people in Congress that don't know how 
to read data, with law degrees.
    So I am just trying to figure out how do you size that up. 
You follow what I am saying? In other words, I want to be 
practical. Sometimes policy is not connected with practicality. 
But I agree with everything you said, except the parking. But 
help me with that. You follow what I am saying?
    Dr. Makary. Absolutely. And I agree with you. Now, there is 
a good model.
    Mr. Cummings. And you are going to have to talk fast, 
because I have to talk to Dr. Goodman.
    Dr. Makary. The heart surgeons in the Country got all of 
their data, their outcomes data together and delivered it to 
Consumer Reports, that put it on their website; they have the 
brand recognition. And you can look up the star rating for a 
heart center in the United States. So it is possible to distill 
it down in a user-friendly way to patients.
    Mr. Cummings. Okay.
    Dr. Makary. Just like the C-section rate.
    Mr. Cummings. Dr. Goodman, you argue that, in place of the 
ACA, health care reform could be better achieved by depending 
on informed individual consumers who would be responsible for 
shopping for price and quality care and, of course, the bill. 
Mr. Goodman, you call that skin in the game. Dr. Goodman, I am 
sorry. I call that shifting costs to consumers. As seen in this 
slide, medical expenses are the number one cause of 
bankruptcies in America. According to the Administrative Office 
of U.S. Courts on behalf of Federal Judiciary, 1.3 million 
petitions for bankruptcy were filed last year; 62 percent of 
bankruptcies are the result of health-related illnesses or 
medical bills; 69 percent of those had medical insurance.
    I want to tell you, when I practiced law, people were very 
reluctant to file for bankruptcy for a lot of reasons, and 
usually it was a last resort. So, Dr. Goodman, you suggested 
that a uniform fixed dollar subsidy of $2,500 for every adult 
and $1,500 for every child is appropriate. Now, I wonder what 
would you say to the millions of Americans who have been driven 
into bankruptcy because they already had more skin in the game 
than they could handle? What about them? And I also want you to 
comment on the 22.3 percent uninsured rate in your area and how 
that plays in with all you are saying.
    Mr. Goodman. Okay. I believe in universal coverage, and I 
believe the Federal Government ought to make it possible for 
everyone to have health insurance, affordable health insurance. 
I think that could be done with a refundable tax credit the 
right way, instead of the bizarre way we are doing it under the 
ACA.
    Skin in the game is not really a phrase I ever use. What I 
believe is that there is a certain amount of money that people 
are going to have to spend on health care, and it should not 
all be given to the HMO, because if it is all given to the HMO, 
then it will decide how the money is spent, and I think 
patients need to play a role in deciding what kind of care they 
get.
    I think the bankruptcy study you are referring to is a junk 
study, and it has been looked at and there are better studies. 
And there are people who go bankrupt for medical bills. There 
are people in Canada who go bankrupt because they have medical 
problems, and the bankruptcy rate in Canada is not that much 
different from what it is in the United States; not a good 
thing, but that is a distraction.
    Mr. Cummings. Well, I don't like distractions. I would like 
for you, since you have better numbers, I would like for you to 
get them to us, because we need to get to the agencies that are 
putting this out to make sure that they are not putting out 
untrue statements.
    Mr. Goodman. I would be happy to do that.
    Mr. Cummings. All right. Thank you very much.
    Mr. Lankford. Thank you.
    Let me submit to the record there is a study that has been 
put out by Diana Roth that deals with that same number that 
said Department of Justice study and the Federal Reserve 
listing on it dealing with that, and I will be willing to 
certainly enter it into the record as well. Good chance to talk 
through that.
    Mr. Woodall, you are recognized for questions.
    Mr. Woodall. Thank you, Mr. Chairman.
    I appreciate you all being here. This is one of the nearest 
and dearest issues to my heart. I just am curious, as we are 
debating so much in Congress about what the future of the 
American health care system is, do any one of you agree that 
the health care system will provide the kind of care that we 
want it to provide at a cost that we, as a Nation, can afford 
if we don't improve transparency in the process? Can we keep 
going, Ms. Quincy, as we are or must we do better?
    Ms. Quincy. We must do better.
    Mr. Woodall. Dr. Goodman?
    Mr. Goodman. Yes, but I think that forcing transparency on 
the system without changing what the third-party payers are 
doing is not going to change very much.
    Mr. Woodall. I certainly agree with you. In fact, I might 
define transparency as eliminating third-party payers from my 
life so that I can actually experience those costs.
    From a practitioner's perspective, doctor, any belief that 
we can get by with the same amount of transparency or less 
going forward?
    Dr. Makary. No. I think the only way to improve the health 
care system is to get at this 30 percent of it that may be 
unnecessary.
    Mr. Woodall. I certainly agree with the ranking member of 
the full committee. You can get overwhelmed with data. I have a 
medical savings account and I am out there making tough 
decisions. I am not a doctor; I am a lawyer, and I have to go 
out and sort these things out.
    I will confess, Ms. Quincy, as much as I fail to agree with 
so much of the policy statement that Consumers Union puts out, 
I love your magazine, and probably every day in the school 
library from age 14 to 18 I read every copy that came through; 
and the biggest purchase in my life at that time would have 
been an automobile. And it is complicated; it is kind of a life 
and death issue in some ways. Something looks really nice, but 
it turns out, when it hits a curb, it falls apart and your head 
goes through the windshield.
    And you all helped me sort through those life and death 
decisions; complicated, big dollar decisions. Sometimes folks 
chose the less expensive, more dangerous varieties for their 
life; other folks chose the more expensive, safer, and bells 
and whistle along the way. Why won't that model work in a 
health care world?
    Ms. Quincy. I think there are a couple reasons. One is we 
are talking about purchasing a product where the spending in a 
year could exceed $100,000, as opposed to the $10,000 for a 
used car that is being spread across five or six years. And we 
are also talking about absolutely essential purchases, because 
they alleviate pain, they increase quality of life, they 
prolong life; whereas, in some cases you may have an option 
other than a car, you may have public transportation.
    So I think most people feel that this market is different 
from other markets where the commodities are more fungible.
    Mr. Woodall. There is no question, I think you are right, 
that most people do feel that way. I just question whether or 
not they are right. You have made the very accurate point that 
some of these are more expensive than others. I use you for 
tooth whitening toothpaste as much as I use you for 
automobiles. You have managed to do things at all ends of the 
consumer spectrum today. I don't know why we wouldn't succeed 
at that going forward.
    I think about my grandparents, who died surrounded by 
people who loved them in their home. There was a choice about 
health care. These were not life and death decisions about 
which they had no choice; these were life and death decisions 
about which they had great choice, and they made those 
decisions. I have a great fortune of having physicians in the 
family who help guide us through those. I do worry about where 
folks go to get that information.
    Dr. Goodman, I think about Medicare Part D, for example. I 
wasn't in Congress then; I would have voted no then. I am not 
in favor of new Federal entitlements. But I remember folks 
saying very much what Ms. Quincy just said, that these are life 
and death decisions, these are very expensive decisions, and 
these are too complicated for the American people to sort out. 
I think the data today suggests that Medicare Part D has been 
successful with individuals sorting out their own decisions.
    Mr. Goodman. Well, it has been. It seems enormously 
complicated, however. Remember, we still have third-parties and 
the Government determining everything. But the Minute Clinic, 
that is the real free market. Nobody tells the Minute Clinic 
what it has to make public and what it doesn't. But if it 
doesn't do it in a way that people can understand, no one goes 
in the clinic. So they are making lots of money, they are 
spreading all over the Country because they give people 
information in a way that they can understand. And, by the way, 
all the records are electronic and they can prescribe 
electronically.
    Mr. Woodall. No question, Dr. Goodman, it is complicated, 
and no question, as Ms. Quincy pointed out, it is so hard most 
folks can't fathom how we can get it done. But I think about 
folks in the actual provision of the business, doctor, and my 
family members who are docs and docs in my communities, people 
who are really questioning whether they are going to stay in 
the business or not and, more importantly, questioning whether 
they are maximizing their ability to make a difference in 
people's lives. And at some point the system we have today is 
actually diminishing the quality of individuals' lives and 
care, rather than improving it. Have you had a similar 
experience?
    Dr. Makary. Absolutely. There is a debate going on right 
now within U.S. hospitals: Should we pay doctors a relatively 
flat amount, maybe with a small bonus for innovation or 
quality, or do we give them gigantic bonuses, quarter of a 
million dollars, half a million dollars, for pure volume? And 
the CEO of the Cleveland Clinic and the head of Kaiser have 
come out saying that they believe it is unethical to pay 
doctors based on volume. Other hospitals are going the other 
direction. And I think that contributes to the doctor burnout.
    Mr. Woodall. I thank you all.
    Thank you, Mr. Chairman.
    Mr. Lankford. Thank you.
    Mr. Horsford.
    Mr. Horsford. Thank you very much, Mr. Chairman. I 
appreciate this panel and the very important information on the 
provisions of the Affordable Care Act that are being discussed 
today. One of which I want to touch on right now is the summary 
of benefits and coverage program created what is an 
unprecedented standardized method of communicating health plan 
information to the over 170 million consumers enrolling in 
private health coverage. The SBC requires providers to give 
consumers information about health care plans in a uniform 
layout and in terms they can understand, meaning consumers can 
make educated decisions about which plan is best for them. And 
I know, as I talk to my constituents, as I talk to small 
business owners, this is something that is very important, is 
having people be more educated about the decisions they make.
    We are fortunate to have a witness who is an expert in 
this. Ms. Quincy, I understand that you, while working with the 
Consumer Union and the National Association of Insurance 
Commissioners, conducted extensive research both to determine 
what information would be most useful to include in the SBC and 
determine how effective the programs were after implementation, 
is that correct?
    Ms. Quincy. Mostly, yes. The Affordable Care Act itself 
included some requirements that we started with as to what 
should be in the SBC, and if I have a chance I will tell you 
about key one that illustrates a lot of points being made 
today.
    Mr. Horsford. Please, elaborate. What are some of those 
features?
    Ms. Quincy. Okay. Well, one thing I will say to start is 
that this particular provision is absolutely beloved; it ranked 
higher than subsidies for health insurance premiums when Kaiser 
Family Foundation did a poll, because consumers do feel they 
need help picking among health plans because the information 
isn't standardized. But I know we are moving quickly.
    If I could have the next slide.
    [Slide.]
    Ms. Quincy. One of the required features, and one where the 
consumer testing produced the greatest surprise, was around 
this page, which is a page called coverage examples, and it 
includes three pieces of information that consumers have never 
seen before. One, it shows how much medical care costs for the 
medical scenarios displayed. And that is something that 
consumers don't know; they don't understand how truly expensive 
medical care is, and that is why, in today's market, they might 
buy a policy with a $20,000 annual benefit limit, not realizing 
they are very under-protected, may end up in bankruptcy.
    Second, it gives a bottom line for what all those myriad 
cost-sharing provisions actually mean to the consumer. By the 
time you weigh the deductible cost-sharing, blah, blah, blah, 
what does it actually mean if you have a baby? What do you have 
to pay? Consumers can't figure that out. I couldn't even figure 
it out when I was trying to create these for testing.
    Third, and the surprise, it shows what the plan pays for 
coverage for that medical scenario. And that may seem like a 
residual; it proved to be very important because consumers do 
not want to shop for health insurance, they would rather shop 
for cars, it is more fun. And they kind of forget the value 
associated with having health insurance. And when they saw, on 
this breast cancer example, which is what we tested and is not 
in the form today, $100,000 service for a year, they went from 
saying I am not going to buy that plan because that deductible 
looks so high, to saying, you know what, that is chump change 
compared to what that plan is paying on my behalf. And I can 
show you the videotape.
    So the bottom line is here is A, consumer testing tells us 
what we need to know and we shouldn't be guessing; B, it is 
powerful. We could be moving the market just by working with 
this form and doing more with it.
    I will stop there so I don't use all the time. Thank you so 
much.
    Mr. Horsford. So, in your opinion and based on the 
testimony that you have given, would you say that the SBC is an 
effective criteria to meet those improved communication and 
education provisions of the law?
    Ms. Quincy. I think that the SBC fills a great need. I 
actually do hope it will be improved over time. I think that 
one thing that did not happen is the form was not designed by a 
designer; and I have told HHS that we need to get a designer in 
here to tune it up a little bit. That is the nature of 
disclosures; ideally, they improve over time. But there is a 
report in my written testimony that I link to that says how 
well received this was by consumers, so we are doing great so 
far.
    Mr. Horsford. Any other recommendations or steps that you 
think this committee should take?
    Ms. Quincy. Well, with respect to this form in particular, 
yes. The form that consumers see today only has two of the 
three examples you see before you; it is missing the expensive 
breast cancer example. And that was the most impactful and it 
needs to be brought back.
    Second, a change was made at the regulatory level to go 
from real world prices to Medicare prices. So you will see that 
having a baby is $10,000 in this slide.
    If you go to the next slide, or the previous one.
    [Slide.]
    Ms. Quincy. Now it is $7,540. That is not a real world 
price. And I can, afterwards, give you a whole list of things I 
would love for this committee to do.
    Mr. Horsford. Mr. Chairman, may I ask, do we have a copy of 
those slides?
    Mr. Lankford. We can certainly get a copy of those slides. 
They will be included in the record as well.
    Mr. Horsford. Thank you very much.
    Mr. Lankford. Absolutely.
    Ms. Lujan Grisham.
    Ms. Lujan Grisham. Thank you, Mr. Chairman. I have to say 
that when you come into these committees this late, you often 
end up repeating many of the fine points and questions. I am 
actually going to dovetail on my fabulous colleague, Mr. 
Horsford.
    Ms. Quincy, I really appreciate describing that we have 
great first steps, including making sure that we have more 
transparency and we are driving folks to a consumer-based 
marketplace through the exchanges in the Affordable Care Act, 
but that health care information is complicated and that even 
the folks who have tried in a variety of before the Affordable 
Care Act have made many attempts to make billing information.
    Anybody who has tried to read a Medicare statement, for 
example, it used to take me months to train doctors and other 
health care professionals to be able to navigate explanation of 
benefits and Medicare bills to figure out whether or not those 
Medicare beneficiaries still have to pay, have reached a 
deductible, what that 20 percent is or isn't, whether it is a 
covered service. So it is, it is very complicated to navigate 
and I think that these are important first steps.
    But I want to talk to you. Mr. Horsford got you to identify 
other things that we could be doing to make this more 
transparent, which will make consumers better able to make 
productive choices. Let's talk a little bit about how that 
would translate into creating better price structures and 
helping consumers help us make sure that we don't have price 
discrimination and overcharges in the system. Do you have any 
suggestions about how we might do that?
    Ms. Quincy. Yes. Some, I think, low-hanging fruit, if you 
will, things fairly easy to achieve. One of the things that 
stops consumers from using the price information that is on the 
marketplace today is it is by CPT code, so a single procedure. 
And they don't bring the knowledge to the table that tells us 
what is the actual full bundle of procedures that I need to 
know. This is why they might get tripped up with respect to 
out-of-network charges, because they don't realize there is an 
anesthesiologist charge that goes with this surgical charge. 
So, anyway, we need to provide them within formation that is 
already bundled into the entire set of services that they are 
going to need.
    Second, we have to link those things with value. We should 
not be showing price information alone. And that is pretty 
tricky, but I think it can be done. I also think that 
underlying all of this, like the testimony of others, is great 
information about comparative effectiveness. What are the right 
treatments? When you are choosing among treatment alternatives, 
you, frankly, don't want to do it on the basis of price; you 
want to know which is going to give you, the patient, the best 
outcomes. And we have that information in some places, but not 
where we should. It is shameful that that information is not 
always available to us.
    I will stop there just so you have enough time.
    Ms. Lujan Grisham. And thank you very much.
    This is for anyone on the panel and, again, I apologize if 
these issues were covered before my attendance here at this 
morning's hearing. And, again, I am in favor of as much 
transparency and not so in favor that I think this is over-
simplistic to say that just a free marketplace kind of 
transparency environment makes this easy.
    As I said, I come from this with experience helping the 
Seniors Saving Medicare project; Operation Restore Trust, where 
we were really looking at ways to really understand what is 
going on; long-term care ombudsmen programs, helping folks 
understand what services they ought to be getting in nursing 
homes. And it is so complicated that the best way I could do it 
would be to train accountants and really looking at folks.
    I am not, for example, able to figure out, when my engine 
light goes on, just exactly what is wrong with my car. Nor am I 
able to navigate it when the mechanic tries to explain it to 
me. And when you are sick, you are not in a position to shop, 
and Americans are sicker than everybody else. And I just like 
these responses that we are not dealing with a patient 
population, no matter how sophisticated we are, that can 
navigate fairly just because people are more transparent. I do 
disagree with these statements and why. Anyone on the panel.
    Mr. Goodman. Well, I think the best way to get transparency 
is to do something like what Walmart is going to do with all 
its employees; it is going to have seven Centers of Excellence. 
You want to get on a plane, go to those Centers of Excellence 
for your elective surgery. They will cover all the costs. If 
you want to go to some other hospital, you have to pay the 
extra marginal costs. So that makes every employee of Walmart 
very aware that there is going to be an expense for going to 
another hospital or another health center. And then once they 
do that, in places where there are a lot of Walmart employees, 
the other hospitals are going to say, hey, we can't get 
customers here with the CPT codes that nobody understands; so 
if we want to compete with the Mayo Clinic and other health 
centers, we better come up with a package price that people can 
understand and quality measurements that they can understand.
    It is on the provider side that we are going to solve these 
problems, not on the buyer side.
    Ms. Lujan Grisham. Thank you, Mr. Chairman. My time is up, 
so I will yield back, but there is plenty more to debate on 
this issue. Thank you very much.
    Mr. Lankford. Good. We will hang around for a second round 
of questioning, if you would like to be able to stay engaged in 
that as well.
    Let me come around for a second time around on a few 
things. For all of us, we want the best in possible patient 
care. That is what this is all about. It is an individual the 
best and possible patient care. It is also best possible price 
not only for the individual that is paying it, but in the cases 
where the Federal Government is involved in health care, also 
for the Federal Government as well. But it is about the patient 
at the center core of this.
    Dr. Goodman, you have done a lot of work on cost issues. 
What would you propose as the most significant things that we 
could do that both improves patient care or takes good 
attention to individuals, but also good attention to price?
    Mr. Goodman. Well, again, I think we have all of these 
clinics that are opening up, all the Minute Clinics, the walk-
in clinics, we have the doc-in-the-boxes, we have the 
freestanding emergency room clinics, and they really are in a 
free market and they do offer posted prices. The mistake we are 
making in our public programs, in Medicare and Medicaid, is 
that we are not allowing the patients to pay those prices; 
instead, we dictate what Medicare is going to pay, we dictate 
what Medicaid is going to pay.
    We don't need to do all that if we have a market that is 
functioning and if the price looks like it is way below what we 
would otherwise pay. So there are a few simple things that we 
could do that I think would greatly expand access to care, 
particularly for low-income folks.
    Mr. Lankford. All right, but that is for basic data care; 
that is the flu, that is an earache, that is a broken bone. 
That is for simple things. What about when we step into more 
complicated?
    Mr. Goodman. For more complicated, just to pick up on the 
Walmart example, other employers are looking at structuring 
their insurance so that if you go to a high-quality, low-cost 
facility, they pay everything; if you want to go someplace 
else, you pay the extra cost out of your own pocket. Then that 
puts enormous pressure on the provider side of the market to 
begin to compete with bundled prices, with quality information; 
and I think you are going to see a lot more of that. Right now, 
in Dallas, Texas, there is not a single hospital that is not in 
Blue Cross's network. It doesn't matter how good the hospital 
is, how bad, what its mortality rate; they cover everybody. 
That is not the way to get to where you want to be.
    Mr. Lankford. What about for the individual? I mean, all 
those assume employer or a larger company that they are 
involved in. What about for a small business owner, himself and 
his wife or her husband own the business and that is it?
    Mr. Goodman. Well, I believe in the very flexible health 
savings account to wrap around any third-party plan, and I 
really think the ideal way to structure it is to put enough 
money into the account so that people can pay for their primary 
care, for their diagnostic tests. If something really expensive 
happens, then the plan pays for it.
    But carve out whole areas of care, especially all the 
diagnostic tests, and say, look, you can have this. We are not 
going to argue with you about how often you can have a 
mammogram or a pap smear or PSA test; we are going to put money 
into an account and you decide how often you get these and you 
decide if you can find a better way and higher quality testing. 
That would change a lot.
    Mr. Lankford. We are all in the middle of the transition to 
the Affordable Care Act and we are all kind of watching the 
Administration right now trying to implement things. There are 
a lot of guesses what it will look like both on price on 
insurance and how it is going to work, and exchanges and State 
versus Federal. All these dynamics are out there. You are doing 
a tremendous amount of research on this as well.
    Based on just typical behavior of individuals, there is 
this sense that individuals will stay out of the insurance 
market until they are sick because they have guaranteed 
coverage at this point, and that they will then step in and 
pick up coverage as soon as they become sick. Are you tracking 
with that or where are we with any of that? Do you think that 
will affect premiums? Do you think that is a likely behavior?
    Mr. Goodman. I think it is going to be a huge problem, and 
it is going to be made worse if the application form is 21 
pages long, and it is going to make worse if the HHS continues 
to not use systems that are already out there. E-Health has 
insured 3 million people on a private exchange. HHS is not 
using that private exchange. I think that is a huge mistake. 
They are going to go hire navigators who will not be insurance 
brokers; they have to be trained. And the fines for being 
uninsured are small and they don't apply to millions of people, 
and it appears that the IRS can't do much to enforce them 
except withhold refunds, so the insurance companies are very, 
very worried that only sick people will sign up, and it is a 
legitimate worry.
    Mr. Lankford. Okay.
    I now yield to Ms. Speier.
    Ms. Speier. Thank you, Mr. Chairman.
    Dr. Goodman, you are an unabashed proponent of HSAs. We 
have heard it five or six times this morning. The GAO has 
indicated that the average adjusted gross income for those aged 
19 to 64 who have either made a contribution to or withdrawal 
from an HSA have an income of about $139,000 a year, compared 
to the average filer, who is making about $57,000 a year. So 
the persons who are accessing HSAs are people who have more 
money, people who have the ability to squirrel away money. So I 
don't think HSAs are the answer, and that is the model on which 
you describe much of your commentary.
    So I guess my question to you is if we don't have HSAs, if 
the majority of Americans don't access HSAs because they don't 
have extra money, we have lots of unemployed people; we have 
lots of people who are just making it, who don't have $5,000 to 
set aside in an HSA, how are we going to make sure that they 
have health coverage under your concept?
    Mr. Goodman. Well, I am not talking about extra money, I am 
talking about the money that is put aside for them by an 
employer or by the Government; and I am saying it should not 
all, in my opinion, go to the third-party payer. But I am 
perfectly willing to allow the market to work, and if people 
want to join an HMO and give all the premium dollars to HMO and 
let it make the decisions, I am willing to allow that to 
happen. That is basically what happens in the Medicare 
Advantage plan.
    But I would like to see people have the option not to give 
all the money to the insurance company, to retain part of it in 
an account that they own and control; and I would especially 
like to see the opportunity for people to carve out whole areas 
of care that they will be responsible for and an employer puts 
money into the account. And I think this could be a real 
interesting way to approach the whole issue of chronic illness.
    In the Medicaid program, of all places, we have something 
called cash and counseling, where the homebound Medicaid 
disabled are managing their own budgets.
    Ms. Speier. All right, thank you. I need to go on and ask 
Ms. Quincy.
    Ms. Quincy, what has your experience been with these HSAs 
and high deductible plans, and their ability to really cover 
people?
    Ms. Quincy. I think that the evidence associated with these 
plans completely comports with what theory would predict; they 
are excellent vehicles for people who are either very well off 
and/or healthy. In fact, there is some data from the IRS that 
indicates that they are actually used to do long-term 
retirement savings, because it is another tax advantage way to 
save for your retirement. And there is nothing wrong with that.
    I do think we need to be careful and state so that we know 
it will not solve all of our health issues. I think there is a 
role for it, but you have already made the point better than I 
have that there are many, many families for whom they are very 
cash-strapped, they have no liquidity, and they may be also 
time-constrained; they are just not in a position to shop all 
these services and manage this large account. I just think the 
evidence is overwhelming that that is the case.
    Ms. Speier. All right. I have a question for each of you 
now. There is still a lot of pushback on the Affordable Care 
Act, still people that want to undo it. I think it is 
counterproductive at this point. I think it is here to stay. I 
think that what we should be doing is making sure that it 
works. And I know for some of you that is a hard concept to put 
your arms around because you just don't support it. But having 
said that, there are issues that we have to address in the 
Affordable Care Act around cost containment, because the bill 
does not address that; and our job in Congress right now should 
be looking at where the areas we can impose cost containment, 
because a fee-for-service model is antiquated.
    So, with that, Dr. Makary, let's start with you.
    Dr. Makary. I appreciate your comment, Congresswoman. Even 
the authors of the Affordable Care Act, at the time that it was 
passed, said more work needs to be done, and it was recognized 
that it was not all-inclusive of the changes that need to be 
made in health care; and, of course, no law is ever perfect. 
Right now, dealing with the cost crisis, it appears that 
transparency is the most common-sense, logical, and low-cost 
way to allow the free market to come around outcomes. But if we 
just talk about price transparency, I do worry it is a very 
dangerous business, because it will simply force the market to 
provide the lowest price.
    We have all talked about the importance of value and 
outcomes, but where are these outcomes? They live in these 
registries. And I think if Medicare is going to reward things, 
they should reward registry participation and public reporting 
in these registries.
    Mr. Lankford. I am going to ask unanimous consent to extend 
for another minute to allow the folks to be able to answer that 
question.
    Mr. Goodman. I personally put together something called the 
Health Roundtable, and it includes the business roundtable, 
includes the drug companies, insurance companies. Basically, I 
said to them, I don't care where you were three years ago; some 
of you supported it, some of you didn't, but I used the very 
words you used: It is here; we have to find a way to make it 
work. So you all know better than Congress knows where the 
train wrecks are. Let's identify them; let's do this in a 
bipartisan way. So we would love to have your input on this 
because one party can't do this next time around; it has to be 
both parties.
    Ms. Quincy. Constraining health care costs is probably the 
thorniest dilemma that we all face; it is very complex and hard 
to do. I would actually be a bit more charitable towards the 
Affordable Care Act. It doesn't solve the problem, but it 
contains just about all the seeds of policy solutions that we 
would explore. I won't enumerate them here, even though I wish 
I could, but perhaps in some of the later questioning we could 
dig into some of those provisions. Like there is a new large 
payer, which we have all agreed is how you move the market, by 
having large payers; rate review; and other issues.
    Mr. Lankford. Dr. Gosar.
    Mr. Gosar. I disagree. I want opportunity and I want 
choice, and that is inherent to me, and I have done it for 25 
years. I built individual insurance models for patients day in 
and day out, so I want choice. And we can't solve this problem 
without involving the patient in this decision process.
    But the market is broken, and it has been broken from the 
Government entity, it has been broken from the insurance 
entity, and it has been broken from the hospitals entity; all 
the way around. In fact, I always share this: Who has been on 
the Government dole the longest for dictated health care 
systems? Actually, it is the Native Americans; and they are 
rebelling like light years. They do not want it; they do not 
like it. They want to have an individually based health care 
model. And they are exempt, by the way, from the ACA, and they 
are actually building some of the better health care systems 
around are being built right now.
    So I want to look, Dr. Goodman, at the system, because I 
think we are built upon a flawed system based upon 
reimbursement rates dictated by CMS and HHS, as well going 
through an insurance industry. Would you agree with me that we 
can get back to some kind of competitive model and look at real 
costs, instead of being able to cost-shift? Because that is 
what we are doing right now, we are just cost-shifting one to 
the next, to the next, to the next; and that is why you see 
some of this churning that goes on.
    Mr. Goodman. Yes. I would go further. We are never going to 
solve the problem of cost as long as you have every patient and 
every doctor having a self-interest in making spending higher. 
So if you want to solve the problem, we have to get the 
economic incentives right, and health savings accounts is one 
way of getting incentives right for the patient. And if you 
were more creative about that idea, you could do the same thing 
in chronic care, long-term care. There are a lot of things we 
could do to get patients good incentives, and we can also do it 
on the provider side.
    Mr. Gosar. But you are your health care, are you not? You, 
the patient, you are your health care.
    Mr. Goodman. Okay.
    Mr. Gosar. You inherit your health, right?
    Mr. Goodman. Right.
    Mr. Gosar. So you have to take an active participation in 
that aspect to drive it. So it is upon us to educate people in 
the genetics that we hold.
    Would you not also agree, Dr. Makary?
    Mr. Makary. Yes.
    Mr. Gosar. So we have to involve them along those lines.
    Let me ask you a question. So we have this Affordable Care 
Act, so they say, and then we have an SGR. Does that make 
sense? How do you have an SGR and then you have reformed health 
care, and you still have an SGR sitting out there because what 
you are doing is you are trying to reimburse physicians for not 
being paid appropriately. How does that work?
    Dr. Makary. The Affordable Care Act addressed coverage in 
one way; it didn't address the SGR, which desperately needs to 
be reformed, and it didn't address the long-term cost crisis in 
a comprehensive way. There is only one thing that units every 
physician in the United States, and that is we want the SGR 
changed.
    Mr. Gosar. Very, very, very interesting. And going back to 
choice, in the Affordable Care Act, what we are seeing in its 
implementations you are seeing also in compliance; hospitals 
buying up private sectors, Dr. Makary. Does this help or hurt 
rural health care implementation?
    Dr. Makary. Well, even before the Affordable Care Act there 
was a trend which I have been concerned about: massive 
consolidation in health care. Do we want our cities and some 
States controlled by one hospital corporation? There were 86 
hospital mergers acquisitions and last year, representing a 
record in U.S. history. I think we all believe that it is going 
to hurt medical prices if there is only one player in town.
    Mr. Gosar. So the question Ms. Quincy was talking about, 
large payer, that seems anti-anecdotal. There is this big move 
to big insurance, big hospitals, big medical groups. That is 
kind of contradictory to what we would solve it with, right?
    Dr. Makary. Well, I like shopping for a cell phone with 
Verizon, Sprint and AT&T and if there were only one carrier, I 
guarantee the price would be higher.
    Mr. Gosar. That is what I found in dentistry, and I found 
that in life as well. Let me ask you the next thing. Talk to me 
about the new doctor. They are very different. You alluded to 
it in your conversation. We are producing a physician that is 
very heavy in debt, I mean between $200,000 and $300,000. So 
their opportunities are very limited in how they can repay 
that. Can you elaborate a little bit on that, Dr. Makary?
    Dr. Makary. Doctors are getting crushed right now. 
Malpractice premiums are going up; their Medicare payments are 
going down; their overheads are going up; and then there is 
this pressure to do more with less, and that is why we are 
seeing this tremendous dissatisfaction. And I think we have to 
look at the SGR. And these young doctors, they want to be 
honest and transparent, because that generation has very little 
tolerance for a lack of transparency in other aspects of their 
life, so they are more likely to disclose errors to patients at 
the bedside and they are more likely to look at national 
registries and say why aren't these available to the taxpayers 
when they fund it.
    Mr. Gosar. Thank you.
    Mr. Lankford. Mr. Horsford.
    Mr. Horsford. Thank you, Mr. Chairman.
    Dr. Goodman, I do have to just respond a little bit to your 
statement prior. Replacing the Affordable Care Act with a model 
like Walmart has for a Center of Excellence, it may work for 
Walmart, and I am not going to make a judgment on that, but it 
is not going to work for millions of Americans in places like 
my district.
    Just by way of example, my district in Nevada covers seven 
counties, it is 52,000 square miles; it is both rural and 
urban. I have rural parts of my district that have no medical 
services whatsoever, or public transportation. So to expect 
them to somehow navigate or be able to get to a Center of 
Excellence, I would take some objection to. And small 
businesses who can't get the same volume prices as Walmart I 
don't think would be advantaged.
    But I really appreciate my colleague, Representative Gosar, 
as a dentist because I found that it is not the doctors, per 
se, that are the problem. The problem, in my opinion, are the 
insurance companies. Until recently, insurance companies spent 
a substantial portion of consumers' premium dollars on profits, 
including executive salaries and marketing. For example, in 
1993, insurance companies typically spent 95 percent of 
customers' premiums on medical benefits, the so-called medical 
loss ratio.
    But by 2009 many insurance companies were routinely denying 
policy claims and dropping coverage for nearly 3 million 
Americans. That allowed them to stop spending so much on health 
care and start keeping a greater share of premiums for profits 
and executive salaries; and only about 85 percent of premiums 
were spent on medical benefits. By comparison, the Government-
run Medicare system put 97 percent of premiums into medical 
benefits.
    So, according to one study, profits for the 10 largest U.S. 
insurance companies jumped 250 percent, 250 percent between 
2000 and 2009. Now, I have no problem with the free market, and 
I think that people are entitled to a profit. But in health 
care, should we have 250 percent of insurance company profit 
when people do not have access to quality health care in 
America?
    Ms. Quincy, way back in 2009, was it legal for private 
health insurers to deny coverage and keep premiums for profit 
and executive salaries?
    Ms. Quincy. Yes.
    Mr. Horsford. Is it legal for insurers to do that, or has 
something changed now?
    Ms. Quincy. Well, many things have changed. Some changes 
have already occurred, like restricting the medical loss ratio 
to a certain range, 80 percent for individually insured and 
small group products and 85 for large group products. This is 
already in place; we can already see the evidence of how well 
this policy is working. But in 2014, of course, things change 
fundamentally and people can no longer be denied or charged 
more because they have a preexisting condition, mostly through 
no fault of their own; and that is the fundamental change that 
consumers really want to embrace. It is just not fair; it is 
unethical.
    Mr. Horsford. So is there evidence that the MLR is actually 
driving down health insurance premiums?
    Ms. Quincy. There seems to be. We just have one good year 
of experience with it so far. Also, when you look at MLR, you 
have to realize it is also being coupled with a much better 
rate review process, and those two things together we have 
observed, again, in our first year that rate requests were 
being reduced or withdrawn, and there is a study out there that 
shows there does appear to be a benefit. And, again, we are 
talking about greater transparency here between the MLR 
requirements and the rate review process.
    Mr. Horsford. Just quickly. Dr. Goodman's website suggests 
that the MLR will result in higher premiums and increased 
profits for insurance companies. What do you say to that?
    Ms. Quincy. Well, I think it depends how real world you are 
going to get. In the realm of theory you could say there is a 
scenario whereby MLR might increase profits, but in the real 
world, where we have competition among health plans, you can't 
arbitrarily increase your medical claims in order to increase 
your profits while still maintaining your MLR. You wouldn't 
fare very well in the marketplace.
    Mr. Lankford. Thank you.
    Quick follow-up question on that, Ms. Quincy, just to 
clarify. Are you suggesting that next year premiums will be 
lower for individuals for insurance, with that statement?
    Ms. Quincy. Well, if you are you trying to get me to say 
what we know about premiums?
    Mr. Lankford. No, just the statement about the MLR and that 
the premiums have gone down. I am just trying to clarify is 
that total premiums or just in that one area?
    Ms. Quincy. I am so sorry. Are you asking me to clarify 
what we already know about premiums for the prior year or are 
you asking about 2014?
    Mr. Lankford. No, no, no. 2014, yes.
    Ms. Quincy. Okay. Well, we have lots of studies on this, 
and premiums will be going up for some people and down for 
others. And that is before subsidies.
    Mr. Lankford. Okay.
    Clarifying question as well, Dr. Goodman. You and Ms. 
Speier talked about something and you brought up a cash and 
counseling program. I just wanted you to be able to clarify 
what that is and how that works.
    And then I am going to see if there are any other quick 
questions, then we will close down the hearing from there.
    Mr. Goodman. Well, it is a remarkable program because it 
deals with the most vulnerable of our citizens, and these are 
Medicaid disabled patients. They are allowed to manage their 
own budget. It is a program initially funded by the Robert Wood 
Johnson Foundation.
    By the way, other countries are doing this too. I was 
testifying about two years ago and I brought this up, and 
Senator Rockefeller said, well, what does that have to do with 
health savings accounts? And I said, well, that is just a 
health savings account for poor people. So after the hearing he 
came up to me and he said, you don't understand, health savings 
accounts is a Republican idea. And I said, well, let's call 
them Rockefeller accounts. Then we will all be happy.
    Mr. Lankford. So how do they work and where do they come 
from? How old are they? This is a pilot that currently exists?
    Mr. Goodman. Yes, in just about every State, I believe. The 
patient manages the money. Initially it was just custodial 
services, but now it is real health care. And they can hire and 
fire people who provide them with services, so if they don't 
like what they are getting from one provider, they can go to 
another.
    Mr. Lankford. Any other clarifying questions? Any follow-
up?
    Ms. Quincy, Dr. Goodman, Dr. Makary, thank you for being 
here and thanks for all you have submitted and the work you 
have put into this, both the books, the research people. Dr. 
Makary, I saw an article that you put out in The Wall Street 
Journal. I would like to enter this into the record as well. 
Ask unanimous consent to do that. So ordered.
    Mr. Lankford. You are doing a lot to push Americans to 
think about health care in different ways and to be able to 
encourage us to do some of those things as well. So I thank you 
for the research that you continue to do and we will look 
forward to continuing this conversation in the days ahead.
    With that, this committee is adjourned.
    [Whereupon, at 12:05 p.m., the subcommittee was adjourned.]



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