[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



 
                       OBAMACARE'S IMPACT ON JOBS 

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

                                HEARING

                               BEFORE THE

                         SUBCOMMITTEE ON HEALTH

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION
                               __________

                             MARCH 13, 2013
                               __________

                           Serial No. 113-14





      Printed for the use of the Committee on Energy and Commerce
                        energycommerce.house.gov


                               ----------
                         U.S. GOVERNMENT PRINTING OFFICE 

80-319 PDF                       WASHINGTON : 2013 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Printing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001


                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman
RALPH M. HALL, Texas                 HENRY A. WAXMAN, California
JOE BARTON, Texas                      Ranking Member
  Chairman Emeritus                  JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania             GENE GREEN, Texas
MICHAEL C. BURGESS, Texas            DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee          LOIS CAPPS, California
  Vice Chairman                      MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia                JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana             JIM MATHESON, Utah
ROBERT E. LATTA, Ohio                G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington   JOHN BARROW, Georgia
GREGG HARPER, Mississippi            DORIS O. MATSUI, California
LEONARD LANCE, New Jersey            DONNA M. CHRISTENSEN, Virgin 
BILL CASSIDY, Louisiana                  Islands
BRETT GUTHRIE, Kentucky              KATHY CASTOR, Florida
PETE OLSON, Texas                    JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia     JERRY McNERNEY, California
CORY GARDNER, Colorado               BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas                  PETER WELCH, Vermont
ADAM KINZINGER, Illinois             BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia         PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
                         Subcommittee on Health

                     JOSEPH R. PITTS, Pennsylvania
                                 Chairman
MICHAEL C. BURGESS, Texas            FRANK PALLONE, Jr., New Jersey
  Vice Chairman                        Ranking Member
ED WHITFIELD, Kentucky               JOHN D. DINGELL, Michigan
JOHN SHIMKUS, Illinois               ELIOT L. ENGEL, New York
MIKE ROGERS, Michigan                LOIS CAPPS, California
TIM MURPHY, Pennsylvania             JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          JIM MATHESON, Utah
PHIL GINGREY, Georgia                GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
LEONARD LANCE, New Jersey            JOHN BARROW, Georgia
BILL CASSIDY, Louisiana              DONNA M. CHRISTENSEN, Virgin 
BRETT GUTHRIE, Kentucky                  Islands
H. MORGAN GRIFFITH, Virginia         KATHY CASTOR, Florida
GUS M. BILIRAKIS, Florida            JOHN P. SARBANES, Maryland
RENEE L. ELLMERS, North Carolina     HENRY A. WAXMAN, California (ex 
JOE BARTON, Texas                        officio)
FRED UPTON, Michigan (ex officio)
  



                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Joseph R. Pitts, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     1
    Prepared statement...........................................     3
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     3
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, opening statement....................................     5
    Prepared statement...........................................     6
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................     7
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     7
Hon. Phil Gingrey, a Representative in Congress from the State of 
  Georgia, prepared statement....................................    97

                               Witnesses

Diana Furchtgott-Roth, Senior Fellow, Manhattan Institute........     9
    Prepared statement...........................................    11
    Answers to submitted questions...............................   115
Linda J. Blumberg, Senior Fellow, The Urban Institute............    39
    Prepared statement...........................................    41
Tom Boucher, Owner and Chief Executive Officer, Great New 
  Hampshire Restaurants, Inc., Testifying on Behalf of the 
  National Restaurant Association................................    49
    Prepared statement...........................................    51

                           Submitted Material

Statement of Small Business Majority, submitted by Mr. Green.....    77
University of Virginia study, submitted by Mrs. Ellmers..........    98


                       OBAMACARE'S IMPACT ON JOBS

                       WEDNESDAY, MARCH 13, 2013

                  House of Representatives,
                            Subcommittee on Health,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:12 a.m., in 
room 2123, Rayburn House Office Building, Hon. Joseph R. Pitts 
(chairman of the subcommittee) presiding.
    Present: Representatives Pitts, Burgess, Hall, Shimkus, 
Lance, Cassidy, Guthrie, Griffith, Bilirakis, Ellmers, Upton 
(ex officio), Pallone, Dingell, Schakowsky, Green, Butterfield, 
Barrow, Christensen, Sarbanes, and Waxman (ex officio).
    Staff Present: Gary Andres, Staff Director; Sean Bonyun, 
Communications Director; Matt Bravo, Professional Staff Member; 
Paul Edattel, Professional Staff Member, Health; Steve Ferrara, 
Health Fellow; Julie Goon, Health Policy Advisor; Debbee 
Hancock, Press Secretary; Sydne Harwick, Staff Assistant; 
Robert Horne, Professional Staff Member, Health; Carly 
McWilliams, Legislative Clerk; Andrew Powaleny, Deputy Press 
Secretary; Chris Sarley, Policy Coordinator, Environment and 
Economy; Heidi Stirrup, Health Policy Coordinator; Lyn Walker, 
Coordinator, Admin/Human Resources; Alli Corr, Minority Policy 
Analyst; Amy Hall, Minority Senior Professional Staff Member; 
Karen Lightfoot, Minority Communications Director and Senior 
Policy Advisor; Karen Nelson, Minority Deputy Committee Staff 
Director For Health; and Matt Siegler, Minority Counsel.

OPENING STATEMENT OF HON. JOSEPH R. PITTS, A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Pitts. The subcommittee will come to order. The chair 
will recognize himself for an opening statement.
    In today's sluggish economy, with depressed wages and 
millions of Americans who simply cannot find work, the Federal 
Government should be encouraging businesses to grow and expand 
and hire more people. We should be incentivizing good jobs that 
provide the opportunity for advancement and increased wages. As 
a result of Obamacare, however, we are doing exactly the 
opposite. And those who are hurt the most by the law are the 
most vulnerable: Low-wage young Americans in the retail and 
service industries.
    Obamacare has multiple detrimental effects on American 
workers. It contains perverse incentives for employers to, one, 
not hire new employees; two, convert full-time employees to 
part-time status or only hire part-time workers; and, three, 
drop coverage they currently provide to employees. 
Additionally, the new taxes and fees created by the law make it 
even harder for employers to compete in our current economy.
    First, Obamacare requires that employers with 50 or more 
full-time equivalent employees provide Federally-approved 
health coverage or face a tax penalty of $2,000 for every 
employee beyond the 30th. If a business cannot afford to 
provide government-approved health insurance, making the 
decision to hire that 50thworker triggers the $2,000 penalty on 
the previous 20 employees as well. In many cases, employers 
have concluded that they simply cannot afford the cost of that 
50th employee, effectively capping their growth and ensuring 
that fewer jobs exist for the millions of Americans who are 
unemployed or underemployed.
    This is not theoretical. According to the January 2013 
Report on Economic Activity published by the Federal Reserve, 
``Employers in several districts cited the unknown effects of 
the Affordable Care Act as reasons for planned layoffs and 
reluctance to hire more staff.''
    Secondly, Obamacare is causing employers to convert full-
time employees to part-time status and/or to hire only part-
time worker employees, because the law defines anyone working 
30 hours a week or more as full time, thus counting against the 
50 FTE threshold. We are already seeing employers reducing 
hours of current employees so as not to trigger the employer 
mandate and resulting fine. And this trend disproportionately 
affects low-wage Americans in the restaurant, hotel, retail and 
service industries. Last month, The Wall Street Journal 
reported on a phenomenon known as part-time job sharing in the 
fast food industry. Here fast food chains such as the 
McDonald's, Burger King, or Wendy's will effectively share 
employees. An employee will work part-time in one restaurant, 
and then go work part-time in another. Both employers benefit--
Obamacare does not require them to provide health insurance for 
part-time workers--but the employee suffers. He or she now has 
two part-time jobs, and yet still does not qualify for 
employer-sponsored insurance.
    The Federal Reserve report confirms this trend. The report 
states that in Fed District 7, Chicago, some employers, ``Are 
also beginning to limit hours for part-time workers to less 
than 30 hours in order to avoid the 30-hour''--that is the 
full-time employee status--``rule related to the Affordable 
Care Act.''
    Thirdly, those Americans blessed with a full-time job may 
lose their employer benefits. Many large employers have 
concluded that paying the $2,000 fine is still cheaper than 
providing health coverage. In some cases, large employers have 
found that they could save hundreds of millions of dollars or 
even billions of dollars by dropping coverage and paying the 
fine.
    These devastating consequences of Obamacare are already 
being seen today. And as the law goes into effect in 2014, we 
will only get worse in future years. I look forward to hearing 
from our witnesses today exactly what the effects of Obamacare 
will be on jobs and the workforce.
    And my time is up, so at this time, I will conclude and 
recognize the ranking member of the Subcommittee on Health, Mr. 
Pallone, for 5 minutes for an opening statement.
    [The prepared statement of Mr. Pitts follows:]

               Prepared statement of Hon. Joseph R. Pitts

    In today's sluggish economy, with depressed wages, and 
millions of Americans who simply cannot find work, the federal 
government should be encouraging businesses to grow and expand 
and hire more people.
    We should be incentivizing good jobs that provide the 
opportunity for advancement and increased wages.
    As a result of Obamacare, however, we are doing exactly the 
opposite. And those who are hurt the most by the law are the 
most vulnerable--low-wage, young Americans in the retail and 
service industries.
    Obamacare has multiple, detrimental effects on American 
workers. It contains perverse incentives for employers to: (1) 
not hire new employees, (2) convert full-time employees to 
part-time status or only hire part-time workers, and (3) drop 
coverage they currently provide to employees. Additionally, the 
new taxes and fees created by the law make it even harder for 
employers to compete in our current economy.
    First, Obamacare requires that employers with 50 or more 
full-time equivalent (FTE) employees provide federally-approved 
health coverage or face a tax penalty of $2,000 for every 
employee beyond the 30th.
    If a business cannot afford to provide government-approved 
health insurance, making the decision to hire that 50th worker 
triggers the $2,000 penalty on the previous 20 employees, as 
well.
    In many cases, employers have concluded that they simply 
cannot afford the cost of that 50th employee, effectively 
capping their growth and ensuring that fewer jobs exist for the 
millions of Americans who are unemployed or under-employed.
    This is not theoretical.
    According to the January 2013 report on Economic Activity 
published by the Federal Reserve, ``[E]mployers in several 
Districts cited the unknown effects of the Affordable Care Act 
as reasons for planned layoffs and reluctance to hire more 
staff.''
    Second, Obamacare is causing employers to convert full-time 
employees to part-time status and/or to only hire part-time 
employees, because the law defines anyone working 30 hours a 
week or more as ``full-time,'' thus counting against the 50 FTE 
threshold.
    We are already seeing employers reducing hours of current 
employees so as not to trigger the employer mandate and 
resulting fine. And, this trend disproportionally affects low-
wage Americans in the restaurant, hotel, retail, and service 
industries.
    Last month, the Wall Street Journal reported on a 
phenomenon known as ``part-time job sharing'' in the fast food 
industry.
    Here, fast food chains such as McDonald's, Burger King, or 
Wendy's will effectively ``share'' employees. An employee will 
work part-time at one restaurant and then go and work part-time 
at another.
    Both employers benefit--Obamacare does not require them to 
provide health insurance for part-time workers.
    But the employee suffers--he or she now has two part-time 
jobs and yet still does not qualify for employer-sponsored 
insurance.
    The Federal Reserve report confirms this trend. The report 
states that in Fed District VII, Chicago, some employers ``are 
also beginning to limit hours for part-time workers to less 
than 30 hours in order to avoid the 30-hour (full-time employee 
status) rule related to the Affordable Care Act.''
    Third, those Americans blessed with a full-time job may 
lose their employer benefits. Many large employers have 
concluded that paying the $2,000 fine is still cheaper than 
providing health coverage.
    In some cases, large employers have found that they could 
save hundreds of millions or even billions of dollars by 
dropping coverage and paying the fine.
    These devastating consequences of Obamacare are already 
being seen today, and, as the law goes into effect in 2014, 
will only get worse in future years.
    I look forward to hearing from our witnesses exactly what 
the effects of Obamacare will be on jobs and the workforce.

OPENING STATEMENT OF HON. FRANK PALLONE JR, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Chairman Pitts. Critics of the 
Affordable Care Act have frequently claimed that the law would 
have a negative impact on jobs and the overall health of the 
U.S. economy. But these claims have not been borne out by the 
facts. Simply put, health reform is contributing to lower 
health care costs which benefits families and employers by 
helping free up capital for saving, investing and hiring. 
Overall, national health spending is growing at a lower rate 
than it has in decades. The latest job numbers released last 
week showed that over 6 million private sector jobs were 
created since we passed the Affordable Care Act, and 750,000 of 
those jobs are in the health care sector.
    Now, today I expect my colleagues to attempt to make the 
case that Congress must eliminate the employer mandate. Of 
course, they advocate that we should repeal the health care 
reform and, you know, their budget, which I understand they are 
voting on right now in the Budget Committee, would once again 
repeal the Affordable Care Act.
    So, you know, they are honing in on the employer mandate as 
just part of their overall effort to kill the Affordable Care 
Act. But I strongly believe that these efforts to repeal not 
only employer mandate, but the whole bill are misguided. Most 
American workers already get their insurance through their 
employers. In fact, almost all, 93 percent of businesses with 
50 to 199 employees already offer coverage. The Affordable Care 
Act purposely didn't change that, despite claims that it is a 
Federal takeover of health insurance. And in a private 
employer-based system aimed at getting at many Americans 
covered as possible, which is the main goal of health reform, 
it is important that all but the smallest businesses share the 
costs. And that is why every small business with fewer than 50 
employees is completely exempt from the laws and employer 
responsibility provisions.
    Now, it is no secret that medical care accounts for 18 
percent of the U.S. Gross domestic product, and it is taking up 
at least as much of the mind share of plenty of American 
entrepreneurs and business owners. So what the Affordable Care 
Act attempts to do is increase access to the millions of 
uninsured Americans while slowing the growth of health care.
    Now, I feel like we have had this discussion so many times, 
I don't know how, 50, 100. We will have it again on the floor 
with the budget this week. Unfortunately, it is still 
misunderstood that the rate at which health care costs have 
risen hang on the fact that so many have gone without 
insurance. Those uninsured don't go uncared for if they get 
sick, but, instead, they use the emergency room or simply go to 
the hospital and don't pay. And these billions in uncompensated 
care get passed along to the health care consumers, including 
large and small employers who offer insurance in the form of 
higher premiums. So by covering more people, we eliminate the 
need to cover this uncompensated care.
    Now, I advocated and pushed forward the Affordable Care Act 
because I strongly believed that as health care costs were 
skyrocketing, American families and businesses simply couldn't 
continue to bear that weight. Business owners know that if 
current trends continue, health care spending will double in 
less than 10 years. For those American businesses and for the 
economy, defending the status quo just simply wasn't an option. 
And I know a lot of businesses are unsure, Mr. Chairman, of the 
law and some are fearful that will cause an inability for the 
business to grow. But I believe that the mandate helps put 
smaller businesses on a more competitive footing with large 
firms, and it evens the playing field for those businesses that 
already provide health coverage but are forced to compete with 
companies that don't.
    So, Mr. Chairman, let me just close by saying above all 
else, I believe that most employers want to be part of the 
solution and once they begin to comply, I am confident they 
will begin to understand the overall advantages to offering 
health benefits. Republican efforts to discredit the law and 
misinform the public can't obscure the fact that more and more 
Americans are benefiting from the provisions of the Affordable 
Care Act. I just don't understand. We continue to have hearings 
about either repealing the bill outright, which is what the 
Republican budget is discussing, you know, the Republicans are 
discussing in the Budget Committee right now, or repealing 
parts of it or cutting back on the funding.
    The fact of the matter is the Affordable Care Act is a good 
bill. And the more their efforts are cut back on funding it, 
not implementing it, the more Americans will suffer. So I hope 
this is the last hearing we have on why the Affordable Care Act 
is, in the Republicans' opinion, not a good idea. But I guess 
that is wishful thinking on my part. I yield back.
    Mr. Pitts. That is wishful thinking. On Friday we have one 
on premium increases that will further discuss the impact of 
the new law on premiums.
    With that, the chair now recognizes the chairman of the 
full committee, Mr. Upton, for 5 minutes for his opening 
statement.

   OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Upton. Thank you, Mr. Chairman. You know, millions of 
Americans are still struggling to find jobs, and is this 
committee's main priority to get them back to work. Today we 
are going to examine the Affordable Care Act's impact on the 
economy and jobs. And, fortunately, based on testimony that we 
are going to hear today, it is clear that the law is hurting 
our Nation's economy, and those Americans are trying to find 
work--particularly with those Americans who are trying to find 
work and make ends meet. Just this past week, the Federal 
Reserve released a report that painted a pretty grim picture of 
how the law is going to affect our economy. According to the 
Fed's own analysis, the law is leading employers to delay and 
minimize new hires.
    Uncertainty stemming from the health care law is a leading 
concern for American businesses, large and small. One major 
provision causing much of the uncertainty is, of course, the 
law's employer mandate. Starting next year, employers with 50 
or more full-time workers will be forced to provide Washington-
approved health care coverage or pay a tax penalty. As we are 
going to hear from our expert witnesses today, this requirement 
is going to hurt part-time workers looking for more hours and 
Americans still looking for a job. As a result of the health 
care law, employers with 49 workers must now weigh whether 
hiring an additional worker is really worth the $40,000 tax 
penalty imposed by the IRS if they are unable to provide 
Washington-approved health care coverage.
    At a time when our unemployment rate is still much too 
high, the Affordable Care Act is making it harder for our 
nation's employers to hire new workers. The new law is, in 
essence, penalizing job creation. For employers who decide that 
they are still going to want to offer health care coverage, the 
law is going to make it even more expensive. Last week our 
committee released a report highlighting over 30 studies that 
analyzed the new law's impact on health care premiums. One 
survey found that small group premiums could increase as much 
as 200 percent for employers with younger workforces. A 
specific provision causing premium increases is the $165 
billion in new taxes on plans, medical devices, and drugs that 
are going to go passed onto consumers.
    In addition, the Affordable Care Act includes price 
controls, regulations, and mandates that are going to lead to 
huge premium spikes. In my home state of Michigan, some folks 
will see their premiums go up as much as 35 to 65 percent. 
These statistics are not just projections on a sheet of paper, 
they have significant consequences as millions of American 
workers will see lower wages and less take-home pay because of 
the new law. Let's hope that we can work together to see what 
we can do to get these things down. I yield the balance of my 
time to Dr. Burgess.
    [The prepared statement of Mr. Upton follows:]

                 Prepared statement of Hon. Fred Upton

    Millions of Americans are still struggling to find jobs, 
and it is the committee's main priority to get them back to 
work. Today, we will examine the Affordable Care Act's impact 
on the economy and jobs. Unfortunately, based on testimony we 
will hear today, it is clear that the law is hurting our 
nation's economy and those Americans trying to find work and 
make ends meet.
    Just this past week, the Federal Reserve released a report 
that painted a grim picture of how the law will affect our 
economy. According to the Fed's own analysis, the law is 
leading employers to delay and minimize new hires.
    Uncertainty stemming from the health care law is a leading 
concern for American businesses large and small. One major 
provision causing much of this uncertainty is the law's 
employer mandate. Starting in 2014, employers with 50 or more 
full-time workers will be forced to provide Washington-approved 
health coverage or pay a tax penalty. As we will hear from our 
expert witnesses today, this requirement will hurt part-time 
workers looking for more hours and Americans still looking for 
a job.
    As a result of the health care law, employers with 49 
workers must now weigh whether hiring an additional worker is 
worth the $40,000 tax penalty imposed by the IRS if they are 
unable to provide Washington-approved health care coverage. At 
a time when our unemployment rate is still much too high, the 
Affordable Care Act is making it harder for our nation's 
employers to hire new workers. The new law is essentially 
penalizing job creation.
    For employers who decide that they still want to offer 
health insurance coverage, the law will make it more expensive. 
Last week, our committee released a report highlighting over 30 
studies that analyzed the new law's impact on health care 
premiums. One survey found that small group premiums could 
increase as much as 200 percent for employers with younger 
workforces.
    A specific provision causing premium increases is the $165 
billion in new taxes on plans, medical devices, and drugs that 
will be passed on to consumers. In addition, the Affordable 
Care Act includes price controls, regulations, and mandates 
that will also lead to huge premium spikes. In my home state of 
Michigan, some folks will see their premiums go up between 35 
to 65 percent.
    These statistics are not just projections on a sheet of 
paper. They have significant consequences as millions of 
American workers will see lower wages and less take home pay 
because of the law.
    My hope is that the president and Congress can work 
together to avert the real harm the law is having on employers 
and workers across this nation before it is too late. I would 
like to thank the witnesses for their time and expertise today.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. I thank the chairman for yielding. I thank the 
chairman of the subcommittee for calling this hearing.
    We have all heard, of course, that provisions of the 
Affordable Care Act are not going to take place until January 
2014. But, honestly, employers and companies are already 
feeling the effects of this disastrous law. The affordability--
patient protection afford--accountability--I can't even say it; 
``affordability'' doesn't belong in the title. But it has a 
direct and indirect effect on employers and employees. 
Individuals who will not only be affected directly by new 
taxes, but also indirectly as employers are forced to lower 
wages and decrease hiring in order to compensate for the new 
taxes that employers face. The law includes a tax intended to 
encourage employers to provide health insurance to their 
employees. Instead of encouraging growth, this tax creates a 
disincentive for employers to grow their workforce.
    Not only does the law tax employers more if they hire 
additional employees, but the law gives employers an outlet, a 
safety valve, to drop coverage for their employees by providing 
premium subsidies to individuals in the exchanges.
    At a time this country is beginning to find relief from the 
severe recession and its high unemployment, now is not the time 
to discourage economic growth. Instead of expanding coverage 
and lowering costs, the President's health care law has pushed 
greater costs onto the backs of consumers, forcing those who 
are not responsible to bear the effects of higher costs.
    Mr. Chairman, I just can't help but observe this past 
weekend when I sat down with my accountant with a shoe box full 
of receipts to do any income taxes, he pointed out to me on the 
W-2 form a new line which has not existed before in which the 
employer's contribution to an employee's health insurance now 
appears. That begs the question, why is that there? At some 
point, that line is going to be taxed. Right now, it is there 
as sort of an innocent bystander. But, trust me, the IRS will 
not sit still long before that is added to the tax burden, 
which only increases the cost of delivering care in this 
country.
    Thank the chairman for the recognition. I yield back my 
time.
    Mr. Pitts. Chair thanks the gentleman. And now recognize 
the ranking member of the full committee, Mr. Waxman, for 5 
minutes for opening statement.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you, Mr. Chairman. Today's hearing is 
entitled ``Obamacare and Jobs.'' It is a topic that has been 
the focus of an endless stream of campaign ads, press releases, 
and talking points ever since the passage of the Affordable 
Care Act in 2010. Given this topic's prominence in the 
Republican echo chamber, and this subcommittee's hearings on it 
in the last Congress, it is understandable if members 
experience some deja vu during today's hearing.
    We will hear some dire predictions that we have been 
hearing for 3 years about this supposedly nefarious piece of 
legislation. And just as before, these claims will be what 
every independent fact checker has called them: Whoppers, 
false, and political gamesmanship. Since the passage of the 
Affordable Care Act, we have added 6 million private sector 
jobs. That is 3 years of continuous job growth.
    Throughout this period of growth, businesses have known 
what reforms look like. They have had time to plan and to 
account for new rules and consumer protections. And despite the 
dire warnings about this job-killing law and the troubling 
statements some businesses have made in anonymous surveys, we 
have seen steady job growth and we have seen health costs rise 
at historically low levels.
    Republicans expect us to believe all of this is happening 
in spite of health reform rather than because of it. And that 
is their right, to say it, but it is not credible. I hope the 
Republicans will heed Speaker Boehner's advice to accept health 
reform as the law of the land. I hope that they will start 
looking at the empirical evidence rather than the Tea Party 
rhetoric.
    Democratic witness today, Dr. Linda Blumberg, has looked at 
the empirical evidence. She, like the Congressional Budget 
Office, or I should say the nonpartisan Congressional Budget 
Office, has crunched the numbers and determined that the 
Affordable Care Act does not raise costs on employers, will not 
cause job losses, and will not lead to a decline in employer 
sponsored health coverage. But I fear that the reason we are 
here today is not to discuss what is really in the Affordable 
Care Act or to have a good-faith discussion about ways to 
improve upon it in the future, or to make sure that it 
succeeds.
    Rather, the goal is to amplify the voices of a small 
minority who believe that the discriminatory, dysfunctional 
system we have had before was working fine. My Republican 
friends think that we should double down on the same 
deregulatory approach to health insurance that led to ever 
higher costs, tens of millions of more uninsured, and did 
nothing to control health care costs.
    I don't believe that is the way forward. Because of health 
reform, insurers will no longer be able to exclude consumers 
from coverage based on preexisting conditions or gouge them for 
40-percent profit margins or charge them premiums 10 times as 
high as their neighbors because of a preexisting condition, 
their age, their gender, or for any other reason.
    Because of health reforms, small businesses are able to get 
tax credits to help pay for coverage, and they will be able to 
pool their purchasing power, like bigger businesses, to keep 
their costs low and decrease the risks that one sick employee 
will dramatically raise their costs. Because of health reform, 
workers will have the security of knowing that they can get 
quality affordable coverage, even if they change jobs, or they 
employer doesn't offer it.
    Because of health reform, businesses will have a healthier, 
more productive workforce. These are real steps forward. It is 
interesting to take note of the Republican budget that was just 
presented to the world yesterday. You know what they did? They 
took all the savings in the Affordable Care Act that they 
complained about and kept them. But they took all the benefits 
of the Affordable Care Act and repealed them. That is what they 
would like to do to this country. I think that we ought to note 
that as we have this hearing, which is just for politics, just 
as their budget is just for politics. But it is the same 
politics that was rejected by the American people in the last 
election. Accept the Supreme Court decision, accept the 
election results, work together as Americans to make sure that 
we can successfully cover all Americans for health insurers and 
not see them treated so poorly as we have had in the health 
care system over all the time up to the present. Thank you, Mr. 
Chairman.
    Mr. Pitts. Chair thanks the gentleman.
    We have one panel today. And I will introduce them at this 
time. Three witnesses. Ms. Diana Furchtgott-Roth, Senior Fellow 
to the Manhattan Institute. Dr. Linda Blumberg, Senior Fellow 
at the Urban Institute. And Mr. Tom Boucher, owner and CEO of 
Great New Hampshire Restaurants, Inc. He is testifying on 
behalf of the National Restaurant Association.
    You will each be given 5 minutes to summarize your 
testimony. Your written testimony will be entered into the 
record.
    Ms. Furchtgott-Roth, you are recognized for 5 minutes for 
your opening statement.

 STATEMENTS OF DIANA FURCHTGOTT-ROTH, SENIOR FELLOW, MANHATTAN 
  INSTITUTE; TOM BOUCHER, OWNER AND CHIEF EXECUTIVE OFFICER, 
GREAT NEW HAMPSHIRE RESTAURANTS, INC., TESTIFYING ON BEHALF OF 
  THE NATIONAL RESTAURANT ASSOCIATION; AND LINDA J. BLUMBERG, 
               SENIOR FELLOW, THE URBAN INSTITUTE

               STATEMENT OF DIANA FURCHTGOTT-ROTH

    Ms. Furchtgott-Roth. Thank you very much. Thank you very 
much for inviting me to testify today.
    As we have heard, the Affordable Care Act is going to raise 
the cost of employment when fully implemented. Companies with 
50 or more workers will be required to offer a generous health 
insurance package. The penalty raises significantly the cost of 
employing full-time workers, especially low-skilled workers, 
because the penalty is a higher proportion of their 
compensation than for highly paid workers.
    So the $2,000 penalty amounts to 10.9 percent of average 
annual earnings in the food and beverage industry and 9.3 
percent in retail trade. This is in addition to the employers' 
cost of Social Security and Medicare. So whereas economic 
models might show that the cost does not have an effect on the 
overall amount of hiring, it does have effect on specific parts 
of the employment spectrum, namely, low-skilled workers. To 
look at the effects of the requirements to offer health 
insurance, I suggest to the honorable members of the committee 
the following thought experiment. What if employers were 
required to pay the cost of food, clothing, or housing for 
their employees? These are admittedly far more important than 
health insurance. Well, they would hire with employees with 
more skills, they would reduce the cash wage to compensate. 
This is what we are going to see in the same scale for 
employees with the Affordable Care Act.
    So I heard today from the honorable members that the 
Affordable Care Act doesn't raise costs and they don't see 
where it raised costs. Well, here's why it does. First of all, 
it requires an overly generous plan, a plan offered in the 
exchange has to have no copayments for routine care, mandatory 
drug abuse coverage, mandatory mental health coverage. And low-
cost plans, catastrophic health plans, where you are just 
insured against routine--where you are just insured against 
large expenditures, such as falling off your bicycle in traffic 
or catching cancer or having a heart attack, those kinds of 
plans are not allowed. But those kinds of plans are less 
expensive than the other plans.
    Another reason it raises costs is the structure of 
guaranteed issue. Under the Supreme Court decision, you could 
pay a tax and legally not get health insurance. Tax is $95 the 
first year, 2014; about $350 the second year; 690 the third 
year. That is much smaller than the cost of buying health 
insurance. So anyone who is young and healthy is going to just 
legally pay the tax, not get health insurance. So the pool of 
sick people who are insured is going to get sicker and sicker. 
So we are going to get that more sick people in the pool of 
insured. That is going to raise costs. These people who are 
uninsured who pay the tax are then going to go to emergency 
rooms. So people will still be going to emergency rooms. There 
is also a large loophole in the bill that is again going to 
require people to go to emergency rooms. If you get affordable 
care under the act, if your employer offers you affordable 
care, you are required to take it. So say you are married, you 
have a family, your employer offers you affordable health care. 
But he is only required to offer you affordable care for a 
single person, not for a family. You are required to take that. 
So you have a wife and three children, and you are low income. 
The wife and three children cannot get subsidies on the 
exchanges. They are not required to be insured by the employer 
either. So these people, the families of individuals who are 
insured by the employer are going to be going to the emergency 
rooms because they won't qualify for subsidies.
    What we have here in the bill is a bill that gives people 
an incentive to hire high-skilled workers. Because if you hire 
a high-skilled worker and you pay them, say, average wage above 
$50,000 a year or so, you take the cost of the health care plan 
out of their wage, they get a lower cash wage. So as an 
employer, you are left basically where you are before. But low-
skilled workers, you are incentivized to hire part-time, under 
30 hours a week. If you are a small business, you are 
incentivized not to grow more than 50 workers because then you 
get a penalty. You are incentivized to hire capital for labor, 
as we see these self-scanning machines in drug stores, and we 
see that people who take money when you go out of parking lots 
are no longer there, you just put your credit card in the 
machine.
    So the economy might do fine, as Dr. Blumberg is going to 
say. But low-skilled workers are going to lose out. And the 
costs of health care in the United States are going to rise 
because of the incentives that I just described. Thank you very 
much for giving me the opportunity to testify, and I would be 
glad to answer any questions afterwards.
    [The prepared statement of Ms. Furchtgott-Roth follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Pitts. Chair thanks the gentlelady, and now recognizes 
Dr. Blumberg for 5 minutes for opening statement.

                 STATEMENT OF LINDA J. BLUMBERG

    Ms. Blumberg. Mr. Chairman, Ranking Member Pallone, and 
members of the committee.
    I appreciate the opportunity to testify before you today on 
the impact of the Affordable Care Act on American businesses 
and workers. The views that I express are my own and should not 
be attributed to the Urban Institute or its sponsors. My 
testimony draws on my own and my colleagues' analyses of the 
ACA, much of it relying on the Urban Institute's health 
insurance policy simulation model, a micro-simulation model 
that incorporates the best economic behavioral research to 
estimate individual and employer responses to the specific 
provisions of the law.
    Our analysis shows that if the Affordable Care Act had been 
implemented in 2012, employer-sponsored coverage would have 
increased by over 4 million people. In small, midsized, and 
large firms alike, more workers and families would have had 
private health insurance. The largest relative coverage 
increase, about 6.3 percent, would have occurred among workers 
in small firms with 100 or fewer employees. The 2.7 percent 
increase in individuals covered by employer plans in total 
would have cost employers the equivalent of .0003 percent of 
total wages. For businesses in general, employer premium 
spending for per person insured would not be affected by the 
law, remaining constant at about $3,650. But for small 
employers, premium spending per person would decline by about 4 
percent.
    For small businesses with 100 or fewer workers, our 
analysis shows that on average, employers choosing to offer 
coverage would find average costs per person insured reduced by 
7.3 percent, and spending for the group as a whole reduced by 
1.4 percent. The reductions reflect efficiencies in the 
insurance market and tax credits that offset premium costs for 
the smallest employers with the lowest wage workers.
    The law leaves the cost per person insured virtually 
unchanged for large businesses with more than 1,000 employees. 
These employers already cover the vast majority of their 
employees, will continue to do so, and will retain the 
flexibility to define their own benefits. Coverage increases, 
largely due to somewhat higher employee enrollment rates, would 
increase total spending by large businesses by about 4 percent. 
Only midsize businesses with 101 to 1,000 employees as a group 
experience an increase in costs per person insured reflecting 
penalties on as many as 5 percent of these employers who are 
not currently providing coverage to their workers.
    Expanded enrollment, however, is the primary factor 
contributing to an increase in overall spending. Aggregate 
employer spending on health, taking into account the increase 
in the number of covered lives and new assessments, would 
increase by roughly 2 percent.
    In short, contrary to concerns that the ACA will increase 
costs and reduce employer-sponsored coverage, the law will have 
a negligible impact on total employer-sponsored coverage and 
costs and make small businesses, for whom coverage expands the 
most, financially better off. An increase in employer costs 
equal to a small fraction of a percent of total wages could 
simply not have large implications for the overall level of 
employment. Plus the increase in health care spending under 
reform will expand employment in the health sectors largely, if 
not completely offsetting any small employment effects in other 
sectors.
    In addition, Lisa Dubay and colleagues, consistent with 
analysis by Kolstad and Kowalski, find that there is no 
evidence that the similar comprehensive reforms implemented in 
Massachusetts in 2006 had a negative effect on employment in 
that State. In fact, Dubay, et al., finding hold up, even when 
looking specifically at the most vulnerable employers, the 
smallest firms and those in the retail trade and accommodation 
and food service industries.
    Most employers potentially facing additional costs do have 
counterbalancing effects that should largely offset these. 
First, the best empirical economic literature finds that most, 
if not all of the contributions that employers make to the cost 
of their health insurance, are passed back to workers over time 
in the form of lower wages than they would have had in the 
absence of health benefits. This will be the case whether the 
employers' costs come as premium contributions or assessments 
paid as a consequence of not offering coverage. Most workers 
will value having access to employer-sponsored insurance, and 
evidence shows that they are willing to trade off a portion of 
their wages to obtain those benefits. Second, employers of low-
wage workers can benefit from the expansion of Medicaid 
eligibility, which will provide comprehensive, low, or no-cost 
coverage to the lowest income workers, with no penalty to the 
employers for their participation.
    Third, more comprehensive information and easier price 
comparisons in the small group market could well lead to 
increased price competition, making employers and their workers 
more effective shoppers and pressuring plans to lower costs. 
Many State-based exchanges are already exploring defined 
contribution approaches for their small group exchanges in 
order to provide employees with plan choice, largely absent in 
small group today, while still providing employers the ability 
to limit their contributions to the costs of coverage. The 
bottom line is this is a very complicated set of interactions. 
But all of our research indicates that the total effects of the 
ACA on employers and employment will be quite small.
    Thank you very much. And I am happy to answer any questions 
you might have.
    [The prepared statement of Ms. Blumberg follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Pitts. Chair thanks the gentlelady. And now recognizes 
Mr. Boucher, 5 minutes for an opening statement.


                    STATEMENT OF TOM BOUCHER

    Mr. Boucher. Thank you, Chairman Pitts, Ranking Member 
Pallone, and members of the committee. I appreciate this 
opportunity to testify on behalf of the National Restaurant 
Association. I am Tom Boucher, an independent restaurateur and 
owner and CEO of Great New Hampshire Restaurants, Incorporated. 
My business partners and I operate eight restaurants, doing 
business as T-Bones Great American Eatery, Cactus Jack's Great 
West Grill, and The Copper Door Restaurant. Like many people in 
our industry, my first job in our company was as a server.
    Over the years, I worked my way up in the organization as a 
dining room manager, a head kitchen manager, and general 
manager. In 1995, I became a partner, and in 2004 chief 
executive officer. Our core business practice is to make 
decisions that equally benefit our guests, employees, and 
company. We call it our three-legged-stool approach to success. 
A high priority is to ensure that we take care of our 503 
employees to the best of our ability. As a mature company, we 
have many veteran and long-term employees who perpetuate our 
culture and core values.
    Over the years, it is our employee benefits, including 
health care, that have helped us recruit and retain the best 
people to contribute to our success. The food service industry 
is extremely diverse. Every operator will face a host of 
difficult decisions based on health care laws requirements. My 
partners and I have spent countless hours considering how to 
comply with the law, with a focus on maintaining employees' 
health care coverage. We have made changes since the law's 
enactment that we hope will help us better prepare for this 
transition.
    For example, we offer benefits to our salaried full-time 
employees and hourly employees who work 30 hours a week. 
Currently, of our 242 hourly full-time employees eligible to 
enroll in our plan today, only 45 percent accept our coverage. 
We have found it challenging to predict how many of the 
remaining 55 percent will accept our offer of coverage in light 
of the individual requirement that begins January 1, 2014.
    For instance, we can't determine how many of our young 
workforce will choose to pay the individual mandate tax penalty 
instead of accepting our offer of coverage in 2014, 2015, and 
beyond. The future coverage take-up rate is hard to predict, 
given many factors, but it could mean a significant increase in 
the costs employers may struggle to absorb when offering 
coverage.
    This is merely one example of the uncertainty and 
challenges resulting from the law. Our team's best estimate is 
that 75 percent of the hourly full-time employees eligible 
today but are not accepting our offer of coverage today will do 
so in 2014. Assuming plan costs were to remain the same, which 
they likely will not, such an increase in the employee take-up 
rate of our plan would increase our company's health care costs 
from $500,000 a year to $700,000 a year, representing a 40 
percent increase.
    An industry that already operates on extremely low profit 
margins, these types of increased costs cannot be easily 
absorbed or paid for by merely raising menu prices.
    While there are numerous aspects of the law that are 
complex, and my colleagues in our industry will struggle to 
implement, another that will impact my company is the 
requirement that businesses with 200 or more full-time 
employees automatically enroll their new and current full-time 
workers in their lowest cost plan unless they affirmatively opt 
out of coverage. This requirement changes the relationship that 
we have with our employees, especially those that may have 
health care from a spouse or parent. If that employee does not 
opt out of coverage, I am forced to enroll them on their 91st 
day of employment. This creates several problems for me. I do 
not like deducting premium contributions from my employees' 
paychecks without their authorization, especially if it leads 
to duplicative coverage. This reduced paycheck could create 
financial hardship on the employee. Moreover, it will lead to 
more administrative work and cost on my end as I have to remove 
them from the plan. Congress should eliminate this provision. 
There has been a lot of recent attention about the law's 
definition of full-time employment as 30 hours a week. The 
restaurant industry is not a 9:00 to 5:00, 5-day a week 
operation, we are an industry that requires flexible schedules 
and work weeks. By redefining full-time employment at 30 hours, 
employers are going to have to make a decision about how many 
hours their employees work and an unintended consequence of the 
law could be reduced hours, especially for employees that are 
just above the 30-hour threshold. As you can probably tell, I 
made a business decision to not reduce any of my employees' 
hours. However, this is something that everyone in the industry 
is going to be closely examining as they better understand the 
impact of the law on their business.
    The National Restaurant Association and its members are 
hopeful that policymakers will remain open to constructive 
revisions to the health care law that will mitigate its effects 
on our Nation's job creating business. We look forward to 
working with Congress as we address these challenges. Thank you 
for the opportunity to testify today on the health care law 
impact, on our restaurant and food service industry, and the 
challenging environment it will cause for job creation and 
growth. And I will take questions and thank you for the 
opportunity.
    [The prepared statement of Mr. Boucher follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Pitts. Chair thanks the witnesses for their opening 
statements. And now we will begin questioning by the members. 
And I will begin questioning, recognize myself for 5 minutes 
for that question--for that purpose.
    Ms. Furchtgott-Roth, when PPACA was enacted, the then-
Speaker of the House, Nancy Pelosi, claimed that the health 
care law would create 4 million jobs and almost 400,000 jobs 
immediately. However, your testimony underscores that PPACA 
will do the exact opposite and hurt job creation. Job creators 
face major incentives to reduce hiring and shift employees to 
part-time work to reduce the damage of the law's employer tax 
penalty. Given your expertise and your experience as the former 
chief economist at the U.S. Department of Labor, does Former 
Speaker Nancy Pelosi's claim bear any resemblance to reality?
    Ms. Furchtgott-Roth. I don't think that the Health Care Act 
is going to create 4 million jobs on net. It might--it is 
obviously going to create jobs in insurance and hospital 
administration. Apparently, it is going to create many, many 
jobs in the IRS. Because the IRS is going to have to evaluate 
whether individuals have paid the right taxes and penalties and 
how much subsidy they are entitled to, because anyone under 400 
percent of the poverty line gets a subsidy. But it is also 
going to cost low-wage jobs. As Dr. Blumberg says, with high-
wage jobs, employers are just going to subtract the costs of 
the insurance from the wage. But this means less cash wages.
    So people are going to do--be able to, say, go out to eat 
at Mr. Boucher's restaurants less often. That is going to cost 
jobs. So it is primarily going to have a decrease in low-
skilled jobs in the economy and probably other kinds too.
    Mr. Pitts. Now, this claim seems particularly specious 
since PPACA included over 20 new taxes which amount to over $1 
trillion over 10 years. One of the most economically damaging 
taxes is the 2.3 percent excise tax on medical devices. Studies 
have shown that the device taxes cost thousands of people their 
jobs, and cost the economy billions of dollars in lost economic 
impact.
    Now, you personally studied and coauthored a paper on this 
issue. Could you elaborate on your findings on this one tax 
alone, how it will affect jobs?
    Ms. Furchtgott-Roth. Yes. We are the only country putting 
the 2.3 percent excise tax on medical devices. And many medical 
device manufacturers export overseas. Many of them also have 
other plans overseas. So the incentive is when the tax is 
imposed here, what they would do is move production offshore to 
deal, certainly, this their offshore clients. Because they 
wouldn't move it offshore to import it in here because they 
would still face the tax.
    So I calculate that if 10 percent of production moved 
offshore, which I think is reasonable, the lost jobs would be 
in the range of 43,000 to 64,000; if 20 percent of 
manufacturing moved offshore, there would be a loss of 84,000 
jobs to 105,000 jobs; if 30 percent moved offshore, there would 
be a lost employment range of 125,000 to 146,000.
    Mr. Pitts. All right. Thank you. Mr. Boucher, your 
testimony indicated that the President's health care law will 
add major costs for your budget. Three parts to this question: 
Can you explain how this cost increase affects your ability to 
invest capital and new investments--new restaurants, create new 
jobs? Explain how the law's regulations and uncertainty have 
forced you to spend more money on human resources to comply 
with the law? And your ability to run your business and create 
jobs?
    Mr. Boucher. Sure. You know, I have spent at a minimum 100 
hours this year with my human resource person just trying to 
figure out the details of this law. And even most recently, we 
constructed a survey to send out to our staff to understand 
what their intentions might be, based on what they know of this 
law right now. That was a task that took some time itself. The 
response level was very low because they don't understand 
what's happening. So we had to resurvey them individually, 
person by person, with our general managers actually spending 
time with them to do that survey. So these are all times that 
are not normally spent by our staff or by myself. So that, in 
and of itself, has been an enormous task.
    As far as the future growth of our company, that added 
$200,000 is a real number that will not allow me to spend on 
capital improvements, build new restaurants. And as a matter of 
fact, we opted not to open another restaurant this year because 
we knew that this was coming and we wanted to see how it was 
going to play out truly before we made a commitment that we 
didn't have the cash to do it.
    Mr. Pitts. Gentlemen, my time is up. Recognize the ranking 
member, 5 minutes for questioning.
    Mr. Pallone. Thank you, Mr. Chairman. I wanted to ask Dr. 
Blumberg, obviously our Republican opponents of the Affordable 
Care Act make these claims that the law kills jobs. They argue 
that requiring employers to offer health insurance and to 
improve employee benefits will increase the costs of labor. And 
I know this is simply not true. In fact, the ACA is helping to 
create millions of jobs. Since the President signed the bill 
into law, the U.S. Has added 6 million private sector jobs, 
this includes 750,000 jobs in the health care industry, which 
so many opponents of the law would be crushed--they say it is 
going to be crushed with job-killing regulations.
    The restaurant industry, which we hear from today, has 
added more than 800,000 jobs in that same time period. And 
independent fact checkers have examined the claim that the ACA 
kills jobs and call it false and a whopper and have rated it 
with three Pinocchios.
    So, Dr. Blumberg, can you explain whether the ACA is a job 
killer? And can you give us some perspective on the other 
factors that we should consider when looking at the law's 
impact on job growth?
    Ms. Blumberg. Sure. The empirical evidence is quite 
consistent that the Affordable Care Act is not a job killer. 
That what we have looked at over time repeatedly with doing 
comprehensive health care reform, all of the macroeconomic 
models indicate that when you invest additional funds in health 
care that some of--yes, some dollars are shifted from other 
products into the consumption of health care. But because 
health care is, by its nature, a locally-produced good, and 
when others are buying things that are coming from other 
countries, that what happens is that some of that money that 
shifted to health care from other sectors actually can create a 
positive impact on jobs locally as a consequence of how health 
care is, by its nature, purchased.
    So while health care reform is not expected to have 
enormous positive job impacts, it is expected to have small net 
positive impacts.
    And, in fact, when you look at the impacts on small 
employers, who are most disadvantaged by the health care system 
today, there is very significant positive implications for them 
in terms of cost reductions and assistance in their ability to 
be competitive in purchasing labor with larger firms. So all of 
this on net, in addition to the fact that the change in costs 
in total to employers is very small. As I noted earlier, 
relative to total compensation, we can't have big effects when 
the change in compensation is that tiny.
    Mr. Pallone. All right. Now, prior to the ACA, only half of 
the States had the legal authority to reject a proposed 
insurance premium increase that was deemed excessive or 
unwarranted. But the ACA provides States with 250 million in 
health insurance premium review grants over 5 years to help 
States improve their rate review process and hold insurers 
responsible.
    The ACA also establishes a new medical loss ratio 
requirement to require insurers to spend 80 to 85 percent of 
premium dollars on benefits. Consumers have already received 
over $1 billion in rebates from insurance companies that failed 
to meet this important new standard.
    Together, these provisions have already saved consumers 
over $2 billion, and the number of double-digit premium 
increases has fallen dramatically. In March 2012, CBO projected 
that premiums are estimated to be 8 percent lower by 2021 than 
originally estimated. And this is an especially important 
finding because of all the ACA does to make sure consumers 
have, you know, overall, more valuable quality insurance.
    So, Doctor, just talk a little about how policies like rate 
review and limiting excessive insurance company administrative 
costs benefit businesses and consumers.
    Ms. Blumberg. The medical loss ratio changes that you 
talked about moving to across the board minimums of 80 percent 
in a small group and the non-group markets in particular are 
very significant changes. The medical loss ratios in large 
group coverage were already reasonably high. So the law doesn't 
have nearly as much impact on them. But we have looked very 
carefully at medical loss ratios prior to the implementation in 
reform by State. And found that, first of all, there is 
dramatic variation across States, with some States having the 
vast majority of enrollment in the small group and non-group 
market in plans that have lower medical loss ratios than the 
law required. And so the impact on them is going to be very 
substantial in terms of lowering premiums.
    Those plans are--those carriers are going to have to 
restructure and are already in the process of restructuring 
their cost structure in order to be more efficient in terms of 
their administrative costs and the way that they market their 
plans. And, in addition, the exchanges will help with that in 
terms of doing more centralized marketing for coverage and 
lowering those costs.
    In addition, we have had a great deal of experience going 
to a number of States to talk to them about their experiences 
in implementing the Affordable Care Act so far. And one thing 
stands out on this topic that we--conversations we had with 
State regulators, insurance regulators across the country who 
noted to us that what was amazing was as soon as the medical 
loss ratio--or the medical loss ratios and the rate review 
rules came in, and the rate review rule indicates that there 
has to be clear evidence of a reason for increasing rates more 
than 10 percent; otherwise, they are prohibited. And what these 
regulators told us, as soon as the law went into effect, 
suddenly all the carriers were clustering, instead of having 
much higher increases that they were requesting, they were all 
requesting them at 9.9 percent.
    Mr. Pitts. Time has expired.
    Ms. Blumberg. And so this was evidence from the regulators' 
perspective that the law was already having a significant 
effect, even in the early years of implementation.
    Mr. Pallone. Thank you.
    Mr. Pitts. Chair thanks the gentleman. Now recognize the 
ranking member, Dr. Burgess, 5 minutes for questions.
    Mr. Burgess. Thank you, Mr. Chairman.
    Mr. Boucher, I am so glad you are here on this panel. I 
know it must be tough for you. I know that because every Friday 
night I go to my pizza restaurant, a Domino's on Southwest 
Parkway in Lewisville, Texas. And I get an earful from the 
owner who just, like you, doesn't understand how in the world 
they are going to comply with all of the things that are coming 
their way and coming pretty fast.
    Staff printed off for me the 21-page application that an 
employee will have to fill out in order to go into the 
exchange. I mean, it is no wonder that when you polled your 
employees about what they think about this, they take one look 
at something like this and say, ``I'm going fishing, I'm not 
going to think about it right now.''
    But let me ask you, you heard Dr. Blumberg's responses to 
some questions. Let me just ask you, do you think the 
Affordable Care Act is a job killer?
    Mr. Boucher. It absolutely can be.
    Mr. Burgess. It hasn't been in your case, hasn't it?
    Mr. Boucher. In this particular year, it was, because we 
didn't actively pursue opening a restaurant. We did open one in 
2011. However, that was before the elections. And, quite 
honestly, we waited to see what was going what was going to 
happen with the elections for this year. So in this case, we 
opted not to.
    Mr. Burgess. You are not alone in that election stuff.
    Does the Affordable Care Act reduce your insurance costs?
    Mr. Boucher. Well, as it stands right now, it is going to 
increase it because of the amount of people that are going to 
come on our plan. It is not going to reduce the existing plan, 
because every year our insurance rates have gone up. What is 
going to happen next year, I can only assume they are going to 
go up, based on historical data. But certainly from what I 
testified earlier that the projected amount, and this is a real 
number, we did surveys, individually, that 75 percent of our 
uninsured right now will come on. Our plan, it is going to 
increase. It is going to increase our health insurance costs. 
$200,000 is a big, big number for us to try and find a way how 
we are going to pay for that.
    Mr. Burgess. Let me ask you this. I mean, you are a 
representative of the Restaurant Association; is that correct?
    Mr. Boucher. Yes. I am on the board.
    Mr. Burgess. Do you have any experience dealing with cost 
and coverage for the State of Massachusetts after the 
implementation of their health reform?
    Mr. Boucher. No, I don't. I just--even though we are States 
right next door to each other, I just don't have enough 
information about what exactly their plan is.
    Mr. Burgess. Fair enough. We might work on trying to find 
that out.
    Ms. Furchtgott-Roth, let me ask you a question.
    You talked about the, really, I think what I would refer to 
as entry-level jobs, people who are just starting in the 
workforce.
    Ms. Furchtgott-Roth. Right.
    Mr. Burgess. They might find those jobs to be diminished as 
a result of the Affordable Care Act. Is that not correct? Did I 
infer correctly from your testimony?
    Ms. Furchtgott-Roth. They will find that. And they are 
already finding that. We hear that 6 million jobs have been 
created since the Affordable Health Care Act was passed. It is 
about 4 percent of total payroll jobs. Our unemployment rate is 
7.7 percent. Our labor force participation rate is at 63.5, 
which is the same as September 1981, the beginning of the 
decade, when millions of women moved into the market, before 
the Reagan revolution.
    Our employment is shrinking. In normal recovery, as 
economic growth expands, then employment also expands, labor 
force participation rate goes up. Our labor force participation 
rates have been going down and shrinking. Unemployment rates 
for teens are about 25 percent, unemployment rates for African-
American teens are 43 percent. Unemployment rates for low-
skilled workers are about 11 or 12 percent. These are the 
people who are hurt by putting a mandate on employers. The 
other people are, as Dr. Blumberg says, they take it out of 
their wage. Well, there's also effects to having less cash 
wages. If people are paying more for their health insurance, 
they have less cash wages to spend, and they can't go Mr. 
Boucher's restaurant.
    Mr. Burgess. Have you had a chance to look at this 
application for employees to apply for health insurance in the 
exchanges?
    Ms. Furchtgott-Roth. I have not. But even a 2- or 3-page 
application would be daunting to me; I can't imagine what a 20-
page application would be.
    Mr. Burgess. Correct. To someone who is just starting in 
the workforce who has had no experience with this type of thing 
in the past.
    I think someone brought up about constructive revisions to 
the Affordable Care Act. Do you have any thoughts on 
constructive revisions? I mean, in other words, we are sitting 
here now less than, what, 6 months away or 6 months away now 
from the implementation where people are supposed to be able to 
go online, live, and register for health insurance in the 
exchange, starting October 1st. Do you have a sense that this 
can all be accomplished in that time? Or should we be looking 
at something that would perhaps postpone by a little bit this 
exchange activity?
    Ms. Furchtgott-Roth. I think we should definitely postpone 
it. HHS is behind in issuing regulations in helping set up 
exchanges. I would say that there are a number of things you 
could do. First of all, allow any plan to be listed on the 
exchange. Right now, only a qualified benefit plan can be 
listed on the exchange. Those are very large, generous 
expensive plans, no copayments, all these different mandates 
like mental health coverage, drug abuse coverage, contraceptive 
coverage, et cetera. Why not allow catastrophic health plans to 
be listed for everybody? Right now, it is just for 30 and 
under. What if everybody could buy a catastrophic health plan? 
I mean, that would make health insurance much less expensive 
right then.
    Then also, the grandfathering provisions for employers. Mr. 
Pallone said that employers would continue to offer their 
coverage and that they continue offering coverage. Well, it is 
grandfathered only under certain circumstances. You make any 
little change in the plan, it is not grandfathered anymore. So 
why not extend grandfathering and just say employers can 
continue to offer whatever plans they want.
    And, third, I don't think that employers should have to pay 
for employees' health coverage, just as they don't have to pay 
for their food, they don't have to pay for their housing, they 
don't have to pay for their clothing. If we want to do this, 
let's have a more general tax on everyone so we don't 
disadvantage hiring.
    Mr. Burgess. Thank you, Mr. Chairman.
    Mr. Pitts. Chair thanks the gentleman. Now recognize the 
ranking member emeritus, Mr. Dingell, for 5 minutes for 
questions.
    Mr. Dingell. Thank you for your courtesy, and I commend you 
for the hearing. I hope this hearing will be successful in 
establishing ways to improve and see to it that the Obamacare 
legislation becomes an effective support for our society and 
for employment. I want to commend our panel for being with us 
today. And I want to observe that it is very important action 
for this Congress to recognize that the people have spoken, the 
Congress has voted, the decision of the Supreme Court, and the 
voice of the voters in the last campaign have all been heard in 
support of the legislation we discussed today. My questions are 
to Dr. Blumberg, and they will require only a yes-or-no answer.
    Doctor, the intent of the Affordable Care Act is improving 
the quality of health care delivered in our health care system 
as well as expanding the access to affordable health coverage 
for individuals and small businesses. This is done, in part, by 
offering subsidies for individuals to purchase health coverage 
and tax credits to small employers who opt to provide such 
coverage.
    In 2014 and 2015, small employers with 50 or fewer 
employers will be eligible for the tax credits, and after 2015, 
those with 100 or fewer employees will be eligible for the tax 
credit. Is this correct? Yes or no.
    Ms. Blumberg. Not quite.
    Mr. Dingell. Now, next question. The IRS has notified more 
than 4 million businesses that they will be eligible for this 
tax credit. Is that correct?
    Ms. Blumberg. I believe that is correct, yes.
    Mr. Dingell. Now, Doctor, would you agree that these tax 
credits make it more affordable for small business to offer 
health coverage to their employees? Yes or no?
    Ms. Blumberg. Yes.
    Mr. Dingell. Is that a consensus?
    Ms. Blumberg. It is.
    Mr. Dingell. Now, Doctor, some of this hearing today will 
be directed at proving that ACA will increase costs and result 
in lost coverage for employees. But you have found differently 
in your research. In your coverage simulation, which included 
penalties and tax credits in ACA, you found that employer-
sponsored coverage did increase, and the largest coverage 
increase occurred among employees from businesses with 100 or 
fewer employees. Is this correct?
    Ms. Blumberg. Yes, it is.
    Mr. Dingell. Doctor, with the increase in employer-
sponsored coverage, 2 percent, what was the cost in terms of 
wages to employers? Can you give me some comment on that? I 
believe the answer is that this is going to only constitute 
about .003 percent of total wages. Is that correct?
    Ms. Blumberg. It was .0003 percent.
    Mr. Dingell. Now, this seems to be a relatively small cost 
to an employer. Would you agree?
    Ms. Blumberg. Yes, I would.
    Mr. Dingell. Do you think that such relative small costs 
would have significant or negative impact on employment?
    Ms. Blumberg. No.
    Mr. Dingell. A pollster, I think, would find this to be 
within the margin of error. Is that right?
    Ms. Blumberg. Yes, it would.
    Mr. Dingell. And most scientific or credentialed research 
would also find this to be within the margin of error. Is that 
correct?
    Ms. Blumberg. I agree.
    Mr. Dingell. Now, if then millions of small businesses will 
be receiving tax credits to help them purchase affordable 
coverage and the cost of an increase in employer-sponsored 
coverage is relatively small, do you believe that small 
businesses will be financially better off under the Affordable 
Care Act? Yes or no?
    Ms. Blumberg. Yes.
    Mr. Dingell. They don't have a nod button; you have got to 
say yes or no.
    Ms. Blumberg. Yes.
    Mr. Dingell. Dr. Blumberg, I thank you for your assistance 
to the committee.
    Mr. Chairman, I just want to make this observation: The 
Congress has fallen to a place that I think all of us find to 
be very distressing. We are known for gridlock, for inaction, 
and for ineffectiveness. And the public generally has an 
attitude towards the Congress that is somewhere below bill 
collectors and just slightly above child molesters. I think 
that working together to resolve the questions that we have, to 
solve the budget concerns, to make Affordable Care Act is a 
laudable goal.
    I know my colleagues want to do it. I hope that this 
hearing will have as its purpose the idea that we are going to 
do that, and that we are going to work together on this 
committee to see to it that we don't just have carping and 
criticism but, in fact, that we do have steps taken by this 
committee that will make this a program which will be good for 
this country. We are the only nation in the world which doesn't 
have--the only major industrialized nation which doesn't have a 
program of this kind. So I look forward to working with you in 
a spirit of remarkable goodwill to accomplish that purpose. 
Thank you.
    Mr. Pitts. Chair thanks the gentleman and now recognizes 
the gentleman from Texas, Mr. Hall, 5 minutes for questions.
    Mr. Hall. Well, thank you, Mr. Chairman.
    Mr. Boucher, you told us of your growth and the steps you 
took to reach, I guess, the top or reach where you are, and I 
admire you for that, and understand your hesitation to gamble 
on an additional facility after the election. I think I know 
what you were saying there, and I agree with you on that.
    And the chair covered some of the complexity of the Act on 
your business now, but I want to ask you about your business as 
you started it and go back in the restaurant business and lay 
out some strategic goals for the success and growth that you 
had then. How do you think this obstacle would have affected 
your business when you were getting started as opposed to now 
that you are well established, or now that we are in what the 
chair called a sluggish economy?
    Mr. Boucher. I mean, we likely would not be where we are 
today. Being where I have been in this position as the CEO 
since 2004, it has become more and more and more difficult to 
operate business because of legislation such as this that it is 
creating hardship that we hadn't seen in the past. And I know 
for a fact that we would not have opened the number of 
restaurants that we have opened had this been in place say, you 
know, 6 years ago.
    Mr. Hall. And do you think that the law's definition of 
full-time employee comports with how most businesses operate 
today?
    Mr. Boucher. Well, no, and----
    Mr. Hall. Prior to the Health Care Act was, I think, 30 
hours was the typical cutoff point for the part-time employees 
versus full-time employees.
    Mr. Boucher. I think it is--the definition of full-time is 
not really clear because the definition of full-time, when you 
calculate overtime, is 40 hours a week. So the definition of 30 
hours a week really doesn't make a lot of sense when you 
compare to that type of thought process.
    Different restaurants will categorize it differently, and I 
think, you know, I am an exception where I categorize it, but 
just like the restaurant industry, it is a very diverse 
industry and business owners in this industry will categorize 
it differently.
    Mr. Hall. Ms. Furchtgott-Roth and Dr. Blumberg, do you have 
a different opinion of the answers that Mr. Boucher gave us or 
any comment you want to make on it? I have about 2 minutes 
left.
    Ms. Furchtgott-Roth. I think it is important to look at the 
difference between the cost of health care as an average cost 
of the average wage, as a fraction of the average wage which is 
very well a small fraction of the average wage, and the cost of 
a health policy to an employer as a percent of a particular 
wage. So the fraction of a percent is a fraction of a percent 
overall, but it is 9 to 11 percent of the wage in low-cost 
occupations such as retail and food.
    And so whereas to an average employee it might not make so 
much difference, it is very important to low-skilled workers, 
it is very important that they be able to get their foot on the 
first wrung of the career ladder. Health insurance policies are 
going to be very expensive. In March 2012, CBO estimated that 
for a family of four, a health insurance policy was going to 
cost $20,000 a year in 2016.
    Ms. Blumberg. I do have a different perspective. The 
situation that we need to keep in mind is comparing to where we 
are today, and one of the things that has been clear to large 
employers for a long time is that health care costs of employ-
--of their employees have absorbed the costs associated with 
covering dependents who were employed by medium-sized and 
smaller firms for many years.
    And so what we are--the situation here when the 
requirements, the employer requirements become more consistent 
across employer sizes over 50 is that it basically levels the 
playing field across employers.
    The other thing to keep in mind is that there are 
demonstrated savings from our analysis for small employers, and 
there are about twice as many workers in the labor force work 
for small employers than do for the medium-sized firms, and so 
there are some distributional issues that occur when playing 
fields are leveled and individuals and firms that have been 
disadvantaged in the past are put on more equal footing with 
their other counterparts, but overall it should have positive 
implications for the----
    Mr. Hall. And I thank you. And I yield back.
    Mr. Pitts. The chair thanks the gentleman. The chair now 
recognizes the gentleman from North Carolina, Mr. Butterfield 5 
minutes for questions.
    Mr. Butterfield. Thank you very much, Mr. Chairman, and 
thank the witnesses for their testimony today.
    You know, Mr. Chairman, when I received the notice of this 
subcommittee hearing a few days ago, I saw that the title of 
the hearing was ``Obamacare's Impact on Jobs,'' and quite 
frankly, I thought we were going to be talking about a positive 
impact on jobs because the evidence seems to me to be 
indisputable. There have been 6 million private sector jobs 
added since the signing of the Affordable Care Act. 750,000 of 
those jobs have been right in the health care sector, and 
800,000 of those jobs have been in the restaurant industry, and 
so, quite frankly, I thought we were going to be talking about 
the positive impact on jobs.
    I am just having difficulty, Mr. Chairman, understanding 
how one can, with a straight face, suggest that the Affordable 
Care Act is in fact killing jobs. That is absolutely not the 
case. It just seems to me that having a healthy and happy 
workforce must be a net positive for businesses, and so I want 
to continue this conversation and learn more, but I don't see 
how the Affordable Care Act is killing jobs. In my estimation, 
we are creating jobs.
    Let me direct my attention to Ms. Roth. Thank you for your 
testimony. A few minutes ago, Dr. Blumberg, when she began her 
testimony, she--and I wrote it down, she said that her words 
should not be attributed to the Urban Institute. Is that what 
you said, Dr. Blumberg? Those were your individual words?
    Ms. Blumberg. Yes.
    Mr. Butterfield. So let me ask you, Ms. Roth, should your 
words be attributed to the Urban Institute or are these your 
words?
    Ms. Furchtgott-Roth. I work for the Manhattan Institute.
    Mr. Butterfield. I am sorry, the Manhattan Institute.
    Ms. Furchtgott-Roth. And these are my words.
    Mr. Butterfield. So we should not attribute these words at 
all to the Manhattan Institute?
    Ms. Furchtgott-Roth. Right. All the individual scholars 
speak on their own behalf. The Manhattan Institute has not even 
seen my testimony.
    Mr. Butterfield. But you are on the payroll of the 
Manhattan Institute?
    Ms. Furchtgott-Roth. That is correct.
    Mr. Butterfield. All right. I am interested to know where 
the funding for the Manhattan Institute comes from. Can you 
tell us the source of your funding?
    Ms. Furchtgott-Roth. I have no idea of the source of my 
funding.
    Mr. Butterfield. You don't know how the Manhattan Institute 
is funded?
    Ms. Furchtgott-Roth. No. I mean, I don't have to go out and 
get grants. They pay me a salary. I don't have anything to do 
with funding.
    Mr. Butterfield. What is the budget of the Manhattan 
Institute; do you know that?
    Ms. Furchtgott-Roth. I do not have that number, but I can 
get that for you. I am sorry.
    Mr. Butterfield. All right. Do you know if by any chance 
any political organizations or any political operatives 
contribute to the Manhattan Institute?
    Ms. Furchtgott-Roth. I don't know the answer to that 
question.
    Mr. Butterfield. All right. Let me now direct the next 
question to Dr. Boucher. Thank you so much for your testimony. 
I am a little confused, Mr. Boucher. You mention in one part of 
your testimony that this could really increase your company 
expenses by 5- to $700,000 if you were to add hourly employees?
    Mr. Boucher. No, it would increase it from 500- to 700,000.
    Mr. Butterfield. Oh, so, I was going to try to ask about 
the 200,000. I see what you are saying.
    Mr. Boucher. Right.
    Mr. Butterfield. So it will increase from 500,000 to 
700,000.
    Mr. Boucher. Right.
    Mr. Butterfield. Now, this is not the Restaurant 
Association. This is your company?
    Mr. Boucher. That is right.
    Mr. Butterfield. And your company, I believe, is the Great 
New Hampshire Restaurants, Incorporated.
    Mr. Boucher. Right.
    Mr. Butterfield. What percentage? I heard the .0003 figure 
a moment ago. What percentage of your gross sales would that 
represent?
    Mr. Boucher. I believe it was on not gross sales.
    Mr. Butterfield. But if you had to spend an extra $200,000 
to provide coverage to your hourly employees, you are saying 
that would----
    Mr. Boucher. I would have to do the calculation in my head.
    Mr. Butterfield. But it would be less than one-tenth of 1 
percent, I suppose.
    Mr. Boucher. No.
    Mr. Butterfield. Yes. Give me--what are your gross sales?
    Mr. Boucher. We are doing somewhere around 28 million, so 
if you do the math.
    Mr. Butterfield. And of course that is gross sales. I mean, 
you have a lot of overhead, and so we figure maybe a 15 percent 
bottom line, and so----
    Mr. Boucher. How much?
    Mr. Butterfield. Maybe a 15 percent bottom line?
    Mr. Boucher. No.
    Mr. Butterfield. It is not that much. You wish. You wish it 
was.
    Mr. Boucher. You are not even close, sir.
    Mr. Butterfield. All right. But notwithstanding, a $200,000 
increase in contribution to help your employees would not be a 
significant amount of money in comparison to your overall 
operation?
    Mr. Boucher. Sir, our bottom line is 9 percent.
    Mr. Butterfield. All right.
    Mr. Boucher. Then we still have to pay taxes, then we still 
have to do our capital improvements, which is depreciation, and 
then we have to pay our business loans. At the end of that, I 
am left with about 4 cents of every dollar that I take in. So 
that 200,000 represents another penny off that 4 cents. Now, 
that is significant.
    Mr. Butterfield. You have hourly employees and then you 
have the higher executive employees within the company. Do you 
now provide insurance to any of your hourly employees?
    Mr. Boucher. Yes.
    Mr. Butterfield. All right. But not all of them?
    Mr. Boucher. We offer it to every single hourly employee, 
and as I testified, about 45 percent--55 percent choose not to 
take the coverage.
    Mr. Butterfield. So that would be 30 hours or more?
    Mr. Boucher. Correct.
    Mr. Butterfield. All right. Mr. Chairman, I am out of time. 
Thank you. I yield back.
    Mr. Pitts. The chair thanks the gentleman and now 
recognizes the gentleman from Illinois, Mr. Shimkus, 5 minutes 
for questions.
    Mr. Shimkus. Thank you, Mr. Chairman. I think my colleague, 
who just spoke, it brings to the point, and we had it in my 
subcommittee, when we invite people to testify, we shouldn't 
impugn their comments based upon who they are employed by. And 
I only say this because this was raised in my subcommittee. We 
want to thank you all for being here and appreciate your 
testimony.
    Having said that, the--you are from the Manhattan 
Institute, and Dr. Blumberg, you work for the Urban Institute, 
so you are not employers. You get a check. You sign the back of 
the check, correct?
    Ms. Furchtgott-Roth. Right.
    Mr. Shimkus. You get a check for your work?
    Ms. Blumberg. Correct.
    Mr. Shimkus. So there is only one employer here on our 
panel, and that is you, Mr. Boucher; is that correct?
    Mr. Boucher. Yes.
    Mr. Shimkus. So you sign the front of the check.
    Mr. Boucher. That is correct.
    Mr. Shimkus. So you are the expert on how rules, 
regulations, and taxes affect your business and the people you 
would like to hire, and the people you hire are the people you 
would like to keep under employ, and is that correct?
    Mr. Boucher. Yes.
    Mr. Shimkus. So you are the expert.
    Mr. Boucher. I am the expert in my business for sure.
    Mr. Shimkus. Thank you. And I guess the other thing that 
kind of rankled me was this debate about gross and net. That is 
a big difference, and in this Bill the medical device tax is a 
tax on gross, not counting the net, not taking out the expenses 
of producing a good. It is a gross tax across the board; is 
that correct?
    Ms. Furchtgott-Roth. Yes, that is correct. That is a 
definition of----
    Mr. Shimkus. And that is why it is so damaging for our 
jobs?
    Ms. Furchtgott-Roth. Right.
    Mr. Shimkus. Is that correct?
    Ms. Furchtgott-Roth. That is right, yes.
    Mr. Shimkus. No one else has a tax in this sector in the 
world on gross.
    Ms. Furchtgott-Roth. No other country has singled out the 
medical device industry for a special tax, correct.
    Mr. Shimkus. And Dr. Blumberg, don't you think a gross tax 
on a good that only this country has that other countries may 
produce might be a disincentive in the competitive market?
    Ms. Blumberg. I would say that there is already a 
disconnect in the medical industries in terms of what is being 
charged and----
    Mr. Shimkus. Let's stay on the point on the gross versus 
the net tax. Does that not raise the cost of a good?
    Ms. Blumberg. Well, the costs are already higher in the 
U.S. plus the firms charge us more than----
    Mr. Shimkus. Will the gross calculation raise the cost of a 
good versus a competitor, everything else being equal?
    Ms. Blumberg. True.
    Mr. Shimkus. Of course. Of course it would.
    So, Doctor--Ms. Furchtgott-Roth, you mentioned job possible 
losses in the medical device industry, did you not?
    Ms. Furchtgott-Roth. Yes.
    Mr. Shimkus. In your testimony. And they are and they could 
and they already are going to be large; is that correct?
    Ms. Furchtgott-Roth. Right.
    Mr. Shimkus. So that is why part of this hearing is 
important, and if we want to fix parts of the bill, the medical 
device tax would be one way that we could fix it to create 
jobs.
    Ms. Furchtgott-Roth. I would definitely recommend repealing 
that tax, yes, absolutely.
    Mr. Shimkus. Thank you.
    Ms. Furchtgott-Roth. And I also question the fact that you-
all seem to think that the labor market is healthy and 6 
million jobs are being created. Well, the unemployment rate is 
still 7.7 percent, including discouraged workers, it is 14.3 
percent. The youth unemployment rate is 13 percent, and these 
are people who have student loans and they can't get jobs. The 
teen unemployment rate is 25 percent. This is not a healthy 
labor market.
    Mr. Shimkus. Yes. I mean that brings----
    Ms. Furchtgott-Roth. And saying that 6 million jobs are 
being created as though that proves that our labor market is 
healthy, well, we might have created many, many more without 
the Affordable Care Act and our employment rate might be lower.
    Mr. Shimkus. And that is part of the debate about even 
youth employment, entry-level jobs, where can they get part-
time employment to bus tables, or we even have a debate about 
raising the minimum wage. Isn't that a disincentive, Mr. 
Boucher, on hiring high school kids?
    Mr. Boucher. What particularly?
    Mr. Shimkus. Either/or? You could talk about increasing the 
minimum wage. You could talk about these rules and regulations, 
these forms in respect to job creation.
    Mr. Boucher. Any regulation that mandates that I operate my 
business in a particular manner without me having the choice to 
do what I think is best for my business is damaging because I 
am not going to be able to give wage increases to, say, cooks 
because I have to give it somewhere else, and that is because 
of a mandate, so----
    Mr. Shimkus. And I will end on this. My time is up, and I 
do think that there is--as we raise the cost of employment 
through health care coverage, there is a result, and I think, 
Dr. Blumberg, in your opening statement, you said there could 
be a reduction or a slower increase in that wage for that 
individual consumer. So there are effects, and we just need to 
have this debate and I appreciate you all being here. Yield 
back my time.
    Mr. Pitts. Thank you, gentlemen. And I now recognize the 
gentleman from Texas, Mr. Green, 5 minutes for questions.
    Mr. Green. Thank you, Mr. Chairman. One of the key design 
features of the Affordable Care Act is the way it builds on our 
existing health insurance system to fill in gaps and make 
improvements rather than making more radical and disruptive 
change. This is especially true in the employer-based insurance 
market. Both prior to and after the Affordable Care Act, the 
majority of the Americans receive health care through their 
employers, but we also know in the last three decades, the 
percentage of employers covering their employees for lots of 
reasons has gone down.
    And so, but the Affordable Care Act builds on it. People 
are going to be protected from the worst insurance abuses. They 
will have access to quality insurance through a fair, 
individual marketplace and if they change jobs or do not want 
their employer coverage, but the overall employer-based system 
is still going to be strong. There have been a host of scare 
tactics used suggesting employers will fire thousands of 
workers or drop coverage en masse in response to health reform. 
And I know particularly the restaurant industry, minimum wage 
is a big issue, and over the years, so--and I know every time 
we increase minimum wage, there is concern about losing 
employees or that you can't afford it, similar with health 
care.
    Two of the most heavily cited examples are the Westgate 
Resorts and Darden Restaurant Group which completely reversed 
their course. Darden employed thousands of people across the 
country, and it indicated they were planning to limit employee 
hours to avoid providing health coverage, but Darden reversed 
course and said it would not limit the hours or drop coverage 
following an outcry from both its employees an its customers.
    The same with Westgate Resorts. The CEO warned its 
employees of mass layoff if President Obama won re-election. 
Instead he gave them a 5 percent pay increase.
    I have talked with restaurant owners in my area in Houston, 
and one of them is a long-time friend, actually a Republican, 
told me he costed it out and he owns a number of restaurant 
locations, so he is pretty large, and he said it is not what he 
was concerned about. In fact, he said it is going to give him 
some options to offer to his employees.
    In fact, Mr. Chairman, let me say that we have heard a lot 
today from supposed burdens of health reform on businesses and 
I want to talk for a moment about the benefits and new 
opportunities that health care provides small business.
    Mike Brey is the owner of a Hobby Works, a hobby and toy 
store he owned for more than 20 years. Mike has always offered 
health insurance to employees because it is a great way to 
attract and retain good employees, but before the Affordable 
Care Act, Mike's health premiums had tripled, and my experience 
in the private sector, small business, 13 employees, every year 
we had to negotiate out our rates because we would sign a 3-
year contract, and they would raise our rates after the first 
year and second year thinking we wouldn't go out, but we 
negotiated every year.
    Before the Affordable Care Act, his premiums tripled. He 
began to see his employees putting off necessary preventative 
care for themselves and children. In 2014, when Mike and his 
employees will have more choice of their quality health 
insurance and competition and cost containment and health 
reform will begin to drive down cost. Mike says because of the 
ACA, he finally has hope, and I quote, Spiraling escalating 
cost and depreciating the quality of coverage might end.
    And I would like to submit, Mr. Chairman, ask unanimous 
consent to submit Mr. Brey's full statement for the record from 
the small business majority.
    Mr. Pitts. Without objection, so ordered.
    [The prepared statement of Mr. Brey follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Green. Dr. Blumberg, you have gone in depth of 
empirical research on employer, health insurance and labor 
market. Do you think that threats or frightening projections 
are justified, or do you think most employers around the 
country should continue to offer coverage and support to their 
workforce just as Darden, Westgate and Mr. Brey did at Hobby 
Works?
    Ms. Blumberg. We do not expect there to be a significant 
change in the rate of offer, although we expect to see an 
increase among small employers in offering as a consequence of 
the exchanges. And the truth is, is that there is a great deal 
of misinformation out there, and when you talk to employers, 
give them the facts about the Affordable Care Act, they are 
often relieved relative to what they have heard, but 
ultimately, employers, as we have seen in many different 
circumstances, ultimately have to respond to market forces 
trying to attract labor and stay competitive with others who 
are hiring, and that is really what drives their decisions, not 
the fear and the anxiety that comes before something is 
actually in place.
    Mr. Green. I have one of the highest districts in the 
country of people who work that don't get insurance through 
their employers. Before the Act, employers are dropping 
coverage, and again, I have an example of that. But after the 
Act, if employers make that decision to drop coverage, won't 
workers have better options in the individual market than they 
had before the reform?
    Ms. Blumberg. That is absolutely true. The nongroup market 
is highly dysfunctional in virtually every State, except one in 
the country, and the improvements in the nongroup--operation of 
a nongroup market for consumers will be a big boom for those 
without offers.
    Mr. Green. Well, even in Texas, even though our State won't 
have a State exchange, the law requires HHS to set up an 
exchange. For those employers who decide to drop it, their 
employees will have that option, whereas, before the Affordable 
Care Act, they didn't have anything.
    Ms. Blumberg. That is correct.
    Mr. Green. Thank you.
    Mr. Pitts. The chair thanks the gentleman. Now recognizes 
the gentleman from Louisiana, Dr. Cassidy, 5 minutes for 
questions.
    Mr. Cassidy. Thank you.
    Dr. Blumberg, I got to tell you, when I speak to small 
employers, I mean, it is just so interesting because you walk 
in, they are not making a big deal about it, they just say we 
are going to stay at 49 employees. And they don't make a big 
deal about it, and you just say, well, why, and then they, oh, 
now that you ask, it is so because once we get to 50, we are 
hit with a penalty.
    If you will, if we have 49 employees and whatever we do for 
insurance we do, but once we go to 50, we have to pay $40,000 
in penalties for that 50th employee so that person's worth has 
to be their salary plus $40,000. And I am struck that you don't 
think this will have a negative impact upon small businesses 
hiring.
    Ms. Blumberg. Well, I will explain why. Number 1, it 
shouldn't be a $40,000 penalty because they pay on--the only 
time an employer pays a penalty at all is if at least one of 
their workers goes into the nongroup exchange and qualifies for 
a subsidy because of not having affordable coverage. So it is 
not automatic that----
    Mr. Cassidy. But at that point, if they do, then they get 
credit for 30 employees and it is the 20 that are left that 
they are 2K per person penalty, correct?
    Ms. Blumberg. That is correct, if that is the way that----
    Mr. Cassidy. But that wouldn't inhibit somebody from going 
to 49, because they tell me it does. So, are their irrational 
or----
    Ms. Blumberg. I am happy to respond. I think that you are 
correct that if an employer is looking to move from 49 to only 
50 employees in the long term, that they are unlikely to make 
the decision to add that next worker unless the value that that 
worker brings to the firm is going to compensate for any 
additional cost.
    Mr. Cassidy. So that will be their salary plus 40K?
    Ms. Blumberg. Let me finish, please. However, that is not 
the way that employers generally make decisions about hiring. 
When they are growing, they are growing because they see a 
long-term expansion in profit that would swamp the----
    Mr. Cassidy. I know you are saying that, but can I go on 
because we have a limited time, and I tell you the employers I 
talk to, they are actually factoring it in.
    Secondly, I am struck, when I speak to employers, they are 
decreasing the number of employees who are full-time down to 
part-time, and I am struck that Mr. Butterfield says we created 
more jobs. According to the Bureau of Labor Statistics, we 
created a lot of part-time jobs, but we actually have 200,000 
fewer full-time. There is, I think, 212,000 fewer full-time 
jobs in the last statistics, and there is 372,000 more part-
time jobs, which to me is consistent with what I am reading and 
hearing that people are converting full-time employees to 30 
hours or less.
    Now, I grant you we have more employment, but it is more 
employment with fewer benefits. How would you respond to that?
    Ms. Blumberg. Well, in any recovery, there is going to be 
an expansion of part-time jobs, and I haven't seen the 
specifics on how many of these jobs are full-time versus part-
time, but you would expect there to be an increase in both 
part-time and full-time.
    Mr. Cassidy. But there is actually a decrease in full-time. 
There is decrease by 212,000 in full-time jobs in the last 
Bureau of Labor Statis---Labor whatever.
    Ms. Blumberg. From the prior period?
    Mr. Cassidy. From the prior period.
    Ms. Blumberg. First of all, the full reforms that would--if 
anything was going to have an impact on part-time status, those 
reforms are not in place at the present time. And the 
complexity of the economy and the dynamics that have been going 
on with regard to the recession and the recovery from the 
recession are so large and complex compared to the costs 
associated with the Affordable Care Act that it would be 
impossible to attribute those changes----
    Mr. Cassidy. So even though Mr. Green gave some high 
profile cases of people converting to part-time, they are 
embarrassed, whatever, intimidated not to do so, but we know 
that is the tip of the iceberg and far more have actually gone 
ahead and done so. We are not going to attribute it to what we 
are being told is the attribution, but rather, we are to assume 
that the answers are too complex for us to understand?
    Ms. Blumberg. No. I am saying that complexity of what has 
been going on with the economy because of the issues related to 
the financial services district and decisions that were made 
there with regard to deregulation and other concerns are much 
more overriding in terms of what has been going on in the 
economy than the terms of the Affordable Care Act.
    Mr. Cassidy. The Federal Reserve recently had a report from 
all their districts, employers in several districts citing the 
unknown effects of the Affordable Care Act is reasons for 
planned layoffs and reluctance to hire more staff. There, they 
seem to put a point on it.
    Ms. Blumberg. I think that those were very isolated reports 
on anecdotal evidence and we don't see any implications of the 
Affordable Care Act for significant changes in employment over 
time. So, anecdotal evidence can be frightening, and I 
appreciate that, but they also----
    Mr. Cassidy. This is Federal Reserve. They are not Drudge 
Reports----
    Ms. Blumberg [continuing]. Market prices.
    Mr. Cassidy [continuing]. They are Federal Reserve, so 
presumably, they would vet a little bit and try and put it in 
context.
    Ms. Blumberg. At this point I looked at that report. There 
was no data behind that. I do believe that they were 
conversations with particular employers, and I do understand 
that there is misinformation and anxiety that is being provoked 
in employers at this point prior to implementation of the full 
reforms.
    But as I noted earlier, employers are interested in making 
profit, they are interested in pursuing labor and hiring the 
right types of workers. In order to get the kinds of workers 
they want, they have got to compete with other employers and so 
they have to provide them with the benefits and compensation--
--
    Mr. Cassidy. So just because we are out of time, we have to 
yield back. I will point out that also there is a CBO report 
that shows those who are most vulnerable are low-wage workers. 
Their elasticity of employment is the greatest. I grant you the 
CEO or the solar engineer is going to have a job. It is going 
to be the low wage earner who is going to be most vulnerable, 
and that is per CBO, but I yield back. I am out of time.
    Mr. Pitts. The chair thanks the gentleman. And now 
recognize the gentlelady from the Virgin Islands, Dr. 
Christensen 5 minutes for questions.
    Mrs. Christensen. Thank you, Mr. Chairman.
    Ms. Roth, your testimony--you make a number of assertions 
that really seem to run counterto the facts supported by 
independent sources like the Bureau of Labor Statistics as well 
as CBO about the impact of the ACA job creation.
    For example, the restaurant industry which you claim and 
Mr. Boucher suggests would likely drop coverage and downsize 
their employees as a result of health care reform, of the law, 
actually has added more than 800,000 jobs since the passage of 
the Affordable Care Act. And as we heard from Dr. Blumberg, you 
would expect some to be part-time, some to be full-time, but 
800,000 new jobs.
    But my question relates to one particular threat posed by--
that you pose to health care reform in your testimony that I 
found particularly interesting. You wrote that because of 
health care reform, businesses have an incentive to become more 
automated or machinery intensive, and your examples are the 
fast food restaurants might serve precooked rather than freshly 
cooked food or that DVD rental stores might close in favor of 
automated DVD rental machines, or the convenience stores might 
start allowing for self-checkout. These dangers that you cite 
as a part of Obamacare are particularly interesting because 
they have really been occurring for a very long time.
    Automation and increasing use of technology are enormous 
seismic shift in our global economy. Is it really your 
contention that these trends would not be occurring if health 
care reform were repealed?
    Ms. Furchtgott-Roth. Well, thanks for that excellent 
question. My contention is that more employers will choose to 
substitute capital for labor as labor becomes more expensive, 
and of course, our economy has been continually getting more 
mechanized. What I was saying is that these trends would be 
faster.
    Also, with the 800,000 jobs added to the fast food and 
restaurant industry, there might be even more of them added 
without the Health Care Act. But I think more importantly, the 
incentives to choose part-time workers over full-time workers 
will mean that actually there will be more employees in the 
restaurant and retail and other low wage sectors, because 
employers will have an incentive to keep them to fewer than 30 
hours a week because if it is fewer than 30, they won't have to 
pay a penalty, so it makes sense for companies to share.
    Mrs. Christensen. Yes. But my question is really about 
tying it to the increasing use of technology, which is 
happening at a really fast speed, not only here, but across the 
country, and so, you know, there are a lot of wild predictions 
of the impacts of health care reform, but I think examples that 
were used in your testimony are really beyond explanation.
    We have a global economy in which every other advanced 
country has some form of universal health care, and they are 
experiencing the same dramatic technological advances that are 
happening every day, and to blame Obamacare because Netflix is 
popular and Blockbusters closing just defies belief.
    As other people have pointed out, some of the assertions 
that are made about job losses from Obamacare are really over 
the top, but I wanted to use the rest of my time for Dr. 
Blumberg, if I might. Marcellus Owens----
    Ms. Furchtgott-Roth. Am I allowed to respond?
    Mrs. Christensen. No, I need to use my time.
    He was 11 years old when he stood next to President Obama 
when he signed the Affordable Care Act into law, and his 
mother's poor health has cost her a job, her health insurance. 
She is a person with a pre-existing condition and she 
eventually died, and that is an example of what happens every 
day in our country, especially to minorities and people living 
in rural communities, and it not only costs lives, maybe as 
many as 100,000 are what is reported and it costs the country 
an excess of over $80 billion a year by some reports.
    So, it is an example of just why health care reform is so 
important. Uncompensated care costs to providers such as 
hospitals and community health centers will flourish if the 
numbers of uninsured rise, and more people will use emergency 
rooms, they will become more overcrowded, hospitals will be 
bearing more of unpaid care.
    Could you please just elaborate for us, Dr. Blumberg, on 
how detrimental uninsurance is for individual families and for 
our country overall?
    Ms. Blumberg. Sure. The uninsured--or the research evidence 
is very clear on this, that the uninsured receive less medical 
care and they receive less timely care and they have worse 
health outcomes, and in fact, the risk of death with a given 
medical condition controlling for health status appears to be 
about 25 percent higher for the uninsured than for those who 
are insured.
    We have seen, from the experience with comprehensive health 
care reform similar to that of the Affordable Care Act in 
Massachusetts, that since its implementation, individuals have 
had greater access to care, they have had lower rates of not 
being able to afford care, and that that has stayed 
consistently increasing even throughout the recession period.
    In addition, the lack of insurance, as you know, provides a 
very substantial financial burden on many families, and this 
also decreases their use of care and causes many bankruptcies.
    Mrs. Christensen. Thank you. Thank you, Mr. Chairman.
    Mr. Pitts. Thank you. And the chair recognizes the 
gentleman from Kentucky, Mr. Guthrie, for 5 minutes for 
questions at this time.
    Mr. Guthrie. Thank you, Mr. Chairman.
    Ms. Furchtgott-Roth, you were going to respond to Dr. 
Christensen. I was interested in what you had to say. If you 
would just take a couple of seconds or half a minute what you 
were going to respond back, I would like to.
    Ms. Furchtgott-Roth. OK. Well, thank you very much.
    Well, as the cost of labor gets higher and we had the 
minimum wage start to go up from $5.15 an hour in 2007 and 
gradually rise, as the cost of labor steadily gets more 
expensive, employers have an incentive to substitute machines 
for labor. This MIT professor called Alberto Alesina who has 
written in great detail about that, I would be happy to provide 
any of you with any of the papers, show--he compared Europe and 
the United States, showing how high cost of labor in Europe 
resulted in more capital intensity there in the production.
    Mr. Guthrie. Thank you.
    And Mr. Boucher, somebody said earlier that you couldn't 
say with a straight face that jobs had been either on hold or 
some way because of the President's health care bill, but you--
I think your face was straight, and I am not sure if I know 
what a straight face is or not, when I looked, but I looked. 
But you did make a decision not to open a restaurant because of 
the uncertainty affiliated with the health care; is that true?
    Mr. Boucher. That is correct, and the key word being 
``uncertainty.'' That was--and it still exists right now with 
regard to a fair amount of the rules that are not real clear 
right now. There is still a slot of uncertainty.
    Mr. Guthrie. And that is what you hear. I mean, I hear that 
quite a bit. I know it is anecdotal, and I appreciate research 
and appreciate that, but on Friday, we were in our districts 
and I was working at a call to go see a gentleman who just went 
to a business owner, that just had gone to a seminar. He had 
got his group together with their insurance agents and the 
anxiety was not settled with him, and he was really concerned 
about decisions he was going to make in his business, the part-
time work and so forth. Those are the real issues.
    I know we are talking about 6 million new jobs in the labor 
force, and we are grateful to have 6 million new jobs, but you 
look at labor force participation, you look at the underlying 
part of it, and even last month, when the new jobs--I think it 
was 170,000 new jobs or something, but they say, we need to 
make 250,000 to keep up, so I don't think any--even though we 
are glad we are not going the other direction like we were, I 
don't think anybody is saying that we have a robust economy 
moving forward, and I don't think you can just point out one 
thing, and say it is this health care bill, and I think it is a 
conglomeration of a lot of things that are going on to create 
uncertainty. But I certainly think, and I do know and it is 
anecdotal, but it is everybody I see that is in business are 
just concerned about--even people who offer good plans of what 
is going to be an essential benefits plan, what are the rules 
going to be and how they are going to have to treat those, and 
so it is a real concern that businesses have, and this just 
isn't a us get together and try to point out different things.
    This is what we hear when we go home. You hear concerns 
about we are not even thinking about--I mean, I walked, 
somebody says, well, if the rebate comes back from the health 
insurance company to my employee because of the medical loss 
ratio, do I get that? Does it come to me? Does it come to the 
employee? I paid 80 percent of the premium. Do I get that back? 
Well, we got to sort that out.
    Then the question, next question was, well, is it going to 
be chargeable to this year's wages or next year wages, do I 
have to go do another W-2? So there are just all these things 
that are out there that really that maybe in the future will 
be, obviously, will be settled and people will get--if it is 
the law of the land, then we will figure out how to make it 
work, but you can't say it is not affecting people's business 
decisions today, I don't think. And I can say that with a 
straight face.
    Mr. Boucher. And if I may, you know, I am considered 
someone who is knowledgeable on this topic, and I still don't 
know nearly what I need to know, and I have fellow 
restaurateurs calling me asking me, so, what are you going to 
do? And my answer to them is I am not sure yet, and they are 
relying on me to help them kind of walk through this, and 
truly, I am not exactly sure what we are going to do yet.
    Mr. Guthrie. Because the other concern being in the 
restaurant business, you have three restaurants and each 
restaurant has 20 employees. Then you got to decide, do I keep 
the third restaurant? Or if you have two restaurant, do you 
open a third? If you have three, do you close one. I mean, 
those are real concerns out there, and it is not, as some 
people have said that we are sitting here just trying to do 
political points.
    My family is in business, we offer health insurance and 
pretty good health insurance actually, and we are in that 
midsize employer category, and I guess, Dr. Blumberg, you 
talked about the change in compensation would be tiny. I think 
I wrote that in a quote. Doesn't it really depend on the level 
of skill of your employee? The people were trying to--there is 
a book called ``Chutes and Ladders,'' it was interesting about 
getting people into--it was a fast food restaurant study, the 
ones who showed up for work, came to work every day, they 
studied him over a course of time, and they are all managers. I 
think that is how you said you started, managers in 
restaurants.
    And so the question is, if you are low skilled, and those 
are the people I work with and deal with, how do you get them 
into the workforce if you make them too expensive to bring to 
the workforce? Do you think that will have an effect?
    Ms. Blumberg. I do take that into account. One of things 
that is important to remember is that for very low wage 
workers, the Medicaid expansion provides very comprehensive no-
cost coverage to those individuals for the states that are 
choosing to participate, and those individuals, those workers, 
when they participate in Medicaid, they incur no penalties on 
the employers as a consequence.
    In addition, while the midsize employers are obviously a 
concern, we know that most of--there is about twice as many 
workers in the small employer group than in the midsized 
employer group, and they are significantly more likely to have 
lower wage, those workers, and as a consequence of the small 
employers being consistently low, they will continue to be less 
likely to offer them their larger counterparts for a number of 
reasons. But the nongroup market and its financial assistance 
for the modest income who are above Medicaid eligibility is 
going to be a huge boon for low-income workers and small firms 
as a consequence of reform.
    Mr. Guthrie. Thank you. Yield back.
    Mr. Pitts. Gentleman 's time has expired. Chair recognizes 
the gentleman from Maryland, Mr. Sarbanes, for 5 minutes for 
questions.
    Mr. Sarbanes. Thank you, Mr. Chairman.
    Before I turn to the panel, I just wanted to caution. I had 
heard this discussion a moment ago about repealing the medical 
device tax, and I do want to point out that Congressman Ryan's 
budget plan includes the revenue from that tax in his proposal, 
so it is a little bit like that game ``Pick-up Sticks'' where 
you throw them down, they are all tangled and you start pulling 
sticks out of the thing, the whole thing will collapse, and we 
need to make sure that that and other things related to the 
budget proposal are in the record.
    Now, Mr. Boucher, just real quick, you said in response to 
a question, you made a decision not to open another restaurant. 
When was that decision made?
    Mr. Boucher. In July of last year as we were heading 
towards the elections.
    Mr. Sarbanes. Right. I want to follow up on something that 
Dr. Blumberg said. I think it is a terrific point, and that is, 
the ultimate fate of the ACA was in question really until this 
election was over. It was kind of a three-part drama. We had 
the passage of the bill, which was highly contested, then we 
had a judicial challenge to it. The Supreme Court removed that 
piece of uncertainty, and then we had a referendum in effect on 
whether it should go into effect, and that was the election, 
and it is now the law of the land, as Speaker Boehner has 
indicated.
    There are a lot of people, and I would imagine you were 
among them and many of your colleagues, who were sort of saying 
to themselves, until I know whether this is actually going to 
be the law and implemented, why am I going to spend a lot of 
time trying to figure it out? And so there was good reason why 
many, many people remained uninformed about the details of 
implementing this.
    Now, I think, you have got people that are very eager to 
know how it is going to be implemented. You indicated, Dr. 
Blumberg, that as you talked to small business people, they are 
exhibiting a tremendous amount of relief in many instances when 
they understand what is, in fact, required as against a lot of 
the misinformation that was put out, which gets further 
distorted in the midst of a highly charged political campaign, 
of course. We end up with sloganeering instead of real 
attention to what the regulations would require.
    So I think that is going to be a make a difference now as 
small business people and others, frankly, come to the table 
and try to understand better what we were trying to achieve.
    Now, a lot of what we are trying to achieve was to address 
the situation as small business people in this country who are 
dealing with stratospheric health care costs, having to make 
these tough decisions affecting their work force, and much of 
what we designed was meant to address that anxiety, specific 
anxiety of small businesses. And I say that because if we 
determine over time that there are certain things that we need 
to go in and tweak and fix and address to make sure that the 
concerns of small businesses are met, we are going to do that 
because that was largely the original motivation behind many of 
our investing so heavily and putting a lot of the political 
capital behind the ACA.
    I remember a statistic that small businesses, on average, 
are paying somewhere between 18 and 22 percent more in premiums 
for the same exact benefit packages than large employers 
because they didn't have the benefit of pooling. I imagine that 
is going to be addressed, and you see that playing out in your 
models; is that correct?
    Ms. Blumberg. That is correct. It is both the lack of 
pooling that has been in place for small employers so that the 
health status of even one of their workers or dependents can 
have a very dramatic effect on their average premium, plus the 
fact that they were charged considerably higher administrative 
costs for purchasing coverage than were their larger 
counterparts, plus the fact that they tend to employ lower wage 
workers, and as a consequence, there is less flexibility in 
terms of adjusting wages versus benefits.
    Mr. Sarbanes. Right. So we have good expectation that that 
can be addressed over time.
    The other thing is, I recall another statistic that the 
cost shifting that went on, because you have people showing up 
in an emergency room, that cost had to be borne some place and 
it was going to be borne by those who did have health insurance 
to the tune potentially, in some instances, of $1,000 per 
person in terms of increased premium.
    Now, I don't know if it was a thousand in certain instances 
and not others, but there was an extra premium being put in 
there because of the cost shifting; isn't that correct?
    Ms. Blumberg. Depending upon the market power of the 
hospitals, yes. There is some potential for cost shifting. 
There are a lot of those uncompensated care costs are paid 
through State and local governments that will have some relief 
and should lead to lower taxes.
    Mr. Sarbanes. So I guess I am going to run out of time 
here, but if there is an uptake of 75 percent of the 45 percent 
that currently have not uptake your offer, if 75 percent will 
do, and I recognize it represents a cost for your business, but 
that is less people that are going to show up in an emergency 
room and result in cost shifting, it is a burden on your 
business and others, and the point is, over the long term, the 
trajectory where we were headed for small businesses and their 
costs was going like this. I think with ACA, it is going to 
still be going up for awhile like this but it is going to start 
going like this eventually, and we are going to get the benefit 
of this reform, and that is going to be a significant benefit 
for small businesses in this country. I yield back.
    Mr. Pitts. Gentleman's time has expired. The chair now 
recognizes the gentlelady from North Carolina, Mrs. Ellmers for 
5 minutes for questions.
    Mrs. Ellmers. Ms. Roth, I have a--going back to the medical 
device tax, I have a question for you. You know, the 
administration and other supporters argue that there will be a 
``windfall'' from the increase from newly insured patients as a 
result of ACA and the tax will be offset.
    Based on your analysis, do you believe that there will be a 
windfall for medical device companies or will the tax hurt 
device startups, capital investment and job creation?
    Ms. Furchtgott-Roth. So, I think that it will hurt medical 
device companies because quite a lot of their products are 
exploited overseas, and they also have foreign plants, so they 
will probably shift the production of the export into their 
foreign plants.
    First, and also, I don't really see as much of a decline in 
the uninsured as Dr. Blumberg and others seem to think, because 
with the Supreme Court's decision, it was legal to pay a tax of 
$95 in 2014, about 315 in 2015, about 690 in 2016, and then you 
don't have to buy insurance. Well, CBO says the cost of a 
premium for a family of four is 20,000; for a single person, it 
is about 12,000. A lot of people are just going to pay the tax, 
which is legal, according to the Supreme Court.
    Mrs. Ellmers. Right.
    Ms. Furchtgott-Roth. And then go uninsured. They will then 
continue to get their care from community health centers or 
emergency rooms, and then when they get sick, then they can 
sign up for insurance because right now, if you are sick, you 
can't write--you can't sign up for insurance. You have to be--
because of the pre-existing condition.
    Mrs. Ellmers. Right.
    Ms. Furchtgott-Roth. You are insured already, but under the 
new law, anyone can sign up at any time.
    Mrs. Ellmers. At any time.
    Ms. Furchtgott-Roth. It is completely rational to stay 
uninsured until you are sick.
    Mrs. Ellmers. Sure.
    Ms. Furchtgott-Roth. And then the pool of insured is going 
to get sicker and sicker. The price is going to go up. Every 
time the price goes up, it will be more worthwhile for someone 
to pay the tax instead of getting the insurance.
    Mrs. Ellmers. Versus the insurance. Thank you so much for 
your testimony. Thank you to the entire panel. This is very 
helpful.
    Dr. Blumberg, I do have some questions for you. You know, 
you had just mentioned that the study shows that, you know, 
putting patients on Medicaid, that that is actually a much 
better situation, and I actually have a study that is 
completely the opposite.
    In 2010, the University of Virginia released a landmark 
study on patients who have had surgery, and it is in stark 
contrast to what you--the testimony you just gave, and I would 
ask the chairman if we would be able to submit that study for 
the purposes of this subcommittee.
    Mr. Pitts. Without objection, so ordered.
    [The information appears at the conclusion of the hearing.]
    Mrs. Ellmers. Great. Thank you. And I won't get into the 
details of it, but basically, it is startling to know that if 
you are on Medicaid, you actually have a 13 percent higher 
chance of dying than if you are uninsured, according to this 
study, and actually double the amount if--versus someone who is 
insured. So it is an interesting thing. And also the cost of 
health care actually increases because you are--if you are on 
Medicaid, your health care stay in the hospital would actually 
be 42 percent longer than if you had insurance.
    So, that being said, you had given your testimony about 
your study, and I am--I would like to submit mine. But I also, 
you know, to this point about anecdotal discussions that are 
being had by employers, you know, I have these discussions with 
my constituents every day, and they are so concerned about the 
cost of doing business and the ability to provide jobs in the 
future as a result of the Affordable Care Act.
    I have one particular constituent, Mr. Gerald Kivit who, 
you know, he produces church furniture, the old-fashioned way, 
and his business, it has been a family-owned business for over 
55 years. Five years ago he had 150 to 200 employees. He is now 
down to 46 employees and that is as a result of the economy. 
That obviously is not a result of Obamacare, but let's look at 
the facts.
    You know, the issue of, you know, adding employees, the 
economy is going to turn around at some point and he is going 
to want to hire employees. How can he go beyond that 49th 
employee? And that is his question. If he were here today, he 
would ask you directly, you know, he said--he has asked me how 
can I, you know, afford this when my bottom line already is in 
the negative? So if Mr. Kivit were here today, how would you 
describe to him what you have been saying, which is that the 
Affordable Care Act is actually going to help small businesses?
    Ms. Blumberg. I would like to respond to that, and I would 
also like to mention that it is not true that an individual can 
buy insurance coverage at any time regardless of their health 
status because there are open enrollment periods in the 
Affordable Care Act, so people can only buy at certain times of 
the year; otherwise, they will not be able to enroll.
    In addition, with regard to the Virginia study, there has 
been a great deal of experimental research done by rather--with 
economists at Harvard University who have looked specifically 
at experimental data from the implementation of public coverage 
in Oregon and shown that in a very short period of time, there 
was actually very positive health status effects for those that 
were randomly enrolled in the expansion of public coverage 
there relative to those who are remaining uninsured.
    So I just want to say that the analysis that you are 
referring to, I haven't seen specifically, but it is 
inconsistent with all of the other economic research and health 
that I have seen on that topic.
    Mrs. Ellmers. We will make sure that you get that study as 
well.
    Ms. Blumberg. That will be great.
    Mrs. Ellmers. Thank you. And to, you know, again, if I were 
Mr. Kivit, what would you say as far as, you know, how is this 
going to help him to be able to provide health care for his--
continue to provide health care for his employees?
    Ms. Blumberg. Well, right now it is going to save him a 
considerable amount of money potentially and help his workers 
obtain health insurance coverage even if he doesn't offer 
coverage today. If he does offer, he is going to have new 
opportunities to offer coverage in the insurance exchange if he 
wants to; otherwise, he can continue to offer coverage outside 
the exchange as he may or may not do today, depending upon his 
situation.
    If he doesn't offer and his workers need--would like to 
obtain coverage, don't get it through a spouse, they can then 
go into the nongroup exchange. There is no penalty assessed on 
him. They can get financial support if they need it to buy 
coverage, so those are----
    Mr. Pitts. The lady's time has expired. The chair 
recognizes the gentleman from Florida, Mr. Bilirakis, 5 minutes 
for questions.
    Mr. Bilirakis. Thank you, Mr. Chairman. Appreciate it very 
much.
    Ms. Roth, recently a major Florida employer announced that 
they were dropping health care coverage for part-time workers 
because the health care law effectively outlawed the low 
premium limited coverage plans that were offered to their 
employees.
    I am concerned that this law is making coverage more 
expensive for Florida and causing premiums to increase an 
average of 61 percent according to actuarial studies. Could you 
elaborate on the provisions of the ACA that will raise the cost 
of coverage for small employers and other individuals that 
might stay in?
    Ms. Furchtgott-Roth. So one element that is going to raise 
the cost of coverage is requiring a very large generous plan 
rather than the plans that the employer you mentioned had 
before, so those are not going to be permitted, so that is one 
thing that raised the cost of coverage.
    Another thing that raised the cost of coverage is being 
able to sign up at--I shouldn't have said any time--at any open 
enrollment period because that means that you can go without 
insurance, you can pay the tax legally, and then you can sign 
up at the next open enrollment period, and in the meantime, go 
to hospital emergency rooms.
    A third thing is just the big--a new administrative cost of 
providing health insurance with a mandatory electronic record, 
all the administrators, all the new IRS officials who are going 
to have to calculate what kind of penalties people are going to 
pay; also, the subsidies which reach up to 400 percent of the 
poverty line. When you go to exchange the amount you pay, it is 
going to depend on how much you earn. Again, this is a very big 
administrative burden.
    The tax credits for small business, those phase out. That 
is not for all small business. It phases out between 10 and 25 
workers, so you get the most tax credit if you have 10 workers, 
declining to 25. You employ 26 workers, you don't get a tax 
credit. It also declines if your average wage is between 25,000 
and 50,000, so it will steadily decline from 25- to 50,000. If 
you pay an average wage of 50,000, you don't get the tax 
credit, even if you have over 10 workers.
    So, all these different things increase the cost of health 
care. I would say the Number 1 is mandating a large generous 
plan and completely disallowing the smaller plans where people 
shop around and so they pay more attention to their health 
expenditures.
    Mr. Bilirakis. Thank you. Mr. Boucher, do you feel HHS has 
been forthcoming with the guidance on how to implement the 
health care law, the provisions of the health care law? If not, 
has this made it very difficult, of course, for you and others 
in the industry to manage?
    Mr. Boucher. Well, I think they have in some cases, but 
there is still a lot of uncertainty with regard to many of the 
rules. You know, there is a laundry list of items that I am 
still not clear on how it is going to affect our business, or 
even our employees, and we are anxious to hear how it is going 
to be defined so that we can plan and strategize for our future 
because right now the Association is trying to work and find 
solutions that work for both parties, but we need some answers 
that work.
    Mr. Bilirakis. Thank you. Again, last question for Mr. 
Boucher. Has navigating the ACA regulations forced you to incur 
any additional costs?
    Mr. Boucher. Well, as I stated earlier, I personally have 
spent and my human resource person has spent in upwards of 100 
hours just filtering through all of this, and I anticipate it 
to continue not at that pace because we are up to speed pretty 
good now, but there is still a fair amount of work to do once 
these rules continue to work out.
    And then ongoing, the administrative efforts that we are 
going to need to track and enroll employees if the auto 
enrollment stays as it is at 90 days, which, you know, we are 
opposed to, that, that is going to be an extremely difficult 
process for us. And even right now, looking back to try and 
determine the look-back period, we are having to deal with two 
different sets of data because we switched payroll companies at 
the end of the year. So we are trying to meld one payroll 
company's data with this year's payroll company data, they 
don't really talk to each other that great, and neither one of 
them has a great system in place right now for helping us to 
track that looking forward.
    So, I feel like we are behind schedule here, and I 
personally would appreciate some relief in some fashion so that 
we are not subject to some kind of penalty because either the 
payroll companies aren't up to speed or the rules haven't been 
defined yet, and that is really the crux of the uncertainty 
that we are facing.
    Mr. Bilirakis. Thank you, Mr. Chairman, I yield back.
    Mr. Pitts. Chair thanks the gentleman. And now recognize 
the gentleman from Virginia, Mr. Griffith, for 5 minutes for 
questions.
    Mr. Griffith. Thank you, Mr. Chairman. I have heard 
numerous people here today say that this probably shouldn't 
have a big impact on jobs. I have even heard some folks say 
they thought when they heard the title of the hearing was 
``Health Care Act and Jobs,'' they thought it was going to be, 
you know, something positive. I am here to tell you that is 
just not the case. I am proud to represent the Commonwealth of 
Virginia. Served in the General Assembly there for 17 years. 
Virginia, which would be closer to a big business than a 
smaller business, has made the decision, both the House and the 
Senate at the request of the Governor, have limited part-time 
hours for State employees.
    Now, it still sits on Governor's desk and has not yet been 
signed into law. But since he requested it, I doubt he is going 
to amend it out. And so we are facing a situation where 7,000 
workers in Virginia are going to find that their hours are 
being cut. A trend of a friend, it has been reported to me that 
a friend of a friend is now looking for new work. She had been 
working for the Department of Health. But with the cutback in 
the hours, she has got to find something else in order to take 
care of her family.
    These are the real impacts. This is the real impact on 
jobs. And it is just not the Commonwealth of Virginia alone. 
And I don't know about other States. But in my district, the 
town of Wytheville--now, it is not a big town, and I am sure it 
is not nearly the 7,000 people who are affected Statewide, but 
the town of Wytheville is also considering cutting back on 
their part-time hours. And in an editorial, and I think they 
said it very, very well, in an editorial that ran on the 
Tricities.com site, which usually means it is either the Wythe 
paper, or more likely, the Bristol Herald Courier, they said 
that, ``Consider these cuts in referencing the fact that the 
town of Wytheville.'' And Councilman Hunley said, ``It would be 
cost prohibitive to provide all the town's part-time employees 
with health insurance. So they are cutting their hours back.'' 
And then they reference the Commonwealth of Virginia and they 
said, ``Consider that these cuts are coming from entities with 
no profit motive, no corporate board demanding rightsizing, no 
shareholders screaming for costs to be held down, and no 
customers who can take their business elsewhere. Then ask 
yourself what the average business, which does not face those 
extra demands, is going to do.''
    Well, I will tell you that what I hear from numerous small- 
and medium-sized businesses, what they are going to do is that 
they are also going to cut the hours of their part-time 
workers. And in some cases, and I will ask you this, Mr. 
Boucher, I know you haven't done it, but if you are not hearing 
from lots of your colleagues that they are, in fact, shutting 
down stores in advance, knowing that if they have a store--now, 
it is not all the PPACA or Obamacare, but as one of the 
restaurant chains in my area's CEO told me, he said, we are not 
going to shut all our stores down. It is going to make life 
harder. But in those stores that are marginal stores, we are 
going to shut down. And I don't know if that was the only 
factor, but I did notice about 6 months ago, an announcement 
that one of his stores in area that is probably a marginal area 
had, in fact, shut down.
    Are you already seeing in the industry--I know you didn't 
do it--but are you seeing in the industry that folks are 
eliminating those stores that may be in the black but are just 
barely in the black, and the cost of this additional cost to 
them with their part-time employees will hurt and, therefore, 
they are just going ahead and making the decision to shutter 
the doors.
    Mr. Boucher. You know I can't speculate on what other 
restaurateurs are doing. But I will tell you that there are 
different business models for different levels of dining. You 
know, fine dining has different business model than fast food 
than casual. And as I stated earlier to the gentleman that our 
end of the day is $0.04 of every dollar. If there are 
restaurants that are $0.01 on every dollar this----
    Mr. Griffith. You can see under certain business models--
because I have limited time--you can see under certain business 
models that this might very well affect those entry-level 
workers and folks working in the restaurant industry. Am I 
correct?
    Mr. Boucher. There are restaurants that are right on that 
tipping edge that could be pushed over.
    Mr. Griffith. And let me say this, in Virginia, the vast 
majority, although I referenced somebody at the Department of 
Health, the vast majority of these employees actually work in 
our 23, 2-year community college systems. And one of those 
community colleges spokesmen was quoted as saying that one of 
the big detriments that they have from the State taking this 
action as a result of the PPACA, that they are going to lose an 
asset. And I quote, Josh Meyer, spokesman for Virginia Western 
Community College, ``One of the great advantages of community 
colleges, like Virginia Western, is that we can agilely adapt 
the training and educational needs of the region. Our adjunct 
faculty gives us the flexibility to create new courses as the 
need arises. This new policy will limit the hours that such 
faculty can teach.'' He wrote that in an email to the 
newspaper. And, obviously, if you need to gear up for some new 
area, and you don't have the personnel to do it, you are 
actually going to impact the ability to retrain folks who need 
jobs. Am I correct?
    Mr. Boucher. That is correct.
    Mr. Griffith. I thank you and yield back my time, Mr. 
Chairman.
    Mr. Pitts. Chair thanks the gentleman. That concludes our 
first round of questions. We will go to one follow-up per side. 
And chair recognizes Mr. Pallone for 5 minutes for follow-up.
    Mr. Pallone. Thank you, Mr. Chairman.
    As we hold this hearing today, I have mentioned that our 
colleagues on the Budget Committee are debating the House 
Republicans' latest budget. The Republican budget repeals 
coverage provisions of the ACA and will leave 27 million 
additional Americans uninsured. It will roll back all of the 
consumer protections the law has put in place, allowing 
insurers to discriminate on the basis of preexisting 
conditions, charge women more than men for the same insurance, 
et cetera. And it turns Medicaid into a block grant.
    So I just wanted to ask Dr. Blumberg, much of the 
discussion today has been around the changes the ACA represents 
for our Nation's businesses. But I wonder if you can help give 
us some perspective here. If the ACA were repealed and Medicaid 
faced significant cuts that Chairman Ryan envisions, are the 
millions of Americans who lost health coverage likely to have 
affordable coverage options in the private market? And then 
secondly, what would the loss of benefits associated with these 
cuts do to the economic and physical well-being of these 
Americans.
    Ms. Blumberg. There would be very dramatic, negative 
effects of repeal and block granting Medicaid. Not only on 
middle-income Americans who are looking forward to the relief 
that the Affordable Care Act could provide them, but most 
especially on low-income Americans who really don't have other 
options. Very relatively small percentage of people even in 
profit, adults in poverty today are eligible for public 
insurance coverage. They don't have the financial wherewithal 
to be able to purchase coverage. In addition, a signet to the 
financial implications for the low-income and modest-income 
population, repealing would also have very negative 
implications for those that have poor health status, who are 
highly disadvantaged and being able to obtain health insurance 
coverage today if they don't have access to an employer-base 
offer of coverage.
    So they would have--they would basically set us back to all 
of the problems that we have experienced in the past. The block 
granting is another issue. Because the way that that block 
grant is designed is that to give a particular amount of money 
to each State to diagnose their Medicaid costs. But the Federal 
dollars would not grow over time at the same rate at which 
medical expenses increase. So not only are you losing all the 
potential cost containment implications of the Affordable Care 
Act, but you are also then putting State budgets at a serious 
disadvantage relative to where they are today in order to 
provide coverage for the low-income population that they do 
currently have eligible.
    And so over time, they either have to cut substantially 
back on the benefits, cut substantially back on eligibility for 
the benefits that they have been providing. And this can have 
very damaging--or to spend a significant amount more money of 
their own budgets in order to keep coverage where it is today, 
which it is often not feasible at the State level. So there 
would be a lot of negative ramifications, both for individuals 
and for State government as a consequence of doing--taking 
those steps.
    With regard to the implications for the economy in general 
of repeal, as we talked about, there is often at least small 
net employment gains as a consequence of investing more in 
health care, which is a locally produced and purchased good, 
and so those would be eradicated as well.
    Mr. Pallone. Now, I know the ACA includes an employer 
responsibility requirement that encourages employers with more 
than 50 employees to offer affordable coverage. And then there 
is a penalty if an employer chooses not to offer coverage. 
However, 96 percent of small businesses in the U.S. have fewer 
than 50 employees and are therefore exempt from the 
requirement, and the firms that will be subject to the 
requirement, more than 95 percent already provide health 
insurance.
    So just talk a little bit--there is not much time here--
about some of the economic benefits of the ACA for small 
businesses.
    Ms. Blumberg. Well, particularly for small businesses, they 
are hugely disadvantaged today by not being able to buy, as you 
referred earlier, to not being able to buy employer-based 
coverage for their workers at the same price as do their larger 
counterparts. This is because the administrative costs that 
carriers charge the smaller groups are much higher because they 
are selling small group by small group and they are doing 
medical underwriting, they had been doing medical underwriting 
of those policies, will continue to do that until January 1st, 
2014.
    All of those considerations increase administrative costs 
significantly for those small employers, which would be 
decreased substantially under the Affordable Care Act. So 
lowering administrative costs would be a very significant 
change because that is a big burden on small employers today, 
one of the reasons they are less likely to offer. In addition, 
they tend to employ a lot of low-wage workers compared to their 
larger firm counterparts. And that means that under the 
Affordable Care Act those that don't offer their workers will 
be able to have access, guaranteed access to affordable 
coverage through the non-group exchanges, which they don't have 
today. And that makes it easier for them to hire workers in the 
small group market. In addition, right now, the small employers 
are disadvantaged because by their nature of being small they--
the average risk for them that they are bearing in terms of 
looking at a price for health insurance can be extremely 
variable. So----
    Mr. Pitts. Gentleman's time has expired.
    Chair recognizes the vice chairman of the subcommittee, Dr. 
Burgess, 5 minutes for follow-up question.
    Mr. Burgess. Thank you, Mr. Chairman. I do appreciate the 
panel being here today. I know it has been a long morning. Just 
a couple of things I would like to kind of close the loop on. 
Mr. Sarbanes mentioned the issue of cost shifting and why it 
was so important to get the Affordable Care Act done because 
all this cost shifting that is going on by the free riders of 
the system, people show up in emergency rooms who don't have 
insurance. But, in fact, really look at the cost shifting that 
is going on, it is happening in the Federal programs. Right 
now, we have real difficulty in the State of Texas because a 
lot of providers are not opening their doors to Medicare or 
Medicaid patients. Why is that? Because the Federal 
reimbursement is lower than what that it is on the private 
side. What happens then is the private side, private insurance 
or self-paid patients end up making up the difference.
    I have got to tell you one of the most frustrating mornings 
I have spent in the last 2 years was the morning, the second 
morning of oral arguments over at the Supreme Court. I was 
fortunate enough to be there. And listening to the Solicitor 
General base his entire case on the fact that, well, you got 
people who are showing up at the emergency rooms without health 
care coverage, and this cost shifting is costing all of us a 
bundle. Wait a minute. The patient who is covered by Medicaid--
we are going to expand that by a bunch; I don't know how much, 
but 16, 20 million people with full implementation of the 
Affordable Care Act in a year's time. If they can't get a 
doctor's appointment, then they are not going to a clinic, what 
are they going to do? They are going to show up in the 
emergency room, because that is what they have always done. And 
that cost shifting will still occur. Because the government's 
reimbursement for Medicare and Medicaid is less than the cost 
of delivering the care, the cost shifting continues, and if 
anything, we are doubling down on that.
    This is not to disparage the person who is covered under 
Medicaid, but to disparage the agency that is responsible for 
the oversight of this. And for heaven sakes, this committee, 
the best we could do if we want to extend coverage to more 
Americans, we sit here in this committee, the best we can do is 
to expand a program that is 45 years old that was intended to 
be a safety net program back in 1965. Ranking member was 
chairman at that time. I just submit that there were better 
ways, but we never bothered, we never bothered to even ask.
    So I had to get that off my chest. Mr. Sarbanes said it was 
cost shifting that was costing the program. Well, cost shifting 
may be costing the program. It is not free rider, it is not the 
27-year old who would rather buy a basketball than an insurance 
policy. The problem is the expansion, the vast expansion of 
Medicaid is going to make this problem a great deal worse.
    Let me just ask you a question, Dr. Blumberg. And it is a 
relatively simple question. I think Ms. Furchtgott-Roth touched 
on the subject that some dependent coverage is going to go away 
as a consequence of the requirements under the Affordable Care 
Act. Is that a fact?
    Ms. Blumberg. There should not be a decrease in dependent 
coverage. It is----
    Mr. Burgess. Let me stop you there. Ms. Furchtgott-Roth, 
you suggested that there would be. Will there be a decrease in 
dependent coverage under the Affordable Care Act?
    Ms. Furchtgott-Roth. Employers are required to offer an 
affordable policy, affordable for a single person. So say you 
have somebody who earns more, is ineligible for Medicaid. Say, 
someone who earns $30,000 a year or $40,000 a year who has a 
wife and three children. His employer offers him affordable 
single coverage. Under the law, he is required to take that 
affordable single coverage. Also under----
    Mr. Burgess. Now, that is an important point. So he is 
required, he or she is require to take that coverage.
    Ms. Furchtgott-Roth. Cannot turn it down. Right. Exactly. 
And his wife and children then are not allowed to get 
subsidized coverage on the exchange. Because he is getting 
affordable single coverage from his employer.
    Mr. Burgess. I have got to tell you----
    Ms. Furchtgott-Roth. They can buy coverage on the exchange, 
but it has to be at full price. They don't qualify for the 
subsidies for people making 400,000--under 400 percent of the 
poverty line. This is a very serious problem----
    Mr. Burgess. Serious.
    Ms. Furchtgott-Roth [continuing]. Dealt with in the 
discussions. Because, originally, employers were required to 
provide affordable coverage for families, not just for singles.
    Mr. Burgess. Here is the deal. The Fort Worth Star 
Telegram, in the middle of January, headline of ``500,000 
Children to Lose Health Care Under the Affordable Care Act.'' I 
mean, that is a big deal. Can you imagine if a Republican 
president pushed through a law that kicked 500,000 children off 
their health insurance? I mean, we would be hearing screaming 
from the mountaintops if that had occurred under a Republican 
administration. I don't know why it barely rated a news story. 
Now, the good news for those uninsured children, I think the 
Internal Revenue Service, under the Department of Treasury has 
promulgated rules where those children will not be fined for 
not having health insurance that they then lost because of the 
Affordable Care Act. Is that your understanding as well?
    Ms. Furchtgott-Roth. I just don't know the answer to that 
question. There was a headline about it, an editorial in The 
New York Times last August, the editorial was entitled ``A 
Glitch in the Health Care System.''
    Mr. Burgess. Mr. Chairman, there are a lot of glitches in 
the health care system as we have heard this morning. I hope 
this committee continues its due diligence to, not just to 
expose these problems, but we need to work on solutions. I 
mean, after all, we can argue about the political stuff. But 
Mr. Boucher has got to deal with it on a very real, personal 
basis. He is not a think tank, he is not a public employee like 
we are. He is out there grinding it out every day, trying to 
battle the forces and to make it all work and to provide for 
his employees. We shouldn't make the landscape harder for him, 
we should try to empower him.
    Thank you, Mr. Chairman. I will yield back my time.
    Mr. Pitts. Chair thanks the gentleman.
    That concludes our questions for the panel. I would like to 
thank the witnesses for their testimony, for their answers. I 
remind members that they have 10 business days to submit 
questions for the record, and I ask the witnesses to respond to 
the questions promptly.
    Members should submit their questions by the close of 
business on Wednesday, March 27th.
    Excellent testimony, excellent hearing. Thank you very 
much. Without objection, the subcommittee is adjourned.
    [Whereupon, at 11:31 a.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

                Prepared statement of Hon. Phil Gingrey

    I believe today's hearing couldn't be more timely. The 
coming wave of regulations that businesses will be forced to 
confront due to Obamacare provisions is already influencing the 
decision for businesses to hire new employees. As our country 
continues to show lackluster job growth, it is essential to 
focus on how this law forces companies to delay hiring workers 
and reduce employee compensation.
    This week, I spoke with a coalition of small business 
owners from the 11th Congressional District to learn how 
President Obama's health care law has affected the day-to-day 
operations of their companies. Across the board, they expressed 
frustration with its new rules and ``moving target'' 
regulations, the increase in health care costs, and the 
uncertainty the law has created. ``We're afraid to grow,'' said 
one business owner. ``The lack of information is creating fear, 
and it's not good for the economy.''
    You see Mr. Chairman; this law is already having a direct 
impact on hiring decisions in my district. Even though most of 
these provisions will not take effect until 2014, job creators 
and employees in Georgia and nationwide are already feeling the 
pain. If we really want to put America back to work, we need to 
lift these onerous provisions on our small businesses.
                              ----------                              


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                 
