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





   THE ROLL OUT OF HEALTHCARE.GOV: THE LIMITATIONS OF BIG GOVERNMENT

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            DECEMBER 4, 2013

                               __________

                           Serial No. 113-83

                               __________

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








[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]






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

                                _____

                  U.S. GOVERNMENT PRINTING OFFICE

87-022PDF                 WASHINGTON : 2014
-----------------------------------------------------------------------
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 OVERSIGHT AND GOVERNMENT REFORM

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

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
























                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on December 4, 2013.................................     1

                               WITNESSES

Ms. Veronique De Rugy, Senior Research Fellow, Mercatus Center, 
  George Mason University
    Oral Statement...............................................     6
    Written Statement............................................     9
Dr. Clifford Winston, Searle Freedom Trust Senior Fellow, 
  Economic Studies Program, The Brookings Institution
    Oral Statement...............................................    14
    Written Statement............................................    16
Mr. Mark A. Calabria, Director of Financial Regulation Studies, 
  Cato Institute
    Oral Statement...............................................    23
    Written Statement............................................    25
Dr. Karen Kruse Thomas, Historian and Communications Associate, 
  Johns Hopkins Bloomberg School of Public Health, External 
  Affairs
    Oral Statement...............................................    37
    Written Statement............................................    39

                                APPENDIX

The Hon. Elijah E. Cummings, a Member of Congress from the State 
  of Maryland, Opening Statement.................................    94
Chairman Issa submitted and article from Wikipedia on Alexander 
  Fleming........................................................    96
Rep Connolly submitted for the record an article from the 
  Washington Monthly called, ``The Best Care Anywhere''..........   102
Chairman Issa submitted for the record letters sent to 15 Health 
  Insurance Companies............................................   117
Chairman Issa sent a letter to Mr. Mark Bertolini, Chairman, 
  President, and CEO, Aetna, Inc.................................   118
Chairman Issa submitted for the record a NewYorker Article ``GOP 
  Healthcare.gov Too Fast Now''..................................   122
Rep. Cartwright submitted for the record article titled ``What 
  About Social Security's Rollout?''.............................   125
Questions submitted from Rep. Collins to Dr. Calabria, Dr. De 
  Rugy, Dr. Thomas, and Dr. Winston..............................   130

 
   THE ROLL OUT OF HEALTHCARE.GOV: THE LIMITATIONS OF BIG GOVERNMENT

                              ----------                              


                      Wednesday, December 4, 2013,

                  House of Representatives,
      Committee on Oversight and Government Reform,
                                           Washington, D.C.
    The committee met, pursuant to call, at 9:35 a.m., in Room 
2154, Rayburn House Office Building, Hon. Darrell E. Issa 
[chairman of the committee] presiding.
    Present: Representatives Issa, Mica, Turner, Duncan, 
Walberg, Lankford, Amash, Gosar, DesJarlais, Gowdy, Farenthold, 
Collins, Meadows, Bentivolio, DeSantis, Cummings, Maloney, 
Norton, Tierney, Connolly, Speier, Cartwright, Davis, Cardenas, 
Lujan Grisham, and Kelly.
    Staff Present: Molly Boyl, Majority Deputy General Counsel 
and Parliamentarian; Lawrence J. Brady, Majority Staff 
Director; Caitlin Carroll, Majority Deputy Press Secretary; 
John Cuaderes, Majority Deputy Staff Director; Brian Daner, 
Majority Counsel; Adam P. Fromm, Majority Director of Member 
Services and Committee Operations; Linda Good, Majority Chief 
Clerk; Tyler Grimm, Senior Professional Staff Member; Frederick 
Hill, Majority Deputy Staff Director for Communications and 
Strategy; Christopher Hixon, Majority Chief Counsel for 
Oversight; Mark D. Marin, Majority Deputy Staff Director for 
Oversight; Laura L. Rush, Majority Deputy Chief Clerk; Sarah 
Vance, Majority Assistant Clerk; Jedd Bellman, Minority 
Counsel; Krista Boyd, Minority Deputy Director of Legislation/
Counsel; Aryele Bradford, Minority Press Secretary; Jennifer 
Hoffman, Minority Communications Director; Julia Krieger, 
Minority New Media Press Secretary; Juan McCullum, Minority 
Clerk; Jason Powell, Minority Senior Counsel; Brian Quinn, 
Minority Counsel; Dave Rapallo, Minority Staff Director; Daniel 
Roberts, Minority Staff Assistant/Legislative Correspondent; 
and Mark Stephenson, Minority Director of Legislation.
    Chairman Issa. The committee will come to order.
    The Oversight Committee exists to secure two fundamental 
principles: first, Americans have a right to know that the 
money Washington takes from them is well spent and, second, 
Americans deserve an efficient, effective Government that works 
for them. Our duty on the Oversight and Government Reform is to 
protect these rights. Our solemn responsibility is to hold 
Government accountable to taxpayers, because taxpayers have a 
right to know what they get from their Government. It is our 
job to work tirelessly in partnership with citizen watchdogs to 
deliver the facts to the American people and bring genuine 
reform to the Federal bureaucracy. It is our mission statement 
and it is our calling.
    Today, when we discuss, once again Healthcare.gov rollout, 
which has undeniably been, and inarguably, a disaster. It is 
not a disaster of the making of one man or any one person. In 
fact, in many ways it is a sign of a failed system that is 
often seen in the Federal Government and very often seen by 
this committee.
    Nearly two months after the Federal website launched, even 
as the Administration declares its vast improvements, 
components of the back end are still unfinished. Customers are 
told that at least in some cases, many cases, their 
applications may not have been correctly forwarded to the 
insurance carrier, meaning they have signed up; they are not 
going to get the benefit. They may go to the hospital and not 
be covered. Or, if they are covered, it will only be after 
weeks, months, or years of paperwork. Additionally, it is now 
learned that the ability to properly pay insurance companies is 
in doubt and, as a result, estimates are likely to occur. 
Estimates not how you do business.
    The project's failure raises serious questions on what 
hindrances Government faces when it intervenes in the private 
market. President Obama wisely said that startups, business 
startups, often have these sort of problems; that these are the 
nature of private sector startups. The difference here is the 
private sector wasn't just starting up; the private sector was 
fully up. Rather than leveraging the private sector, 
Healthcare.gov essentially built a whole new layer, a whole new 
decision process on top of it.
    Before October 1st, the President told Americans that 
purchasing insurance on Healthcare.gov would be as simple as 
shopping for airfare at Kayak or Expedia. I have shopped at 
Kayak and Expedia. The only difficult thing at those sites is 
choosing from many choices, well defined, and making your 
decision. In fact, nothing has been more different than Kayak 
or Expedia at the site. Just yesterday I logged in to the D.C. 
exchange, where members of Congress must go, and got an error. 
We do not have either the front end or the back end, not just 
in the Federal system, but in systems that feed into it, in 
fact ready.
    Can anyone honestly imagine what would happen if you went 
to buy an airplane ticket on Kayak or Expedia and the site 
constantly crashed, losing your information, or in fact if they 
told you leave your personal email and we will email you back 
in eight or ten hours in order to tell you that it is now a 
better time to try to log on and find prices?
    Healthcare.gov is a monopoly. Healthcare.gov is a mandated 
tax-end location. For members of Congress, they will either go 
to Healthcare.gov or they will be without insurance and be 
fined.
    Yet, today no one has been held accountable for spending 
hundreds of millions of taxpayer dollars on a website that 
simply didn't serve the President or the American people on his 
signature legislation.
    As someone who spent many years in the private sector, I 
know that if I had ever staked my business on a product that 
performed like this, it is unlikely I would have gotten a 
second chance. In fact, if a company launched like this, they 
would have to go back down, regroup, remarket, and relaunch. 
But that is not the case. Most of the laws stay in place; most 
of the enforcement stay in place; and, as many of the other 
committees are looking into, many of the exceptions are not 
ones which are codified in law or within the purview of the 
Administration to decide to forgive or delay.
    More importantly, the failure of this website, some $640 
million invested, will undoubtedly cause a loss of revenue many 
times that. The actual exposure to the vendors and the 
individuals may be limited, but to the American taxpayer it 
will be billions of dollars of lost revenue because of this 
failure.
    I did not vote for the Affordable Care Act. I do not 
believe that it will drive down the cost and up the 
availability and affordable to the American people. However, 
getting the system under the law to work as well as possible 
and then having a discussion about how to improve healthcare 
for the American people is our responsibility.
    Today we are joined by Dr. Clifford Winston of The 
Brookings Institute, who wrote in 2006 that government failures 
appear to be explained by a shortsightedness, inflexibility, 
conflicting policies of government agencies.
    I might note that 2006 was before President Obama was 
president. As Senator Obama, this was not about his government, 
this was about the government of his predecessor. Healthcare 
was broken before President Obama came.
    By its very design, the Federal Government may never be 
efficient or effective or innovative enough to carry out big 
initiatives like Obamacare, nor should it be. Government should 
not be picking winners and losers precisely because it has 
proven to be so bad at it.
    More importantly, America is a free market Country, and the 
free market has worked for the American people time and time 
again. Americans know that when you close off and create an 
artificial monopoly, it costs more. It always costs more not to 
have competition. But, in fact, that is what is happening in 
healthcare today. Half of healthcare costs to the Federal 
Government reflects the entire cost of defense. Defense is not 
something we can outsource to the private sector. Healthcare is 
something that has always been within the private sector, and 
should be. We can hire the best and brightest, as 
administrators have boasted, and still end up with a product 
that arrives delayed and not working properly.
    There are things that are inherently governmental, and this 
committee will always be absolutely determined to defend the 
responsibility of Government to do what is governmental, 
procurement certainly being one of them. Protecting our 
homeland, securing property rights are just a few of the 
others. But something as complicated, as complex, as 
multifaceted as a web portal supposed to rival sites like 
Amazon.com for healthcare is something the Federal Government 
clearly was not prepared to take on and do properly.
    Government inefficiencies are not limited to massive 
interventions in the healthcare industry. However, as this 
committee, which has voted on a unanimous and bipartisan basis 
the reform of IT procurement, has discovered, we need to make 
major changes in how we do procurement. We also need to do what 
is inherently governmental and leverage the private sector to 
the greatest extent possible. The hearing today will go a ways 
toward understanding what Government can do, what it cannot do, 
what in fact should be expected by our Government and what 
should be expected to be innovated in the private sector.
    The limitations on big government will never include 
preventing waste in a massive scale; it will always happen. And 
this committee will do everything it can to reduce it, to 
organize it. But I believe that, in fact, we have before us an 
example of something that may be too big to swallow even for 
the U.S. Federal Government.
    With that, I recognize the ranking member for his opening 
statement.
    Mr. Cummings. Thank you very much, Mr. Chairman, and I 
welcome our witnesses here today and I look forward to an 
informative and spirited discussion.
    I must say that, Dr. Thomas, I had an opportunity to read 
your testimony and I think it is appropriate that I start out 
by just quoting a little bit of it, because this is reading 
that every single American and every member of Congress needs 
to read. It is some of the best testimony I have read since I 
have been in Congress, 17 years.
    It says: In 1900, a newborn American citizen had a life 
expectancy of 47 years. A heartbreaking 10 percent of all 
infants died before their first birthday, and infant mortality 
was far higher among the rural and urban poor, whether on 
southern farms or in northern tenements. By contrast, an 
American born in 2000 could expect to live 75 years and infant 
deaths have been cut by 93 percent. You go on to say in all 
these areas of medical and public health progress, the Federal 
Government has played a fundamental role as both sponsor and 
coordinator of a remarkably concerted effort involving 
communities, States, organizations, and institutions across 
American society. The Federal Government therefore deserves a 
great deal of credit for doubling, doubling life expectancy for 
Americans, as well as for tackling a long and ever-changing 
list of problems regarded as the worst enemies in the Nation's 
health, from tuberculosis and polio to cancer and AIDS.
    According to the chairman's invitation letters today, the 
committee will examine the institutional limitations on the 
efficacy of Government action, and our case study will be the 
rollout of the Healthcare.gov website. The fundamental 
presumption underlying this hearing is that the Federal 
Government is somehow incapable of successfully administering 
large-scale programs. In fact, the Republican staff briefing 
memo challenges ``Government's ability to effectively design, 
implement, and administer large-scale projects and programs.''
    The problem with this presumption is that it does not take 
into account many extremely successful Government programs that 
have helped millions of Americans throughout our history. In 
1935, President Roosevelt signed into law the Social Security 
Act, the centerpiece of our social security safety network. 
When it first launched, critics panned its confusing procedures 
and less than half of the labor force participated. Over time, 
however, it has reached 90 percent of American workers and has 
been expanded to cover the self-employed, to include dependent 
and survivor benefits, and to provide for cost-of-living 
adjustments.
    Thirty years later, in 1965, President Johnson signed 
Medicare into law. Like the Social Security rollout, there were 
challenges initially and the American Medical Association 
called it ``the beginning of socialized medicine.'' The Federal 
Government had to negotiate with hospitals, nursing homes, and 
insurance companies, and had to coordinate with all 50 States. 
Eventually, 93 percent of eligible seniors enrolled in Medicare 
and the program has been expanded and improved several times 
since then.
    Forty years after that, in 2005, President Bush signed into 
law the Prescription Drug Program, on Part D of the Medicare 
law. Like Social Security and Medicare before this, this drug 
program also experienced challenges in its rollout. Newspaper 
headlines were dire, stating: ``Confusion Reigns Over Drug 
Plans,'' ``Not Ready for Prime Time,'' ``Prescription Drug Plan 
Part D Gets an Early F.''
    In all of these cases early setbacks were resolved, critics 
were proved incorrect, and these programs are now immensely 
popular with the American people. But, more importantly, they 
prevented our Nation's seniors from dying penniless and 
homeless. They provide a basic level of security to the 
American people where the private sector failed to do so. But 
it also provides something else: it is called dignity.
    The same is true of the Affordable Care Act. The private 
insurance market discriminated for decades against people with 
preexisting conditions. Insurance companies threw people off 
existing plans when they discovered evidence of previous 
illnesses the patients themselves did not even know about. But 
now, thanks to the ACA, millions of Americans who could not get 
health insurance in the private market now have access to it.
    In terms of today's hearing, I think everyone understands 
what is going on. The Republicans want to use the initial 
challenges with the Healthcare.gov website to make a broader 
argument that the Federal Government cannot administer large-
scale programs effectively and that we are all better off 
leaving it to the private sector. But we have tried that, and 
it simply does not work.
    I believe the premise for today's hearing is fundamentally 
flawed. Our Country's experience with Social Security in 1935, 
Medicare in 1965, and the Prescription Drug Program in 2005 
demonstrates our Government is fully capable of overcoming the 
initial problems with the implementation of programs that help 
millions of people in their daily lives. I remind all Americans 
that we are a can-do Nation. We are a can-do Nation and we are 
better than that.
    This premise becomes even more absurd when you look at our 
Nation's broader history. In the 1940s we mobilized our entire 
Country, our people, our industry, and our workers to defeat 
the Nazis and the Japanese in World War II. In the 1960s we 
tapped the best and brightest minds in government and the 
private sector to build a space program that put a man on the 
moon for the first time in human history. Our Government does 
not always work as well as it should, but it is certainly 
capable of great things when there is a strong commitment to 
the underlying goals we all share.
    In the case of the Affordable Care Act, we know that one 
component of the rollout, the Healthcare.gov website, did not 
work as it should have. But we also know from testimony before 
this committee that another component, the complicated 
interagency data hub that most experts worried about, worked 
much more smoothly, and that is a testament to the strong work 
of the agencies and contractors involved.
    As I close, as we go forward, I hope that we can work 
together to solve any problems that arise in order to improve 
the program so that it works effectively and efficiently. It is 
not about who we fight against. It is not even about who we 
fight with. It is about what we fight for. What we fight for, 
and this moment is greater than this moment; it is about 
generations yet unborn. In that way we can honor the commitment 
we made in the Affordable Care Act to help people who could not 
get health insurance to attain it now.
    Mr. Chairman, I look forward to today's hearing and I thank 
you for calling it.
    Chairman Issa. Thank you.
    All members may have seven days to submit opening 
statements and other extraneous material for the record.
    We now welcome our distinguished panel of witnesses.
    Dr. De Rugy, I always get your first name. It is a lovely 
name. This is not the first time I have had trouble with it. 
Dr. De Rugy is Senior Research Fellow at the Mercatus Center at 
George Mason.
    Obviously, Dr. Winston. Welcome. Dr. Clifford Winston is a 
Trust Senior Fellow at The Brookings Institute.
    Dr. Mark Calabria is Director of Financial Regulation 
Studies at the Cato Institute.
    And Dr. Karen Thomas is a Historian and Communications 
Associate at Johns Hopkins Bloomberg School of Public Health.
    Welcome.
    Pursuant to the rules, would you all please rise and take 
the oath, and please raise your right hands?
    Do you solemnly swear or affirm that the testimony you are 
about to give will be the truth, the whole truth, and nothing 
but the truth?
    [Witnesses respond in the affirmative.]
    Please be seated. Let the record reflect all witnesses 
answered in the affirmative.
    In order to allow time, without objection, your entire 
opening statements will be placed in the record, and I ask you 
to observe the lights in front of you and limit your time to 
five minutes.
    Dr. De Rugy.

                       WITNESS STATEMENTS

                 STATEMENT OF VERONIQUE DE RUGY

    Ms. De Rugy. Chairman Issa, Member Cummings, members of the 
committee, it is an honor to appear before you today.
    While the Nation is focused on the day-to-day problems 
related to the ACA's rollout, these are only the most recent 
and visible signs of the fundamental flaws that plague 
Government intervention in general. My testimony will focus on 
why Government intervention is often doomed to fail and it will 
illustrate this point with the example of a specific loan 
guarantee program.
    The idea that Government fails shouldn't be a surprise to 
anyone who has read the academic work of public choice 
economists such as Nobel Laureate James Buchanan, George 
Stigler, or Vernon Smith. Their work has explained why, despite 
good intention and nearly unlimited resources, top-down 
solutions not only fail to address the problem they are trying 
to address, but also sometimes and often makes the problem 
worse.
    There are many reasons for this, but I would like today to 
highlight two of them. The first one is that even with the best 
of intention, the incentive of elected officials and 
bureaucrats to prudently manage taxpayers' money are very weak. 
They are not rewarded when they maximize consumer value, nor 
are they necessarily punished when they take unnecessary risks 
or fail to minimize costs. In fact, no one in Government, so 
far as we know, has been fired over the problems with the ACA 
website. Meanwhile, private companies that misstep are quickly 
replaced by better competitors.
    A key reason for these poor incentives is that Government 
actors all operate within limited knowledge. While individuals 
acting in markets are able to use price signals to guide their 
decisions, Government decision-makers have no such guides. 
Hence, they have no way of accounting for their value or cost 
their decision might create for others.
    The second reason why Government often fails is that 
interest groups are able to exploit this environment to obtain 
their own goal, often at the expense of the public welfare. And 
for this you don't have to go to look further than the sugar 
lobby and the tariffs and subsidies they are getting and the 
increased price of sugar that they impose on all customers.
    The bottom line is that in Government intentions do not 
equal results. More importantly, this is true no mater who is 
in power, and it is true across many Government programs, not 
just healthcare.
    The Department of Energy's 1705 loan program is a good 
example of the gap between what a program's proponents claim it 
will achieve and what it actually does. This policy was put in 
place under the claim that renewable energy companies do not 
have access to sufficient credit to support new projects. These 
alleged imperfections of the credit markets, we are told, are 
particularly important for small and innovative companies. 
However, when you look at the data, what you find is that 
nearly 90 percent of the 1705 loans go to projects that are 
backed by large and well-connected companies such as NRG Energy 
or Goldman Sachs. So in that sense it is very hard to argue 
that the loans are going to small innovative companies that 
wouldn't have access to credit if indeed their project was 
viable.
    This program is also a good example of Government favoring 
two distinct interest groups: first, the bank, because the 
lenders now don't have to face the risk of lending money to a 
company that may default; and, second, the companies that are 
now benefitting from very good rates and good borrowing 
conditions, especially if compared to their competitors.
    The taxpayers, on the other hand, bear the risk and 
shoulder the burden when companies like Solyndra or Abound 
Solar default on their loans and when they go under. The other 
losers in this case, of course, are the companies in that same 
field who now do not have access to credit, even though they 
have viable projects, because all the money tends to go to 
companies that are backed by Government guaranteed 
independently of the merits of the project.
    In addition, like most Government interventions, these 
programs and, of course, exponentially larger program 
interventions such as the health care law, create serious and 
systemic distortion in the market. However, the tragedy is, 
despite evidence, lawmakers often don't get rid of inefficient 
programs, and that is because they are more likely to respond 
to the pressure of vested interest groups than they are to 
actually try to protect taxpayers, who very often don't even 
realize the cost of these programs, whether it is directly or 
indirectly.
    Now, there is good news. We have over six decades of 
research on Government decision-making to help guide policy 
decisions going forward. In many cases a sensible solution is 
simply to leave some activities outside of the Government 
purview. This is not a loss, but a gain for Government. Not 
only will it prevent the type of Government failures that we 
have been talking about, but it will also allow the Government 
to focus on its core function: the provision of public good and 
the protection of property rights.
    Thank you.
    [Prepared statement of Ms. De Rugy follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]






    Chairman Issa. Thank you.
    Dr. Winston.

                 STATEMENT OF CLIFFORD WINSTON

    Mr. Winston. Thank you very much. I am very happy to be 
here.
    Chairman Cummings posed a very challenging question. He 
raised the issue about successful Government interventions and 
Government projects. And it is challenging because the issue is 
how do we determine success. What is the benchmark that we use 
for success? And if Government does not achieve that benchmark, 
how should we proceed? So my testimony is really trying to 
shape that framework and give us some information about what we 
know about success, the evidence, and alternative ways to 
proceed.
    I am an economist, so I am going to follow the way 
economists do things: first outlining the theory of why 
Government intervenes in economic life, what it is trying to do 
and what it should be doing, and what the empirical evidence is 
on its interventions; and then given the motivation of this 
session by the ACA, I will try to draw some basic implications.
    All right, the theory. Government intervenes in economic 
life for two reasons: one, to correct a market failure: 
monopoly, externalities like collusion. That is what we mean by 
market failure. The other is to pursue a social goal. The 
market is efficient, all right? There is nothing wrong with the 
market in terms of its allocation, but the public doesn't like 
the allocation that exists, okay? So we want to do things like 
reduce poverty. All right? The third issue is macro. We are not 
talking about macro economics here, thankfully.
    Market failure involving large projects, where do things go 
wrong? One, they are simply not supplied. They are not 
privately profitable, even though they are publically, socially 
desirable; or there are free riders, so there is an under-
supply of that kind of project. Government's role, then, steps 
in and tries to provide the project, but has to do it 
efficiently. And when I mean efficiently, I am talking about it 
prices it right, makes cost-benefit assessments and 
investments, produces the project at minimum cost, and provides 
technological advance.
    What are social goals? Well, the social goals we are 
talking about here are what we call merit goods. These are 
goods and services American society believes that everyone 
should have, regardless of whether they can afford them. Social 
insurance is obviously what we are talking about in this case, 
coverage for healthcare. These usually involve some sort of 
redistribution. You are going to be taking some resources from 
some people, giving them to another. This is something, though, 
that is a democratic decision. That is fine, but it should be 
done at minimum cost. So there is still an assessment there. 
Market failures, you are looking to try to maximize efficiency. 
Social goals, you try to minimize costs.
    So what is the evidence that we have on how well Government 
has done on this? I go through this in detail in my written 
testimony. What I can say here, in the areas that I have done a 
lot of work in, in transportation, anywhere from highways, 
airports, air traffic control, inland waterways, urban transit, 
passenger rail. Probably as I even say these things you are 
beginning to think of the symptoms: congestion, delays, budget 
deficits. So these actually are symptoms, and they are symptoms 
of the economic inefficiencies: mispricing, poor investment, 
production cost overruns. These are all familiar, but these 
things total up the hundreds of billions of dollars of cost. 
And, of course, there are other things that we can see as 
inefficient.
    So the question is how can we improve Government in these 
areas. Social policies are not really my area of expertise, but 
I think it is pretty much well known that Social Security, 
Medicare, and so on, regardless of whether they have certainly 
established, and they have, are they achieving their goals at 
minimum cost? And obviously that is a high standard, but I 
think that is really what we are looking at, how can we do 
these things more efficiently.
    All right, so faced with evidence of Government failure 
trying to correct market failures and pursue social goals, what 
is the explanation for this? And it has actually already been 
given by the chairman: certainly agency limitations; technical 
expertise and a culture where you don't provide the kind of 
retro assessments to sort of correct where you are going; 
regulatory constraints. What I found interesting about the ACA 
matter was actually a provider offered to do the website at no 
cost, but was told that he couldn't do it because of regulatory 
constraints. Political forces, obviously, stakeholders, and it 
is a big part of what public choice is.
    So there are well known reasons for failure. What now do we 
say, pulling this all together for ACA? I think the lessons are 
there were predictable concerns in rolling out the website, 
technical issues, lack of ongoing assessment, inflexibility, 
and various constraints. I think, obviously, the full story 
hasn't been told yet and we will see other explanations, but I 
am sure that they will have a familiar ring to it.
    The question, though, is the key point of what I am trying 
to get at. Too much of the discussion has been attacking ACA 
and, indirectly, the social goal of universal coverage. To me, 
that is off the table. That has been decided by the democratic 
process. The President has been elected and re-elected on that 
position. All right? That is how that has to be decided. The 
analytical issue and the policy issue, though, is achieving 
that goal at minimum cost. That is what we ought to be talking 
about; how can we do this more efficiently? We already see ways 
that some States are doing it in a better way than others. We 
should certainly be open to that. But I would also say, too, 
that we can certainly be open to the private sector having 
greater involvement.
    [Prepared statement of Mr. Winston follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman Issa. Thank you, Dr. Winston.
    Dr. Calabria.

                 STATEMENT OF MARK A. CALABRIA

    Mr. Calabria. Chairman Issa, Ranking Member Cummings, and 
distinguished members of the committee, I thank you for the 
invitation to appear at today's hearing. Let me first commend 
the chairman for calling today's hearing. All too often in 
Washington I think we can sometimes get lost in the details of 
policy and forget some of the basic principles, so I do think 
that today's hearing offers us that opportunity.
    Academics and practitioners have long recognized that 
governmental action faces a number of institutional 
limitations. I want to be very clear that these limitations 
don't change with the party in control, they don't change with 
the personalities and competencies of political appointees. 
Certainly, I think anybody could look at, for instance, the 
response to Hurricane Katrina or the initial rollout of the 
Iraq war and say that these things did not go smoothly. This is 
not an issue of party. And, of course, these considerations 
should always be taken into account, and I think we always 
should keep in mind that while Government is capable of great 
good, it is also capable of great harm.
    I would also say that, unfortunately, it seems to be often 
the attitude in Washington is we must do something and leaving 
that option to the private sector should always be something 
that should be considered.
    I also want to be very clear at the beginning of my 
comments that nothing I say is meant to imply that markets are 
perfect. Quite frankly, I don't know of any human institution 
that is not flawed to some degree, so it is always a choice of 
flawed institutions. I will note, however, that, to me, the 
first limitation that Government lacks is the powerful feedback 
mechanisms we find in the marketplace. Private businesses can 
rely on a small number of signals, such as sales volume, 
prices, to determine their success. By contrast, Government 
programs can spend millions, even billions without any clear 
signal of success or failure. For instance, few of us would 
debate whether the iPod or the iPhone has been a success. I 
think we could all agree on that. But economists continue to 
debate whether the New Deal actually ended the Great Depression 
or not, and economists debate whether the 2009 stimulus created 
jobs or not.
    In some degree, these are inherent in the nature of these 
programs. Certainly, Government programs, social issues have 
far greater number of causes and, therefore, do make it harder 
to access. That said, given that all action, public or private, 
is made in an environment of uncertainty, I do think that the 
market allows for a greater level of experimentation that 
reduces that uncertainty in a more timely basis.
    Veronique touched upon even if we did know the right 
solution ahead of time, which, in my opinion, is a big if, 
there is a whole bunch of different incentives that Government 
actors face that might mean they might not even pursue the 
right incentive. For instance, as mentioned, compensation of 
Government employees is rarely tied to performance. One doesn't 
get paid more for success, nor does one get punished for 
failure. Equally important is the fact that few Government 
employees suffer in the face of failure. You can look at the 
area that I look in, financial regulation. I think it is beyond 
question that various bank regulators failed to do their jobs 
during the financial crisis. I would go as far as to say there 
was probably no bigger regulatory failure than at the New York 
Federal Reserve Bank. But its president at that time, Tim 
Geithner, rather than being punished, was given a promotion for 
his performance.
    Again, I would be the first to say that the private sector 
has more than its share of problems, but it is hard to think of 
any firm or industry that has the Federal Government's track 
record of rewarding failure.
    I need not remind members of the political considerations 
that often come in mind. Veronique touched upon those. You 
certainly are very aware of those; you deal with those every 
day, so I will just skip past those. I will say one of the 
problems often that we see in Government is conflicting 
objectives. In general, private businesses have a clear-set 
measurable objectives; in contrast, Government programs often 
result in attempts to make numerous parties happy, with the 
outcome that no party ends up being happy. And while numerous 
objectives might seem like an benefit, I think it leaves 
Government programs without a clearer mandate and makes those 
programs less accountable to both Congress and to the public.
    I would say that one of the contrasts between, as the 
ranking member mentioned, something like Social Security and 
the current healthcare is Social Security has a fairly clear 
objective: to raise elderly people out of poverty. You can 
measure that; you can determine it; you can see whether it is 
working or not. When you have programs that have multiple 
objectives, it is far harder to figure out whether those 
objectives are being met or not.
    Let me spend my last few seconds talking about some of my 
examples from banking regulation, which is my area of 
expertise, not healthcare. But I do think we need to worry 
about any time an insurance program where you provide a 
Government guarantee, are you minimizing the incentive of 
parties to make responsible choices? We call this moral hazard 
in the economics literature. But certainly bailing out banks 
encourages them to make bad decisions; you keep the same banks 
around. For instance, I am sad to say that I don't think is the 
last time we bail out Citibank. We will probably bail them out 
a few more times because we continue to keep them around.
    So, again, it is important to keep in mind that failure has 
to be an important component of the learning process. And just 
like in the private sector, you need to let firms that don't 
actually do a very good job go away, you need to let programs 
that don't do a very good job in the government sector go away 
so that you can focus on those programs that actually do a good 
job.
    Thank you.
    [Prepared statement of Mr. Calabria follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman Issa. Thank you.
    Dr. Thomas.

                STATEMENT OF KAREN KRUSE THOMAS

    Ms. Thomas. Chairman Issa, thank you for the opportunity to 
testify today regarding the past accomplishments and future 
potential of Federal intervention in healthcare.
    Chairman Issa, during your opening remarks you said that 
healthcare has always been in the private sector and should be. 
I would respectfully disagree. Healthcare is one of the most 
heavily subsidized by government areas of the economy, and if 
we want to look at a time when healthcare was still largely in 
the private sector, we would need to go back to pre-1935, and 
it is a disturbing picture.
    Critics of Federal intervention in healthcare, including my 
fellow panelists, see intervention as interference, and they 
see the healthcare industry as a group of private actors, 
health professionals, hospitals, insurance companies, drug 
manufacturers, and these private actors, would according to 
them, if left to their own unregulated devices, do a far better 
job of providing the American people with broad access to 
quality healthcare. Let the market do its work, they say.
    But these criticisms rely on sharp distinctions between the 
public and private sector, and they misapply the same basic 
economic principles to all types of markets, whether the 
product is houses, handbags, or heart surgery. And I can only 
notice that each of my panelists are economists, and no one has 
really talked about how the healthcare market operates 
specifically, so I will try to do that.
    Of all the industries that make up the American economy, 
healthcare most defies the classic model of the private market. 
Physicians are the quintessential small business owners, and 
they have traditionally fiercely defended fee-for-service 
practice as the best system for guarding their patients' 
health.
    Yet, without publicly funded medical education, research, 
service delivery systems, and other Government-sponsored 
aspects of medical care, the medical profession would still be 
the small and struggling band of individualists who began the 
twentieth century with little scientific understanding of how 
disease spread, much less how to cure it.
    I think one of the best examples of the dollar-for-dollar 
value of Government investments in medical research were the 
wartime trials of antimalarial drugs and penicillin. Penicillin 
was brought to you by the Federal Government, essentially. And 
I should be very specific to say that the Federal Government 
has not interfered with the private market so much as it has 
coordinated many public and private actors.
    So in the development of synthetic antimalarial drugs that 
were very important for protecting the lives of U.S. military 
personnel, the malaria research program proved to be the 
largest biomedical undertaking to date, at that time, and it 
also became the model for post-war scientific medical research 
that both private and Government research agencies adopted 
after the war. And that model marshaled the resources of 
academia, Government, and private industry together to produce 
things like cortisone and a variety of other drugs that we now 
take for granted and many of us use on a regular basis.
    So from 1942 to 1946, the Office for the Survey of 
Antimalarial Drugs conducted tests on birds and yielded precise 
pharmacological and toxicological data on 14,000 drugs, roughly 
10 a day for four years. And the private sector, at that time, 
simply was not capable of coordinating such a massive effort, 
and the survey decisively identified a drug called chloroquine 
as the drug of choice against malaria.
    So with my remaining time, the NIH I think is certainly one 
of the most successful examples of Federal sponsorship of 
medicine, but Medicare and Medicaid now function as much to 
preserve the financial status of middle class Americans as to 
enable the poor to purchase healthcare. So, really, those 
programs have operated to support the private market in 
healthcare as much as to undermine it. And I will conclude with 
that.
    [Prepared statement of Ms. Thomas follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Chairman Issa. Thank you. I couldn't disagree with you 
more, Doctor. First of all, I wasn't talking about NIH; it is a 
small part of the budget compared to the trillion dollars plus 
that Medicare and Medicaid consume. The ranking member, in his 
opening statement, talked about the buy-in rate of Social 
Security and Medicare. With all due respect, the buy-in rate is 
mandated by law, and the people who are not in it are in fact 
State employees and city employees who have the good fortune to 
be out of the system, in most cases to their benefit.
    I am from California, which is the largest area of an 
alternative to the Social Security system, one in which the 
returns are three to four times greater than what Social 
Security does, which means for the same amount of dollars in 
California State employees, city, county, that participate 
receive far better benefits. But we are not here to talk about 
Social Security or the NIH.
    What we are here, I believe, is to figure out some 
questions that Dr. Winston--and, Dr. Winston, Brookings is not 
a right-wing conservative bastion, is it? Not a trick question.
    Mr. Winston. No.
    Chairman Issa. Okay.
    Mr. Winston. It is not anything, to the best of my 
knowledge.
    Chairman Issa. Right. Usually when we look for people on 
the left, we often look to Brookings; when we look for people 
on the right, Mercatus, Cato, and so on often come in. We try 
to have a balance here.
    You said some very important things and I am going to use 
my time specifically on areas that are more liberal for a 
moment. You mentioned monopolies, free rider, market 
distortions. Those are all good points and I think you made 
some points. And the Affordable Care Act, although I didn't 
vote for it, does recognize that the market is dysfunctional.
    But, Dr. De Rugy, CMS underpays the prevailing rate, the 
cost of healthcare, don't they? So isn't Medicare and Medicaid, 
administered by CMS, already distorting the market by taking 
private sector doctors and hospitals and underpaying, compared 
to what the private sector has been paying, and cost-shifting 
then to private sector by statute?
    Ms. De Rugy. This is a very good question. I am not a 
healthcare expert, but one of the things that we know about 
government intervention is that it often distorts pretty widely 
the market it operates in. And as Dr. Thomas rightly mentioned, 
the healthcare market has been highly subsidized and Government 
has intervened quite widely. So yes, of course, we can expect 
that providers would be expected to provide a service at a 
lower rate than they would otherwise, which creates problems, 
and also force people to pay at a higher price than they could 
otherwise.
    Chairman Issa. Dr. Calabria, similar question. The fact is 
that Federal intervention, over a trillion dollars worth of 
money taken involuntarily by American workers that are spent on 
Medicare, Medicaid, do eligible, the poor, retirees, so on, it 
is over a trillion dollars. Is there any case to be made, not 
that the money hasn't done good, because people do have 
healthcare, but is there any case to be made that it has driven 
down the cost of delivery to the American people broadly?
    Mr. Calabria. I think this is something we fundamentally 
see across a variety of areas, whether it is housing, whether 
it is education, whether it is healthcare. If you take 
something, and again I am going to apologize for making members 
think about their Econ 101 classes, but if you think about 
something where the supply is relatively fixed, if you give 
people more money to spend on that, you will largely run up 
prices. You have to make sure that you are actually doing 
something that increases supply in the process, and for the 
most part healthcare, like education, like housing, is 
relatively inelastic; that is, supply does not increase a lot 
in the interim. So we do need to make sure that it isn't simply 
captured by providers, but it actually flows through to the 
ultimate beneficiaries.
    Chairman Issa. One of the areas that I want to bring out 
today that is going on today, and it is a little off topic, but 
I think it is appropriate, CMS is reimbursing hospitals at a 
rate higher than clinics or doctors' offices. And, Dr. Thomas, 
you talked about this rugged individual doctor. I haven't met 
them, so they must have been before my time, because doctors, 
in fact, have joined hospitals, and even when they have clinic 
practices they are being bought out by hospitals because CMS 
has made a decision that the same procedure they will pay two 
to three times more if it is done in a hospital, even if not 
clinically necessary, than if it is done in a clinic or 
doctor's office.
    Is there any question in your mind not that Affordable Care 
Act should be scrapped or not scrapped, any of that, is there 
any question in your mind that we need serious reform in how we 
deliver medicine so that the patient gets the best value?
    Ms. Thomas. Yes, and I agree that we do need reform, but 
leaving the market to act supposedly independently is not the 
way to achieve that.
    Chairman Issa. Right. And no one here is suggesting--and I 
will close with this, Mr. Ranking Member--no one is suggesting 
for a moment that we take Government out of healthcare. I was 
with former member Jim Marshall, a dear friend of mine, today 
and we were talking about the fact that we have taken the 
consumer out of the process. And nothing in the Affordable Care 
Act puts the consumer back into it. If anything, health savings 
accounts and other areas in which the consumer was making 
decisions about best value have been taken away.
    So as much as we can rail for or against the Affordable 
Care Act, today is one of many hearings that I believe this 
committee will have on both how do we get good product for the 
Federal Government, like a website, if it is determined to be 
there, but also how do we deal with the fact that since 
Medicare enactment what we have done is we have inordinately 
driven up the cost of healthcare with cost-shifting from the 
Government whenever possible to the private sector. It is not 
sustainable as the Government becomes a bigger and bigger 
buyer.
    And I think, Mr. Ranking Member, with the Affordable Care 
Act we are going to see that, which is we are telling insurance 
companies what is the cost, and we can't tell them to work for 
less, so when they give us the cost it is higher. And I think 
it is the first time, unlike Medicare, where we just find what 
we will pay, it is the first time that we are dealing with the 
market force and finding out that we haven't driven down cost, 
and that is something that your constituents and my 
constituents demand that we figure out how to do.
    With that, Mr. Ranking Member, Elijah, I recognize you.
    Mr. Cummings. Thank you very much, Mr. Chairman. Mr. 
Chairman, I too want a good product for the Federal Government, 
and I do believe in effectiveness and efficiency. I also want 
to make sure that every single American has healthcare and that 
we save lives. So I want to thank our witnesses for being here 
today.
    Dr. Thomas, the basic idea seems to be, in this hearing, 
that the Government is bad and the private sector is good; the 
Government should not intervene, it should not try to help 
people, it should not distort market forces. I certainly 
understand the logic behind free market principles, but I think 
we need to recognize that private corporations are not going to 
necessarily look out for the poorest, the sickest, and the 
least fortunate among us. We have seen people thrown off of 
their insurance policies over and over again. We see the 
preexisting condition situation, where women had minor ailments 
in the past and the next thing you know she doesn't have 
insurance because she didn't even know there was a preexisting 
condition.
    So, Dr. Thomas, I want to ask you, as a historian, to take 
us back and describe for us what it was like for our Nation's 
seniors 100 years ago, before Social Security, before Medicare, 
before they had the social safety net that they have today. 
What was it like for poor, elderly Americans heading into their 
final years when they were unable to work or to rely on a 
family or friends?
    Ms. Thomas. Well, before Social Security and before 
Medicare and Medicaid, older Americans were the single most 
impoverished demographic group in American society and one of 
the problems with healthcare markets is that it is not 
profitable to provide many types of healthcare that are most 
needed. So care for long-term chronic disability, such as that 
caused by tuberculosis or cancer or many other diseases that 
afflict us in old age, is very expensive to provide, so that 
has traditionally been provided, in many cases, by either 
nonprofit charitable organizations or by Government hospitals. 
In those days, many poor people would end up in poor houses, 
and there were no separate health facilities to even care for 
them.
    Mr. Cummings. Is it safe to say that some of them died?
    Ms. Thomas. Absolutely. Yes.
    Mr. Cummings. So where did they go for healthcare services 
if they had no insurance?
    Ms. Thomas. Well, if they were lucky enough to belong to a 
fraternal order, they might go to their fellow members for 
help, but the resources there were so small and especially in 
the rural south and in poorer parts of the Country, even in the 
poorer areas of northern cities, the resources were simply not 
available, either individually or collectively, to pay for 
adequate medical care, and certainly not for preventive care. 
And I think one thing we haven't really talked about is the 
cost of not preventing disease is much greater than the cost of 
preventing it.
    Mr. Cummings. Ron Paul stated, during the debate in 2012, 
that when he started medicine, he said, ``There was no Medicare 
or Medicaid and nobody was out in the streets.'' I don't know 
how old he is, but do you agree with that assessment?
    Ms. Thomas. I do not. In fact, there has been a very 
lively--in the 1930s and 1940s people were riding the rails; 
many people were in fact homeless during the Depression. I 
don't know how old he is, but certainly there were people on 
the streets at that time as well.
    Mr. Cummings. There is a New York Times article this 
morning that talks about 39 percent of the bank tellers in New 
York are getting some type of public assistance, and, of 
course, that probably means a lot of them don't have insurance; 
they need some assistance. What about that type of population? 
And this is in New York, now.
    Ms. Thomas. Right. Well, they can go to city, State, and 
federally-funded health clinics; they can end up in the 
emergency rooms of their local hospitals, who are required by 
law to care for them; and in some cases they may get inadequate 
care or get care too late, which can end up being even more 
costly in the long-run, or they may die.
    Mr. Cummings. And that doesn't necessarily include the 
follow-up.
    Ms. Thomas. Correct.
    Mr. Cummings. Right. They might get care right there, but 
then the question is what follow-up is there, is that right?
    Ms. Thomas. That is right. And if the services are not 
coordinated, and that is a function that government agencies 
often have, if the services are not coordinated, then it may be 
very difficult for individuals to navigate through the system 
and get care.
    Mr. Cummings. Just a last question. Dr. Thomas, The 
Washington Post cited a report issued in 1959 by the United 
States Department of Health and Education Welfare, finding that 
the elderly faced disproportionate risk of illnesses, yet had 
less ability to afford medical care, mostly because of fixed 
incomes. It also cited a report issued in 1963 by Social 
Security Administration which concluded ``Many aged persons 
never recover from economic effects of a single hospital 
episode. Unfortunately, the heaviest burden is likely to fall 
on those with the least resources, and even for the insured 
there is no present guaranty against dependency in old age 
caused by catastrophic medical expenses.''
    Do you agree with that?
    Ms. Thomas. I do, and a major problem with the healthcare 
market is the people who are most likely to be able to 
participate in the private healthcare market are the least 
likely to need extensive and very expensive care. So if we do 
not broker a system where everyone is participating and 
everyone is covered, then there will be large populations that 
are not covered and that create major needs for care.
    Mr. Cummings. Thank you, Mr. Chairman.
    Chairman Issa. Thank you.
    I now ask unanimous consent that the pages from Wikipedia 
on Alexander Fleming be placed in the record. Without 
objection.
    Chairman Issa. Dr. Thomas, do you know who Dr. Fleming was?
    Ms. Thomas. Of course I do.
    Chairman Issa. So March 7th, 1929 is the date of the 
invention and naming of penicillin?
    Ms. Thomas. Yes.
    Chairman Issa. In Scotland?
    Ms. Thomas. Yes.
    Chairman Issa. Okay. I just wanted to make sure it was 
World War I that caused it to be invented. It was World War II 
that it was widely used in and had very little to do with the 
U.S. Federal Government except that we were a recipient of 
Scottish invention.
    Mr. Connolly. Mr. Chairman? Would you yield for a unanimous 
consent request?
    Chairman Issa. Of course.
    Mr. Connolly. I thank the chair.
    While we are putting things in the record, I would ask 
unanimous consent that an article from The Washington Monthly 
called The Best Care Anywhere, by Phillip Longman, be entered 
into the record.
    Chairman Issa. Without objection, so ordered.
    Mr. Connolly. I thank the chair.
    Chairman Issa. Dr. Thomas, I put this in, but I went beyond 
it. Is there something you wanted to say? I didn't want to cut 
you off.
    Ms. Thomas. Just that we may have had penicillin before 
World War II, but we did not know in what dosage to use it or 
how to effectively treat disease with it until we conducted 
clinical trials during World War II that were coordinated by 
the Federal Government. That is what I meant.
    Chairman Issa. By the Department of War, yes.
    We now go to the distinguished gentleman from Florida, Mr. 
Mica.
    Mr. Mica. Thank you, Mr. Distinguished Chairman. Good to be 
with you this morning. Thanks for highlighting some of the 
issues that we face with the size and scope and reach of 
Government.
    Probably some fundamental questions. Ever since the 
founding of the Republic, to get away from king's distant rule, 
taxation without representation, and then the size and scope of 
government and their interference in the colonies' affairs, 
shifting to the creation of our current government, founding 
fathers were always skeptical of government, and again probably 
for good reason. The longer I stay here, the longer I am 
convinced that government could screw up a two car funeral and, 
if given the opportunity, often does.
    Big government programs--I saw some of your comments, Dr. 
Winston--sometimes are adopted because a need, a social need or 
public need, is not met or the public's private sector cannot 
meet that need. In looking at this whole mess, wouldn't it have 
been possible to--for example, I think there is pretty wide 
consensus we need to do something about preexisting conditions, 
about people who were in a lower economic scale, maybe not 
poverty scale, but couldn't afford healthcare, but these were 
some of the deficits that brought about the government and 
people stepping in, saying that government had to take a bigger 
role. But, honestly, the question I would pose is wouldn't it 
have been possible to take and tweak some existing things to 
establish a rules that these plans, and then let the public 
sector put the plans out there, rather than creating the 
exchange, the bureaucracy?
    I remember they came to me when I was chairman of 
transportation. We oversee public programs. They came and said 
we just came to tell you we need a building in Washington that 
will house 5,000 people. That is the administrative people 
required under the--I am not talking about enforcement people, 
just the--I was kind of stunned when they said, well, the bill 
mandates this, we just can do it, all we have to do is tell 
you. And then they came back later and I think they needed a 
building for 7,000. But couldn't it have been done by changing 
some of the requirements and then letting competition and the 
private sector, existing mechanism rather than big government 
take it over?
    Dr. Winston, then others.
    Mr. Winston. I am not an expert in healthcare, but, to be 
honest, I asked the same question. My thinking about this is we 
already have an existing insurance program in the Government; 
it is quite a large one.
    Mr. Mica. Right. We have Medicare and we have Medicaid. 
Medicaid, in particular, might be a vehicle. But we could have 
also mandated that insurance plans cover some of these or----
    Mr. Winston. Or allowed them into the Government's plan.
    Mr. Mica. Exactly.
    Mr. Winston. That was my sense.
    Mr. Mica. Exactly.
    Mr. Winston. I think what we are grappling with is, again, 
what really would be the ``lowest cost solution.''
    Mr. Mica. Exactly.
    Mr. Winston. To the extent we want to achieve this goal, 
how can we do it at least cost.
    Now, my understanding from the experts I know is there is 
no magic bullet. No one has ever told me, look, we all know 
exactly what would be the least cost solution. I think that is 
one of the intellectual challenges in dealing with this. But, 
that said, it would have been nice to at least see a set of 
alternatives, including the one that you are talking about, one 
that intuitively, to me, made sense, and sort of get these 
head-to-head and see how we should go forward.
    Now, maybe that was out there, but through political 
compromises that didn't work. But I think at least it would be 
good to separate out the economics and the politics.
    Mr. Mica. We have something else.
    You wanted to comment?
    Ms. De Rugy. Government intervention always creates 
distortion, so no matter what it would have done, so the 
question is how do you get the Government to do exactly that 
social goal at the least cost without introducing too much 
distortion. And it is worth noting that one of the goals of the 
ACA was to provide universal coverage, which, by the way, 
getting insurance is very different from getting improved 
health outcome. And when you look at the actual results, 
actually not everyone is going to get insurance.
    So right there, when you try to measure success and 
failures, you see that there is a problem in the way the whole 
thing was designed. And, yes, targeting it better could have 
achieved it. It would have introduced distortions, because it 
always does, but it would have been probably better and maybe 
even have achieved the stated goal of the ACA.
    Chairman Issa. You can go ahead and answer briefly.
    Mr. Calabria. Again, what I will start out with, we know 
that the resources have costs, therefore we know that the 
market is not going to provide anything at zero cost. Or the 
fact that somebody cannot afford something when they have zero 
income is not a market failure. It is also important to keep in 
mind that somebody who has zero income can't pay taxes, and we 
don't consider that a government failure.
    So my point is that we confuse, in my opinion, a number of 
programs in thinking that this is some market failure to 
provide a good, when the problem that we are facing is an issue 
of poverty. If rich people don't have this problem, then we 
know it is not a market failure. And essentially I think we 
would have a much better functioning Government if we gave 
people in poverty the dignity of let's cut you a check and make 
you non-poor, and let's let you make the decisions for what is 
important in your life for you to spend that money on, rather 
than us tying assistance to a whole basket of various different 
goods, of which, of course, the providers grab most of the 
subsidy anyhow.
    Mr. Mica. Thank you.
    Chairman Issa. I thank you.
    We now go to the gentlelady from New York, Mrs. Maloney.
    Mrs. Maloney. I want to thank the chairman and the ranking 
member for holding this important hearing and all of the 
panelists for their testimony, many of whom represent 
distinguished institutions of learning and think tanks. I would 
like to quote my own distinguished comedic think tank, the 
Borowitz Report. Now, Andy Borowitz has pointed out that many 
or some of my Republican colleagues have criticized President 
Obama and his team for having the audacity to support one of 
their own ideas, an idea that came out of The Heritage 
Foundation. And I would like to quote the conservative Heritage 
Foundation, which had praise for a plan that it described this 
way. And this was their report in 2006 on Romneycare, this 
statement. They said, ``The cornerstone for this reform is a 
personal and responsibility principle. The plan establishes a 
health insurance exchange to enable individuals to purchase 
health insurance. The plan also focuses on restraining the 
growth in healthcare costs by empowering consumers and making 
healthcare service and cost information more readily 
available.''
    The distinguished report went on to criticize some of my 
Republican colleagues for plotting to make the Affordable Care 
Act work, or criticizing efforts by President Obama and his 
team to be flexible, to make adjustments in the plan. Some went 
on to criticize the President and his team for having a website 
that was far too slow. Then some turned around and criticizes 
the President's team for having a website that worked too fast.
    So we have some difficulty in working together, but I do 
think you raise some important points in your testimony, Dr. 
Thomas, and I would like to quote the area where you talked 
about how healthcare, not only the improvement in quality of 
life and education, but the life expectancy has been improved 
by 37 years, and some of this was because of public healthcare 
and public healthcare research and standards, and I want to 
thank you for pointing that out. But I have some further 
questions on healthcare.
    I would like to ask you, Dr. Thomas, do you remember how 
many Americans were without healthcare insurance before the 
passage of the Affordable Care Act? How many Americans were 
there? There were many reports. Do you remember how many 
Americans did not have healthcare?
    Ms. Thomas. I have always gone with the figure of 
approximately 40 million.
    Mrs. Maloney. Some say 50.7 million in 2010.
    Ms. Thomas. Right.
    Mrs. Maloney. I also want to cite a very important study in 
2009 by the Harvard School of Public Health. Now, this 
celebrated study, you may remember it, found that a large 
number of early deaths were associated with the lack of health 
insurance. And they further pointed out that 45,000 Americans 
died yearly, in their report they estimated, because they did 
not have health insurance.
    Now, do you believe this report, Dr. Thomas, that came from 
the Harvard School of Public Health?
    Ms. Thomas. Yes, I do.
    Mrs. Maloney. You do believe that that many people were 
dying. And before the passage of the Affordable Health Care 
Act, do you recall the percentage of people without healthcare 
by States? There were a lot of reports that showed the 
percentage of people who did not have healthcare, and it varied 
dramatically, from 4 percent to 24 percent. The 24 percent was 
the State of Texas. And the 4 percent, guess what State it was? 
What State was it that had the highest number of people with 
health insurance? Only 4 percent of their population did not 
have it.
    Ms. Thomas. I am guessing Connecticut, but I----
    Mrs. Maloney. No, it was Massachusetts.
    Ms. Thomas. Right.
    Mrs. Maloney. Because of Romneycare.
    Ms. Thomas. Yes, of course. Yes. Yes.
    Mrs. Maloney. Romneycare. And I did my own survey; I called 
anyone I know in Massachusetts. They were very happy with their 
healthcare coverage.
    Do you understand why there was a difference between the 4 
percent and the 24 percent? What was the difference?
    Ms. Thomas. Because there was Romneycare in Massachusetts.
    Mrs. Maloney. Yeah, Romneycare, which President Obama gives 
full credit to the distinguished former governor for his work 
in supplying healthcare to the vast majority of the people who 
live there.
    Are you also aware that in the three years since 2010, the 
real per capita annual growth rate of national health 
expenditure has been just 1.3 percent? And this responds to the 
concerns that I think are very legitimate of the chairman to 
contain costs. We all agree the costs were out of control, and 
the historic average growth rate was 4.5 percent. But now, 
because of the Affordable Care Act, we are at 1.3 percent 
growth in the cost of medical care.
    So I would like to ask any of the panelists are you able to 
point to any prior three-year period that saw a lower growth 
rate in our national healthcare expenditures ever in history?
    Chairman Issa. The gentlelady's time has expired, but 
please answer.
    Ms. De Rugy. So, actually, the growth in the cost of 
healthcare has been going down since 2003, and, in fact, it has 
stopped to decline since 2009. So in some ways you could 
actually say that maybe the ACA has actually paused that 
decline in the cost. And, in fact, CMS has put out a report 
which actually one of my colleagues, a trustee for Social 
Security and Medicare, charged----
    Mrs. Maloney. Reclaiming my time. If you could get your 
response in writing, because I think it is very important, and 
it is absolutely different from the report that I have seen on 
the per capita growth rate that showed a 4.5 annual growth in 
expenditures. I think this is an important point and we should 
get this in the record.
    Chairman Issa. Without objection, that material could be 
placed in the record.
    Ms. De Rugy. Absolutely.
    Chairman Issa. Thank you.
    We now go to the gentleman from South Carolina.
    Mrs. Maloney. And may I also place in the record my 
research on this from the National Institutes of Health on the 
growth rate during those periods.
    Chairman Issa. Anything from the National Institutes of 
Health will be welcome. Without objection.
    Mrs. Maloney. Thank you.
    Chairman Issa. Mr. Gowdy.
    Mr. Gowdy. Thank you, Mr. Chairman. The debate over the 
role of Government in our Republic is a fascinating one and 
probably outside the boundaries of a five-minute Q&A. What is 
not debatable is if Government is going to enter into 
something, we have a legitimate expectation that they do so 
competently and in a trustworthy fashion.
    So, Dr. Thomas, let me start with you. What do you think 
the largest avoidable mistake was with respect to the rollout 
of the website? The largest avoidable mistake.
    Ms. Thomas. I am not qualified to speak to that. I am not 
knowledgeable about the technological aspects of the website.
    Mr. Gowdy. Neither are the people who designed the website, 
apparently. You have no thoughts on what the largest avoidable 
mistake was with respect to the website?
    Ms. Thomas. I do not.
    Mr. Gowdy. Dr. Calabria?
    Mr. Calabria. I would preface with saying I am not an IT 
expert, I am not an expert on the website, so I certainly would 
say the sense you had to have it running by a certain date, 
rather than having made sure it was ready before I certainly 
think is a mistake, but I would emphasize what Dr. Thomas said, 
not an expert on the website.
    Mr. Gowdy. Well, let me ask you this, then, if you are not 
an expert on the website. It strikes me that if there is a 
security issue with Amazon or eBay, the consumer has recourse; 
there are consequences for that. What are the consequences if 
there are security issues with a Government website? I mean, 
you could argue that there would be electoral consequences, but 
we had a several hour hearing and I still can't tell you who is 
responsible for the website. I can tell you it is not the 
President, it is not Kathleen Sebelius, it is not any of the 
people that you would think would be responsible for this train 
wreck. So what does a consumer do when they are let down by a 
Government website?
    Mr. Calabria. I think that is an important point, and both 
Veronique and myself talked about the role of incentives here, 
which is, A, there is often not clear chains of authority, I 
mean, the buck should stop somewhere with something; and there 
is never any penalty, there is never any punishment. Certainly 
not the website. Alone, we have all heard the stories of NSA 
spying and going through what we are all looking at on the web, 
but I haven't yet heard of any NSA employees being disciplined 
for that.
    Mr. Gowdy. I have one even worse than that. How about the 
GSA? Do you remember the picture of the gentleman with the 
glass of wine in the hot tub?
    Mr. Calabria. Oh, yes.
    Mr. Gowdy. Do you know what consequences came from that?
    Mr. Calabria. I believe they rehired him. Of course, I will 
also say, as somebody who follows financial services, you have 
probably heard of the very large number of SEC employees who 
spent the financial crisis looking at porn sites on their 
office. None of them were fired. So, again, where is the 
accountability? Where does the buck stop is an important part 
of this question.
    Mr. Gowdy. Dr. Winston?
    Mr. Winston. I mentioned in my testimony that story that I 
read about an IT supplier who offered to build this website at 
no cost. I can't remember exactly now the name of the firm, but 
they had a lot of experience doing it. I am sure we can find 
that out. But they were told they couldn't do it because of 
regulatory constraints, and then the Government went out and 
hired another firm. At the very least, one could have brought 
them on as a technical consultant or somebody who could provide 
guidance, because they certainly were confident enough and 
experienced enough to do it. So I think clearly an avoidable 
mistake was just the lack of ability to bring in the highest 
level of technical advice and competence, which apparently may 
have been able to prevent some of the problems that occurred.
    Mr. Gowdy. Well, it just strikes me that you can debate the 
role of Government, but if Government is going to do something, 
you really should not debate whether it ought to be done 
competently and in a trustworthy fashion. And there are no 
consequences or, if there are, I haven't seen them to date.
    With that, I would yield to the chairman.
    Chairman Issa. I thank you for yielding.
    I just want to get two things in the record quickly. One of 
them is because there was the doubling of life expectancy, I 
just want to get into the record in 1960 we spent 5 percent of 
GDP on healthcare and we had a 69.7 combined life expectancy 
age. In 2006 we spent 16 percent, a more than threefold 
increase in the percentage of our growing GDP we had. We became 
very wealthy during this period, but we exceeded it by triple 
and we raised ourselves by eight years, to 77.7.
    Dr. Calabria, quite frankly, isn't that what we should be 
talking about, is how we spend more than three times the 
growing wealth of our Nation on healthcare and, yes, we are 
getting an increase in life expectancy, but certainly not 
proportional and not when you look at our competitors around 
the world, where countries like Canada, to our north, spend a 
third to a half less than we do?
    Mr. Calabria. I would very much agree. You could certainly 
that we are spending a lot of money on these things, but what 
are we getting? We are getting a bang for our buck and we could 
do a far better job of that and try to get more efficiencies 
out of that, which I think gets back particularly to 
Congressman Mica's point about having some consumer choice in 
this to me is an incredibly important part of it.
    Chairman Issa. Dr. Thomas, my colleague said something and 
I am taking something because he said it and he is rightfully 
so. He said universal healthcare. The debate that we are having 
today is on something that is not universal, it is an extension 
of Medicaid, effectively, it is a vast expansion of Medicaid 
both in literally who gets it and in the subsidy that is 
effectively a back-door Medicaid for the working less wealthy 
up to over $60,000. From the standpoint of your view of the 
good it is doing, it is predicted we will get to 20 percent to 
21 percent of GDP as a result of the Affordable Care Act in 
total healthcare spending. Would you sit here today and say 
that our goal should be to deliver life expectancy beyond 78 
years and do it for less than 21 percent of GDP?
    Ms. Thomas. I would respond to that by saying that our 
healthcare spending, we are living longer than ever before and 
much of our healthcare spending is to deal with the chronic 
diseases of old age that we used to not have to deal with 
because were dying earlier. So those life expectancies----
    Chairman Issa. Okay, well, my time has expired, so does 
anyone want to answer the question, which is should we have a 
goal to live long, live well, and do it at a rate below 21 
percent and growing, or likely to be 21 percent and growing, 
percentage of GDP, when we are competing against nations that 
have 9 percent or less and have life expectancy as long as 
ours? Hearing none, I will recognize that my time has expired.
    Mr. Gowdy. Mr. Chairman, could I correct one thing very, 
very briefly that my friend from Virginia--my friend from 
Virginia told me that there were consequences that arose from a 
hearing that we had with respect to GSA. If my friend from 
Virginia tells me that, I believe him and I will take it upon 
myself, Mr. Chairman, to find out the full panoply of the 
consequences and report back to you and to my friend from 
Virginia.
    Chairman Issa. I thank you. And I don't think there is 
anyone here that would fail to think there should be 
consequences in the case of GSA.
    With that, we go to the gentlelady and my friend from the 
District of Columbia, Ms. Norton.
    Ms. Norton. Thank you, Mr. Chairman. Just to try to respond 
to your question about the correlation between the increase in 
life expectancy and what we spend, sure it is going to go down, 
because we have been spending--and I think Dr. Thomas gave one 
answer, but you know the Affordable Healthcare Act is going to 
help that because we have been spending this money on sending 
these people, up until now, to the emergency room; we have been 
spending almost no money on preventative care; we have been 
spending disproportionate amounts of money on the very last 
years of life, when people are about to die anyway. You have a 
lot of factors. But I do want to----
    Chairman Issa. Would the gentlelady yield?
    Ms. Norton. If you don't take my time for me.
    Chairman Issa. I will stop the clock.
    Are you saying that there is something in the Affordable 
Care Act that is actually going to drive down----
    Ms. Norton. I am. I am saying, for example, that the 
subsidies, which are a part of the Affordable Healthcare Act, 
means that people are going to get their own doctors, they are 
going to have preventative care, that you won't get to the 
point where the disease is costly, you have to have the most 
expensive procedure, you have to have your leg taken off.
    Chairman Issa. I hope to see it.
    Ms. Norton. I am saying that those things will, in time, 
show up. They are not going to show up in the first few weeks 
of the rollout.
    And I do want to thank a very distinguished panel. One of 
them is one of my own constituents. Welcome, Mr. Calabria. But 
I want to thank all of you for your testimony.
    I do note for the record that only Dr. Thomas is an expert 
in healthcare, and I think that must have been deliberate, 
because we are talking about the rollout of healthcare. And 
that is without casting any dispersion on the very 
distinguished witnesses we have here.
    But what troubles me, Mr. Chairman----
    Chairman Issa. Would the gentlelady accept a friendly----
    Ms. Norton. Certainly.
    Chairman Issa. Dr. Thomas, according to our information, is 
a historian and communications associate at Johns Hopkins. We 
were unaware. It is the School of Public Health, so it is 
history of health. But I may be wrong. Perhaps she could tell 
us what her expertise is in health, because everyone today is a 
PhD. None of these are medical doctors.
    Ms. Norton. She is an expert on healthcare, Mr. Chairman. 
And if she is not, let her tell us.
    Ms. Thomas. I spent four years doing a post-doctoral 
fellowship in the history of medicine, largely concentrating on 
twentieth century health policy in public health at the 
Institute of the History of Medicine at Johns Hopkins 
University.
    Ms. Norton. I was simply drawing a contrast between some 
background in healthcare, and I did say, even though I respect 
all three of the other witnesses, Mr. Chairman, I hope that 
wasn't taken from my time.
    But I do want to say that this is an amazing hearing that 
the Government of the people, by the people, and for the people 
should not provide healthcare for the people is essentially the 
theme of this hearing. It is a fundamentally anti-American 
message. Fortunately, it is false, and I think the chairman, 
with his rollout of the many ways in which the Government has 
produced for the people, lays that to rest.
    The Affordable Healthcare Act is not a Government program. 
Not even single payer. So I don't understand the concept here. 
This is a Republican idea which outsources to the private 
sector. This is why the insurers bought into the program and 
that is why they are so anxious that this website get up and 
get right. Yes, they are getting subsidies, but that is to save 
the American people money. Nobody is just throwing money at 
people.
    Mr. Chairman talked about D.C. Health Link. Yes, there are 
errors there, but it was cited as one of the four successful 
rollouts throughout the United States, and I want to cite it 
because it is an example of why this is not a Government 
program. You go on D.C. Health Link; 267 options. And when they 
insisted that on D.C. Health Link they would put the costs up 
front out so anybody could see it, they drove competition and 
others came in and lowered their prices. This is a 
quintessentially private sector approach. The Government's only 
role is to say we are not even refereeing it, we are putting up 
a website. That is why we think that website has got to be 
gotten right.
    The chairman talked about winners and losers. Here we have 
267, or whatever the number is in your district. Nobody is 
picking anything except the people who go on that website.
    Mr. Calabria talked about market feedback. I just cited to 
you, Mr. Calabria, what the market feedback was when 
competitors saw 267 prices on the link. They never could have 
seen it otherwise. The individual never could have gotten that 
information if it had not been for D.C. Health Link. My staff 
went on there and report, for example, several of them have 
reported to me that they have saved $100 already looking on the 
site, with comparable healthcare, $100 per month.
    Dr. Winston talked about programs in the public sector, 
like ACA, do not necessarily drive down costs, and he may be 
right. Of course, I have cited an example where, precisely 
because the Government put this website out, costs are being 
driven down.
    One thing that ACA does not have is a mechanism, a 
Government mechanism for driving down costs. They are depending 
upon this competition to do so.
    I want to ask Dr. Thomas about--since what was supposed to 
have spurred this was the rollout--about the Medicare rollout. 
Now, we would have done Part D in a different way. The last 
thing we did, though, when it finally happened, we certainly 
didn't say we will just wipe it off the board. We didn't try to 
repeal it. Do you recall public and, for that matter, political 
sentiment at the time of the Medicare D rollout, whether there 
were large problems?
    Chairman Issa. The gentlelady's time has expired.
    Ms. Norton. My time was taken up, Mr. Chairman, by you, 
among others.
    Chairman Issa. No, we stopped the clock.
    Ms. Norton. You don't even want to let her answer the 
question?
    Chairman Issa. No, I was saying your time has expired, but 
the gentlelady certainly can answer.
    Dr. Thomas. At the time of the Part D rollout in 2005 and 
2006, there is great concern about how complex the instructions 
were for enrollment and people were very concerned that their 
existing drug coverage would end and that they would not be 
picked up by the new law, and there were great difficulties in 
the initial implementation of the law that have since been 
fixed, and we now, I think, are in bipartisan agreement that 
Medicare Part D is working and is a good program.
    Ms. Norton. Thank you, Mr. Chairman.
    Chairman Issa. Thank you.
    The gentleman from Tennessee, Mr. Duncan.
    Mr. Duncan. Well, thank you, Mr. Chairman. I remember 
during my first term in Congress, in 1989, I went to a 
conference put on by the American Medical Association, and the 
man who was then the president of AMA was laughing in a 
presentation that he made about the fact that, as the ranking 
member mentioned, the AMA had opposed Medicare, because he said 
that he knew at the time it was started that the doctors would 
get their part, and they certainly have. Many doctors have 
gotten wealthy off of it. And I remember reading last year, I 
think it was in an Associated Press article, that six of the 
ten wealthiest counties in this Country are suburban counties 
to Washington, D.C.
    What I am getting at is, as Dr. De Rugy has mentioned, all 
these Federal programs, they have wonderful motherhood and 
apple pie titles and they have good goals, but they end up 
benefitting primarily Government contractors, large 
corporations, and Government employees. You mentioned Goldman 
Sachs and some other companies, and the chairman mentioned that 
we have spent $640 million so far on the website. The Canadian 
company whose American subsidiary got the bulk of the money on 
the website, one of the top officers is a close friend to the 
President's family. And all of these Government contracts, when 
you go beneath the surface and you find out what is behind it, 
almost all these big Federal contracts are some sort of 
sweetheart or insider deal. I read several years ago about the 
revolving door at the Pentagon, because they hire all the 
retired admirals and generals, the defense contractors do.
    And the same thing is going to happen, I am afraid, with 
Obamacare. It is going to end up benefitting some extremely big 
companies. I read just this morning an article that some of the 
health insurance companies are now working with the White House 
to try to implement the program because they see huge profits 
ahead.
    And I think back to the mid-1990s, when I went to a 
reception in Tennessee, and the doctor who delivered me came 
and brought my records, and I asked him how much he charged 
back then. He said he charged $60 for nine months of care and 
the delivery, if they could afford it. Medical care used to be 
cheap and affordable, and doctors even made house calls; and 
then the Federal Government got into it. The same thing has 
happened. It shocked students at the University of Tennessee 
when I tell them that it was $90 a quarter when I went there, 
$270 a year. Until that program started, college tuition and 
fees went up at just the rate of inflation. Then when the 
Federal Government got into it, every year since then it has 
gone up three or four or five times the rate of inflation.
    It just seems that everything the Federal Government 
subsidizes, the costs just explode. And we talk now, already we 
are hearing that Obamacare is going to cost three or four times 
more than when it was passed. And I remember reading years ago 
that Medicare was predicted was going to cost $12 billion after 
the first 25 years; instead, it cost almost 10 times that much, 
and now it costs four times more than that. So all these 
Federal medical programs have been low-balled on the front end. 
And what I don't understand is how we are going to add many 
millions of people who were previously uninsured and now 
millions more receiving notices saying that their premiums are 
going out the window so much that they are not going to be able 
to afford those premiums, so we are going to add all those 
millions.
    These costs, it seems to me, are inevitably going to 
explode. Dr. De Rugy, what do you say about that?
    Ms. De Rugy. I agree with you. A lot of these programs, 
independently of the social benefit that we assign them, are 
unsustainable, whether we like them or not. Medicare, Social 
Security, Medicaid, these are programs that are extremely 
expensive. And then you add on top of it the ACA. We already 
have a big debt problem, but it is going to explode.
    And I wanted to add something about what you said. Yes, the 
private insurance industry was extremely supportive because 
they were going to benefit immensely from it. When you have a 
law that mandates that everyone buys insurance, that means 
millions more customers for the insurance industry. And I would 
bear to also say that in this instance, because of the way the 
law was drafted, the law did pick winners and losers. Because 
of the requirement by Obamacare, it meant that younger and 
healthier Americans were going to have to face much higher 
premiums.
    Chairman Issa. The gentleman's time has expired.
    Dr. Winston, if you need to answer.
    Mr. Winston. I just want to add one point just to round out 
what you were saying. I think it is important to keep in mind 
that a large source of the increase in medical expenditures is 
due to technological change and innovation. Obviously, we are 
not getting the same products that we once got. That is a good 
thing, and that is coming from the private sector, to a large 
extent. The challenge for Government is how is it that they 
intervene in ways that spur technological change in innovation 
without excessive increases in cost, as opposed to impeding 
technological change and innovation. That is really what we 
need to do.
    Mr. Duncan. Well, I will close just by saying that we are 
having great difficulty funding the programs that we already 
have.
    Thank you, Mr. Chairman.
    Chairman Issa. I thank the gentleman.
    We now go to the gentleman from Massachusetts, Mr. Tierney.
    Mr. Tierney. Thank you, Mr. Chairman.
    So, Dr. Calabria, I just want to note that you were here 
for a hearing on the rollout of healthcare government. Your own 
testimony says, ``I am not an expert on healthcare,'' is that 
right?
    Mr. Calabria. That is correct.
    Mr. Tierney. Okay. And in your statement you also say, 
``Doing nothing should always be an option or, rather, leaving 
the problem to be solved by the voluntary private sector.'' Is 
that accurate as well?
    Mr. Calabria. Absolutely. You can always make something 
worse.
    Mr. Tierney. Thank you.
    Dr. De Rugy, in your written testimony you focus mostly on 
the Department of Energy's loan guarantee program and then you 
say, ``Government solutions are not only unlikely to solve most 
of our problems, they often make problems worse.'' Is that 
fair?
    Ms. De Rugy. It is fair.
    Mr. Tierney. Okay.
    Dr. Winston, you talked mostly about transportation and 
infrastructure programs. Let me quote from your testimony: ``I 
am much less familiar with empirical assessments of Government 
services and programs to pursue social goals.'' Is that an 
accurate quote?
    Mr. Winston. Yes.
    Mr. Tierney. Thank you.
    So, Dr. Thomas, you actually work in the public health 
field, you have the background that you just stated on that, so 
I want to focus a little bit on you and talk about this concept 
that the free market always works better. Before Horace Mann, 
how was the private sector doing on educating most students in 
this Country?
    Ms. Thomas. In some parts of the Country, literacy rates 
were high, but in many, many parts of the Country there is no 
education available to the vast majority of the population.
    Mr. Tierney. And before Social Security and Medicare, what 
was the poverty rate among seniors?
    Ms. Thomas. I do not specifically know, but I know that it 
was significant and that health costs were a major part of that 
poverty.
    Mr. Tierney. And how did Social Security and Medicare's 
enactment affect that?
    Ms. Thomas. We need to remember Medicare and Medicaid are 
parts of the Social Security Act. Together those things lifted 
many, many millions of Americans out of poverty. And I think it 
is important to add that minority groups, who had been hardest 
hit by poverty rates, were also dramatically helped by those 
programs.
    Mr. Tierney. And I would assume that since the recession, 
the fact that 95 percent of all economic gains have gone to the 
top one percent is not what you would think is a great symbol 
of the private market working effectively for everybody?
    Ms. Thomas. No, I would not.
    Mr. Tierney. Okay. So the premise by the Majority seems to 
be that Government's ability to effectively or inability to 
effectively design, implement, and administer large-scale 
projects and programs. Let me talk to you a second about the GI 
Bill. Is it your understanding that the GI Bill has been a 
success?
    Ms. Thomas. Absolutely. My own father went to Georgia Tech 
on the GI Bill.
    Mr. Tierney. And, in fact, on November 8th of this year we 
had the one millionth recipient of the GI Bill that was passed 
after September 11th, 2001.
    Ms. Thomas. Yes.
    Mr. Tierney. And basically I would think that the 
Government has been administering that program fairly well, in 
your opinion?
    Ms. Thomas. Yes.
    Mr. Tierney. Some $30 billion in new GI Bill benefits have 
been awarded to Iraq and Afghanistan veterans since 2009, is 
that about right?
    Ms. Thomas. Yes.
    Mr. Tierney. So you would think that the GI Bill has been 
worth the effort of the Federal Government in its expenditures?
    Ms. Thomas. Yes. And it helped the overall market to work 
better because it brought so many more skilled people into the 
workforce.
    Mr. Tierney. Now, the intervention of Government in 1966 
through Medicare, that saw some problems with the rollout of 
that program, similar to what we are hearing today?
    Ms. Thomas. Very similar.
    Mr. Tierney. And in 1937 we could say the same about Social 
Security, correct? People were all sorts of critics about the 
program; it was going to cause too much swelling of 
bureaucracy, it was going to slow the economy?
    Ms. Thomas. Correct.
    Mr. Tierney. And Part D, Medicare Part D talked about their 
being a marred rollout. Republicans, in fact, at that point in 
time, however, were saying, look, it is a marred rollout, but 
it has glitches; we should work closely with CMS to get the 
problems resolved on that.
    Ms. Thomas. Yes.
    Mr. Tierney. All right. And I would protest that if we work 
closely with the glitches in the Affordable Care Act, we can 
get those resolved as well, would you agree?
    Ms. Thomas. I agree. I think the Affordable Care Act is 
very much in the tradition of these other programs that you 
have mentioned and that we are going to look back even a year 
from now and see that the Affordable Care Act is a good 
investment and is working.
    Mr. Tierney. So, historically, are you familiar with any 
program that the Republicans proposed during this discussion of 
the Affordable Care Act that would cover the 40 million 
Americans that were otherwise uncovered?
    Ms. Thomas. I am not.
    Mr. Tierney. Are you aware of any proposal that would have 
affordably allow people to stay on their parents' policy until 
they are 26 if they are not otherwise covered?
    Ms. Thomas. No.
    Mr. Tierney. Are you aware of any Republican suggestions of 
how they would affordably make sure that insurance companies 
didn't shut off your health insurance with an annual or 
lifetime cap on coverage?
    Ms. Thomas. No. The insurance companies had done none of 
this on their own.
    Mr. Tierney. And the same is true with preexisting 
conditions, is that correct?
    Ms. Thomas. Correct.
    Mr. Tierney. I yield back. Thank you.
    Chairman Issa. I thank the gentleman.
    I now ask unanimous consent that 15 letters sent to health 
insurance companies related to broken promises and when did 
they know that they were going to be canceling individuals 
under the Affordable Care Act be placed in the record. Without 
objection, so ordered.
    Chairman Issa. We now go to Mr. Meadows, who came back just 
in the nick of time.
    Mr. Meadows. Thank you, Mr. Chairman.
    Dr. Thomas, I know that my friend and colleague was asking 
you about Republican proposals, and hopefully this is not 
something--how many people do they estimate will still be 
uninsured under ACA, do you know?
    Ms. Thomas. I do not have an exact figure.
    Mr. Meadows. Do you have an approximate figure? You are a 
historian.
    Ms. Thomas. Yes.
    Mr. Meadows. So you don't know trends?
    Ms. Thomas. Well----
    Mr. Meadows. So, under ACA, how many people will--you were 
able to quote how many were going to be covered, so I would 
assume that you would know how many are going to be left 
uncovered.
    Ms. Thomas. I think there will still be approximately 5 to 
10 percent uncovered.
    Mr. Meadows. Well, according to estimates, some 30 million 
people will still be left uninsured, is what the current 
estimates have. Some 30 million people would still be without 
insurance even under ACA.
    Ms. Thomas. And may I ask where those estimates are from?
    Mr. Meadows. CBO. So if you look at the CBO, they are 
saying almost 30 million people will still not be covered. So 
this is not a solution that will have everybody covered.
    Ms. Thomas. Mm-hmm.
    Mr. Meadows. So I want to ask--you have gone and you have 
had a number of options here as we have started to look at 
history. Can you speak to the fact that we have trends right 
now where, under current Medicaid and Medicare, that the 
reimbursements are not covering the costs? Would you agree with 
that? To provide those healthcare coverage. Does Medicaid cover 
all the costs of actually providing that service, reimbursement 
to physicians?
    Ms. Thomas. No, it does not.
    Mr. Meadows. All right. So does that distort the market?
    Ms. Thomas. The rates of----
    Mr. Meadows. Of reimbursement.
    Ms. Thomas. Well, I can speak from personal experience. 
When you get an explanation of benefits from a medical visit--
--
    Mr. Meadows. All right, maybe let me change and rephrase 
the question. Do you ever hear complaints from physicians where 
they don't want to take new patients because the reimbursement 
is not adequate to cover their costs? That is an easier 
question.
    Ms. Thomas. Yes. However, in some cases, over time Medicare 
has reimbursed at higher rates than private insurance.
    Mr. Meadows. Okay, but let's look at Medicaid. I am in a 
rural areas, so we get a lot of Medicaid patients, and what I 
am finding is a lot of physicians don't want to take Medicaid 
patients because the reimbursement doesn't even cover their 
costs, hospitals included. Would you agree with that?
    Ms. Thomas. I would, but I would also say that without the 
Medicaid program, there would be far more people who wouldn't 
get care at all.
    Mr. Meadows. All right. Is there not a Federal law that 
says everyone has to get care?
    Ms. Thomas. There is a Federal law----
    Mr. Meadows. Is there a Federal law, yes or no?
    Ms. Thomas. Care in the emergency room, yes.
    Mr. Meadows. Right. So it is a matter of how we get that 
care to them in terms of the efficiency of that. Because right 
now there is a law, if I show up, regardless of my ability to 
pay, at an emergency room, I can get care, is that correct?
    Ms. Thomas. Yes.
    Mr. Meadows. That is a Federal law. So what we are talking 
about is the efficiency, as Dr. Winston talked about earlier, 
is what is the most efficient way to deliver that healthcare, 
is that not correct?
    Ms. Thomas. Yes.
    Mr. Meadows. All right. So in doing that, from a historical 
perspective, are there major inefficiencies in Government 
delivery of services, whether they be medical or anything else? 
Are there inefficiencies there?
    Ms. Thomas. Certainly.
    Mr. Meadows. All right. So has the private sector 
historically done a more efficient job of providing services, 
whether they be medical or not? Have they historically done a 
better job of providing a more efficient delivery, historically 
speaking? You are under oath.
    Ms. Thomas. You are talking about all of the private sector 
in all parts of the economy?
    Mr. Meadows. I am saying historically speaking--you are 
talking about trends. Historically speaking, is the private 
sector a more efficient mode of delivering goods and services, 
whether they be medical or not, historically speaking, have 
they been more efficient? You are a historian.
    Ms. Thomas. I don't think I can answer that question 
because it is so broad.
    Mr. Meadows. Okay. Well, my time has expired. I yield back.
    Thank you, Mr. Chairman.
    Chairman Issa. We now go to the gentleman from Virginia, 
Mr. Connolly.
    Mr. Connolly.
    Mr. Connolly. I thank the chairman. And I am delighted to 
hear my friend from North Carolina's concern about uncovered 
citizens. Hopefully, North Carolina and Virginia will both come 
to their senses and broaden Medicaid so that those people will 
have coverage.
    By the way, let me follow up on my friend's last question 
to you, Dr. Thomas. Historically, since World War II, can you 
give us a single industrialized country where the government 
has not intervened and provided healthcare to its citizens?
    Ms. Thomas. No. There are none.
    Mr. Connolly. There are none. So that efficient private 
sector somehow just didn't work in any industrialized country. 
The United States is actually laying way behind others in the 
industrialized world in the comprehensiveness of its coverage 
until the passage of the ACA. Would that be an accurate 
historical statement?
    Ms. Thomas. That is absolutely true.
    Mr. Connolly. And you are under oath, as my friend reminded 
you.
    Ms. Thomas. Yes.
    Mr. Connolly. Thank you.
    Ms. Thomas. That is absolutely true.
    Mr. Connolly. Dr. De Rugy, my friend the chairman 
characterized Brookings as a left-of-center organization in 
contradistinction to your center, the Mercatus Center, which he 
characterized as right-of-center. Would you accept that 
characterization?
    Ms. De Rugy. No. Actually, we are really independent.
    Mr. Connolly. Really independent.
    Ms. De Rugy. We spend a great amount of time criticizing 
both sides of the aisle.
    Mr. Connolly. And lots of donors like the Koch brothers, 
for example, is that correct?
    Ms. De Rugy. We have lots of individual donors.
    Mr. Connolly. Including the Koch brothers?
    Ms. De Rugy. Yes. It is well known.
    Mr. Connolly. Yes. You don't come here as a healthcare 
expert, you come here as an economist, is that correct?
    Ms. De Rugy. That is correct.
    Mr. Connolly. And your position is, a priori, that any 
Government involvement distorts the marketplace.
    Ms. De Rugy. It does.
    Mr. Connolly. It does. So you consider Medicare a 
distortion?
    Ms. De Rugy. It does, yes.
    Mr. Connolly. Medicaid?
    Ms. De Rugy. Medicaid.
    Mr. Connolly. Veterans Administration?
    Ms. De Rugy. We may be willing to put up with distortion to 
achieve some social goal.
    Mr. Connolly. No, I am not asking--don't jump ahead. I am 
asking the question here. So is TRICARE, medical TRICARE, 
military TRICARE healthcare a distortion in the marketplace, 
based on your philosophy?
    Ms. De Rugy. All Government intervention introduced 
distortions.
    Mr. Connolly. And that includes the Veterans Administration 
healthcare system.
    Ms. De Rugy. It does.
    Mr. Connolly. It does. And I see Dr. Calabria agreeing with 
you. Does the Centers for Disease Control, is that a 
distortion? It is a big Government program; monitors public 
health.
    Ms. De Rugy. It does, but again----
    Mr. Connolly. Again, ma'am, I am just trying to see is it 
consistent with your philosophy that it represents a 
distortion. We will hold off for a minute, normatively, whether 
it is good or bad.
    Ms. De Rugy. Government intervention introduced 
distortions.
    Mr. Connolly. And you would include the National Institutes 
of Health in that rubric?
    Ms. De Rugy. It does.
    Mr. Connolly. And the Federal Drug Administration.
    Ms. De Rugy. It does, certainly.
    Mr. Connolly. Now, all right, are some of those things 
necessary, despite their distortive effect?
    Ms. De Rugy. Yes.
    Mr. Connolly. Which ones do you think are unnecessary?
    Ms. De Rugy. So I think there are a lot. For instance, I 
don't think the Government should be involved in education; 
that is a State and private function. I mean, there are a lot 
of things.
    Mr. Connolly. No, no. I am talking about the healthcare 
system. Would you abolish the CDC and let the private sector 
monitor public health?
    Ms. De Rugy. I think there is an important role for the 
Government to try to prevent epidemics, true epidemics. But the 
CDC does a lot of things that actually it shouldn't be doing.
    Mr. Connolly. Okay. So there are some things--you would go 
granular and pick what functions you like and what you don't.
    Ms. De Rugy. Yes.
    Mr. Connolly. Even though anything you pick is distortive, 
by your definition.
    Ms. De Rugy. Yes. Government intervention----
    Mr. Connolly. Excuse me, but because of time. Is it your 
position that absent the Government, even in functions you 
might deign to approve of, the private sector could do it 
better, and should?
    Ms. De Rugy. Not necessarily.
    Mr. Connolly. Not necessarily.
    Ms. De Rugy. Because, as I said, there is some function 
that we may want the Government to do, even if it introduces 
some distortions. And as Dr. Calabria has said, the private 
sector doesn't do everything efficiently.
    Mr. Connolly. Right. By the way, there was a debate here 
earlier about the Government setting prices for Medicare. Do 
you actually know how the process is set for which are 
recommended and approved procedures? Who does that? Who 
recommends that to the Government, do you know?
    Ms. De Rugy. I don't know----
    Mr. Connolly. It is actually a committee.
    Ms. De Rugy. Actually, it is a committee made of doctors.
    Mr. Connolly. That is right.
    Ms. De Rugy. And I think I remember a report recently that 
actually highlighted the fact that a lot of what they were 
doing was boosting prices in area where the service could be 
delivered at a lower price.
    Mr. Connolly. That is the private sector doing that.
    Ms. De Rugy. But this is how one of the ways that the 
Government introduces distortion, is it gives incentive to the 
private sector to try to get as much as it can from the 
Government.
    Chairman Issa. I would ask unanimous consent the gentleman 
have an additional minute. Without objection.
    Mr. Connolly. I thank the chair.
    Well, of course, philosophically, Dr. De Rugy, there is no 
end of that; that is a horse that left the barn a long time 
ago. Gosh, if we want to talk about economic distortions and 
the Government's role, let's talk about agriculture.
    Ms. De Rugy. I agree.
    Mr. Connolly. Let's talk about nuclear.
    Ms. De Rugy. I agree. I agree.
    Mr. Connolly. All nuclear power in the United States came 
from Federal research and dollars.
    Now, is it your contention that this big Government 
distortive effect extends to pharmacological research? Because 
it is my understanding that, by and large, all basic research 
in the United States, and this is not new, is done by the 
Government. It is the commercialization of that basic research 
is when the pharmaceutical firms come in, but they do not fund 
basic research, nor are they going to.
    Ms. De Rugy. Some of the distortions that the Government 
introduces by actually picking and choosing which areas are 
going to be funded, which areas should be researched while 
others may not.
    Mr. Connolly. Yes, that is true.
    Ms. De Rugy. And the Government has a knowledge problem.
    Mr. Connolly. Excuse me. Pharmaceutical companies do that 
too, except their motivation is commercial value, as opposed to 
the health value.
    Ms. De Rugy. Actually, I actually think----
    Chairman Issa. This is a wonderful discussion, but I have a 
feeling it could go back and forth for a very long time.
    Mr. Connolly. Mr. Chairman, I want to thank you for 
extending my time. I just wanted to highlight that. I think 
this is a really important debate because it is a very 
fundamental one in the United States when people say why can't 
we all get along? Because we have fundamental differences 
philosophically about the role of Government. And while I 
respect Dr. De Rugy and I certainly love George Mason 
University, which is entirely within my district, I couldn't 
disagree with her more, fundamentally. Just as you pointed out 
you disagree with Dr. Thomas, I also disagree with Dr. De Rugy 
and her philosophy.
    Thank you, Mr. Chairman.
    Chairman Issa. Thank you. If I can enter a colloquy 
quickly, I actually think that all of the panelists have said, 
in one way or the other, that Government is necessary. They all 
know it causes market distortion and they all have differing 
views at the level of Government intervention. It could be that 
you disagree with some of the levels. I am sure they disagree 
with some of the levels I would achieve.
    Mr. Connolly. Yes.
    Chairman Issa. By the way, one of my major constituents 
produces botox, which was a Government-funded orphan drug that 
if not for the Government looking at a very rare disease, 
probably would not be the blockbuster success it is in other 
areas.
    Mr. Connolly. That is right.
    Chairman Issa. So I think we all know that basic research 
is important. Hopefully here today we are talking about the 16 
to 18 to 20 percent of GDP is that is there a better way to 
allocate those resources.
    Mr. Connolly. Mr. Chairman, I couldn't agree with you more, 
and I actually commend you. I think we have actually put 
together a panel here that has been very stimulating. It 
highlights some of our differences, but it also asks some 
provocative questions that need to be asked, and I thank the 
chairman for putting it together.
    Chairman Issa. Thank you. And then we are going to get back 
to FITAR and real IT reform together. Thank you.
    We now go to the gentleman from Michigan.
    Oh, I am sorry.
    Ms. Thomas. I wanted, if I may, to add that it is not 
always just the Government that ``distorts'' the market, that 
sometimes private actors can also drive up prices. And in 
healthcare a very good example of that is competition among 
private hospitals, private for-profit hospitals for highly 
expensive and complex medical equipment that one hospital buys 
the million dollar piece of equipment and they are the only 
hospital in town with it until the hospital next door buys it 
also, and really there is only enough patients to justify one 
such purchase. So that is one way that private healthcare 
drives up prices sometimes.
    Chairman Issa. The allocation of resources in healthcare is 
so complex that, to a great extent, the theme of today is is it 
so complex that neither the public nor the private sector have 
been able to do it.
    I apologize, Dr. Winston, but it have taken too much time 
of everyone's.
    The gentleman from Michigan.
    Mr. Bentivolio. Thank you, Mr. Chairman, and thank you for 
holding an important hearing.
    The founders of this Nation understood exactly what some of 
our witnesses have all expressed: Government makes decisions 
poorly because too often politicians and bureaucrats do not 
have the same incentives that the citizenry has.
    I certainly don't wish to offend my colleagues here, but 
our Government is inherently made up of those with at least a 
little hubris. After all, it takes some hubris to believe that 
you should be the representative of the sovereign people of the 
United States. In fact, I have even heard of people campaigning 
for office simply to say that they are Congressman, rather from 
the hope of protecting people's rights. A hubristic style 
trumps substance in service of the people.
    Unfortunately, Mr. Chairman, that hubris in our leaders 
sometimes gets out of control and leads to disaster. The 
President's healthcare reform is the only major reform ever 
passed by one party over a bipartisan opposition. And, boy, 
Obamacare is certainly turning into a disaster.
    I thank the witnesses for their enlightening testimony.
    Dr. De Rugy, you talk a lot about special interest groups 
and the lack of incentives for politicians to spend taxpayer 
money wisely, stemming from the average citizen not really 
feeling the pain from having the collective money of the Nation 
wasted. Could this come from taxpayers simply not realizing how 
much money is being spent on what departments in Government?
    Ms. De Rugy. That is one of the reasons. I mean, one of the 
ways the Government expands is by concentrating benefits of 
Government intervention and spreading the cost thin and wide. 
So that is one of the reasons why we don't always see that 
cost. We also don't necessarily see the distortions, or even 
when we feel them it is hard to track it back to a particular 
Government intervention. What is interesting about the ACA--and 
I am going to make a prediction and we will see whether I am 
correct--is even when the website is completed, it is possible 
that the Administration is not going to get the benefit and the 
hurray that people are going to feel because actually it is a 
program that is designed the opposite way, like the benefits 
are spread somewhat widely to an audience who may not actually 
be very vocal about how great it is, while the costs are highly 
concentrated and visible to some, which will continue to be 
vocal.
    Mr. Bentivolio. Thank you. Do you think that if every 
taxpayer received a receipt explaining where their tax money 
went would be useful in granting politicians here in Washington 
more incentive to act more wisely?
    Ms. De Rugy. More transparency, certainly would be 
necessary. For instance, I would be very happy to see which 
part of my taxes go to farm subsidies.
    Mr. Bentivolio. I couldn't agree with you more.
    With that, thank you very much. I yield back.
    Chairman Issa. Would the gentleman yield?
    Mr. Bentivolio. Yes.
    Chairman Issa. We have had a lively discussion, and I am 
sure we are going to continue to, but, Dr. Winston, in your 
opening remarks you really did touch on the fact that--and I 
think it is something that Dr. Thomas also said--monopoly and 
monopolistic type behavior, distortions in the market not just 
by Government, but the inherent distortions that occur in both 
for-profit and not-for-profit hospitals. I happen to have two 
not-for-profit hospitals nine miles apart along its a State 
highway, but it is built like an interstate, and I can't get 
them to put one machine that is not emergency-related in one 
and share; they just don't do it. Isn't that part of the 
problem--and I will go to Dr. Winston and maybe back to Dr. 
Thomas--is that healthcare has built, with a system that has 
very little to do with market forces, meaning that market 
forces already didn't work well in healthcare before we started 
funding a system that didn't work well from a standpoint of 
supply and demand? In other words, cash is not king; the 
consumer is not educated to make a buy-in; prices are not 
transparent; cost-effectiveness is not easy to discover.
    Dr. Winston?
    Mr. Winston. Yes, that is right. There is not distortions, 
but there are wedges, if you will. It is not a simple market, 
you go to a store, you buy something. You are going through a 
doctor, you are going through insurance, so on and so forth. So 
these wedges make efficient, smooth operations----
    Chairman Issa. I am going to ask a closing question for all 
of you. If this committee, the committee of transparency in 
Government spending, if we concentrated our efforts related to 
the Affordable Care Act on mandating transparency in healthcare 
so the consumer knew more and the public knew more, would we be 
well spent in then driving, through market awareness, better 
distribution of dollars and, thus, more efficiency? Any 
opinion?
    Ms. Thomas. Yes.
    Chairman Issa. That is Econ 101, so just go ahead.
    Mr. Calabria. Certainly, transparency would help, but you 
have to get the incentives right, too.
    Mr. Winston. Incentives are, I think, the critical thing. 
Information is one thing, but still people have to have 
incentives and firms have to be able to enter, so on and so 
forth.
    Chairman Issa. I know people want to buy the best 
healthcare. Hopefully we can also create incentives for them to 
buy it at the lowest possible price. Thank you.
    We now go to the gentleman from Illinois, Mr. Davis.
    Mr. Davis. Thank you very much, Mr. Chairman. You know, I 
believe that a good way to measure the greatness of a society 
is by how well it treats its young, how well it treats its 
elderly, and how well after it looks after those who have some 
difficulty handling their affairs effectively themselves.
    Dr. Thomas, as a historian at Johns Hopkins, I am certain 
that you have some insight into the question of whether or not 
the Federal Government, as I have heard questioned, is able to 
administer large-scale programs effectively.
    Ms. Thomas. Yes.
    Mr. Davis. I have heard comparisons between the Federal or 
the Government and the private sector. So I would like to ask 
you about the Medicare program, which was signed into law by 
President Johnson in 1965.
    Mr. Chairman, I ask unanimous consent to enter into the 
record an article that appeared in The Washington Post on May 
17th of this year.
    Chairman Issa. Without objection, so ordered. I love The 
Washington Post.
    Mr. Davis. Yes, it is a great paper.
    Mr. Davis. The article is entitled, When Medicare launched, 
Nobody Had Any Clue Whether It Would Work. Dr. Thomas, I would 
like to read an excerpt from this article and then get your 
response. Here is what it says: ``Medicare in these days, an 
incredibly popular program. Americans overwhelmingly oppose 
cutting it. No politician would consider repealing it. Most 
think providing health insurance to all Americans over 65 is 
worth both the trouble and the cost. That was not always true. 
Back in 1966, as Medicare was just about to launch, nobody knew 
whether the new program would provide benefits to millions or 
fail completely.''
    Dr. Thomas, based on this reporting, there was trepidation 
in 1966 with the rollout of the Medicare program. Is that 
correct?
    Ms. Thomas. That is absolutely correct.
    Mr. Davis. Well, the article describes how the American 
Medical Association ran ads across the Country denouncing the 
program as the beginning of socialized medicine, and many 
people who were unfamiliar with the program were suspicious of 
it. Is that correct?
    Ms. Thomas. Certainly.
    Mr. Davis. The article also describes the implementation 
effort. It says that the Government launched project Medicare 
Alert, with thousands of Federal workers charged with educating 
people and helping them enroll in the program. Is that correct?
    Ms. Thomas. Yes. They had to go door-to-door to try to 
reach people, of course, before the Internet, who might not 
know about the program and make sure they knew they were 
eligible.
    Mr. Davis. Means they were serious. One of the biggest 
challenges of that era----
    Ms. Thomas. They even asked forest rangers to go out in the 
rural areas.
    Mr. Davis.--was with hospitals in States that did not want 
to provide healthcare services to black Americans. I know that 
this has been a focus of some of your research and some of your 
writing. Can you tell us a little bit about how this problem 
was addressed?
    Ms. Thomas. Yes. I would say that one of the greatest moral 
failures of the private health system and, unfortunately, for a 
time of the public system as well was its segregation by race 
of patients and outright denial of care to many Americans in 
minority groups, so that death rates, disease rates, draft 
rejection rates, many measures were dramatically higher among 
African-Americans than among whites, and there is racial 
disparity in life expectancy and many other health measures 
that persist to this day.
    Mr. Davis. And yet we have been able to overcome all of 
those objections and all of those difficulties where now 
Medicare is considered a very popular program. Everybody who 
can get it wants it, and I think it just takes a bit of time. 
It will take some time with the Affordable Care Act and 
ultimately I think that Americans are going to feel the same 
way about the Affordable Care Act that we now feel about 
Medicare.
    Ms. Thomas. I do----
    Mr. Davis. And I yield back.
    Chairman Issa. I thank the gentleman.
    The gentlelady may answer, if you were mid-sentence.
    Ms. Thomas. Just that it was the combination of the 1964 
Civil Rights Act and the Medicare-Medicaid Act of 1965 that 
definitively integrated the American healthcare system, and it 
was much more successful in healthcare and has produced some 
very good results.
    Chairman Issa. I thank you.
    I now ask unanimous consent that the New Yorker article 
entitled GOP Healthcare.gov Too Fast Now be placed in the 
record. Without objection, so ordered.
    Chairman Issa. We now go to the gentleman from Arizona, Dr. 
Gosar.
    Mr. Gosar. Thank you very, very much.
    Dr. Thomas, just as a background, I am a dentist for 25 
years, okay? This is going to be very important to kind of keep 
track of this. Is Medicare financially sustainable as is?
    Ms. Thomas. No.
    Mr. Gosar. Is Medicaid financially stable as is?
    Ms. Thomas. No.
    Mr. Gosar. Is Obamacare financially stable as is?
    Ms. Thomas. I can't answer that question.
    Mr. Gosar. It's a no. Is Romneycare financially viable as 
is? No.
    Ms. Thomas. I don't know.
    Mr. Gosar. No. I mean, you are a historian. You better 
know. You are very flippant with the statistics, and I am about 
details. And Romneycare isn't financially stable. The only 
reason it has lasted so long is it is from a rich State. That 
is it. So aren't they very close to go to a single payer?
    Ms. Thomas. I am sorry, is Romneycare close to a single 
payer?
    Mr. Gosar. Massachusetts.
    Ms. Thomas. Yes.
    Mr. Gosar. Yeah. That is what I thought. That is how they 
keep hinting in this way.
    I am looking at three problem-solvers here, and that is 
what is key about this thing, is that when you have a problem, 
you always go to lowest common denominators to figure them out. 
Wouldn't you agree?
    Ms. Thomas. I am not sure what you mean by lowest common 
denominators.
    Mr. Gosar. Well, you figure out all the parts that are part 
of the problem, you go to the lowest basis and you come up with 
core principles and build upon simple simplicity. Wouldn't you 
agree?
    Ms. Thomas. Okay. Sure.
    Mr. Gosar. Would you agree, Dr. De Rugy?
    Ms. De Rugy. [Nonverbal response.]
    Mr. Gosar. Dr. Winston?
    Mr. Winston. [Nonverbal response.]
    Mr. Gosar. Dr. Calabria?
    Mr. Calabria. [Nonverbal response.]
    Is it possible, the three of you, is that actually possible 
today in the Federal Government to do that? Quick answer.
    Mr. Winston. No.
    Ms. De Rugy. No.
    Mr. Gosar. I want to agree with you, because we talked 
about monopolies, we talked about noncompetitive bids, we 
talked about all sorts of things. Is there tort reform in this 
bill, Dr. De Rugy?
    Ms. De Rugy. No.
    Mr. Gosar. Is it part of the problem?
    Ms. De Rugy. I guess part of it.
    Mr. Gosar. Dr. Winston?
    Mr. Winston. Yes.
    Mr. Gosar. Dr. Calabria?
    Mr. Calabria. [Nonverbal response.]
    Mr. Gosar. Hey, how about you, Dr. Thomas?
    Ms. Thomas. It is part of the problem, but politically----
    Mr. Gosar. No, I don't care about politically.
    Ms. Thomas. Okay.
    Mr. Gosar. Because you know what? It has to be part of the 
solution here, okay?
    Number two is we brought up monopolies. Do you think that 
we have handled, Dr. Thomas, the monopolies of insurance 
industries properly in Obamacare? I'll give you a minute to 
catch that answer.
    How about you, Dr. De Rugy?
    Ms. De Rugy. No, absolutely not.
    Mr. Gosar. Actually, the Federal Government is prohibited 
from interceding in insurance companies by McCarran-Ferguson, 
is it not?
    Ms. De Rugy. Yes.
    Mr. Gosar. Dr. Winston?
    Mr. Winston. Yes.
    Mr. Gosar. So do you see a need for actuarial tables? I 
mean, 1945 I see actuarial tables being a necessity; we didn't 
have good computers back then. But today you have an algorithm, 
your own facts, a computer, you should be able to do it on your 
own, don't you think Dr. De Rugy?
    Ms. De Rugy. [Nonverbal response.]
    Mr. Gosar. Dr. Winston?
    Mr. Winston. Times change.
    Mr. Gosar. Absolutely.
    Dr. Calabria?
    Mr. Calabria. Yes.
    Mr. Gosar. So, I mean, one of the key principles here is 
that we have a collusive environment, right?
    Ms. De Rugy. Yes.
    Mr. Gosar. Oh. Is any part of this bill talking about 
repealing McCarran-Ferguson?
    Mr. Winston. No.
    Mr. Gosar. Let me ask you, Dr. De Rugy, because my 
colleague from Virginia asked a question. Government 
intervention would be great here, because in this aspect the 
Federal Government now intercedes and breaks up the monopoly, 
sends it back to the State, would it be, Dr. De Rugy?
    Ms. De Rugy. Yes, it would be.
    Mr. Gosar. Dr. Winston?
    Mr. Winston. A quick point, if I could just say, is we are 
looking to Government to correct distortions. There is too much 
emphasis on the distortions it ``creates,'' but its main job is 
to correct the distortions. That is the problem we are having.
    Mr. Gosar. That is exactly, redirect it. So I am getting to 
this.
    Dr. Calabria, do you want to comment on that?
    Mr. Calabria. I would absolutely agree with that. We need 
to allow competition, particularly across State lines, in terms 
of bringing competition to the insurance market.
    Mr. Gosar. Wow. I mean, I want to turn the insurance 
industry free because they are harnessed right now.
    Ms. De Rugy. Or create a level playing field.
    Mr. Gosar. What is that?
    Ms. De Rugy. Create also a level playing field between 
employer tax credit and individual market.
    Mr. Gosar. Thank you.
    Dr. Thomas, can we treat out way out of this epidemic of 
healthcare?
    Ms. Thomas. Can we----
    Mr. Gosar. Can we treat our way?
    Ms. Thomas. Treat? No. You have to prevent.
    Mr. Gosar. Oh, absolutely. So what we have actually done 
is, what I have shown you right here through distortions is, we 
have actually priced primary care out of the marketplace. From 
1965 on, what we started doing is taking the lowest common 
denominator, which is the private family doctor, and priced 
them out of the market so that you weren't making any money. 
And that my good friend highlighted about the committee that 
redresses CMS, but CMS redirects the reimbursement rate for 
medical.
    There is a reason I brought up dentistry. Can you tell me 
about the inflationary aspects of dental costs over 30 years 
versus medical costs over 30 years? Inflationary. Which one is 
higher?
    Ms. Thomas. Dental costs have stayed much more in line with 
inflation.
    Mr. Gosar. That is right. And medical more than 20 times. 
What is the thing that is interesting about the two healthcare 
models, one has lots of government, almost entirely Federal 
Government, and one has very little Federal Government. 
Wouldn't you say that, Dr. Thomas?
    Ms. Thomas. Yes. But the nature of dental care is largely 
preventive and not anywhere near as expensive as the medical 
care system, so I don't think you can compare apples to 
oranges.
    Mr. Gosar. Oh, yes we can. Oh, absolutely. It is paradox 
that we do this, because in the dental model there is many more 
primary care physicians than there are specialists. Today, what 
we have done is reinversed the whole payment model to be a 
specialist, not a primary care doctor. That is key.
    Mr. Winston. If I could just quickly add one additional 
point to what you are getting at. Dental schools and medical 
schools. Dental schools are closing, and there is less 
availability of dentists. That too is affecting the market. I 
would say a similar kind of restriction also exists in medical 
care in the sense that you still have an entry barrier and a 
license to provide service and I think the combination of those 
things are also increasing the costs, and there is another area 
where Government could intervene to reduce distortions.
    Mr. Gosar. Oh, absolutely.
    Chairman Issa. I thank the gentleman. Suffice to say that 
the Affordable Care Act does not have preventive dentistry in 
it, which perhaps was one of the mistakes.
    With that, we go to the gentlelady from New Mexico.
    Ms. Lujan Grisham. Thank you, Mr. Chairman. I really 
appreciate this hearing. I think it is demonstrating on both 
sides of the aisle these principles: one, the healthcare system 
is incredibly complicated, so complicated, in fact, that, when 
each of us are identifying situations, historical facts, 
spending trends, it is very difficult to say whether that is a 
private market issue in and of itself or a Government issue. 
Some of the best programs that are most cost-effective are 
where the Government and the provider system, whether that is 
local or Federal, are effective, that partnership is effective. 
When it is not effective, you have all kinds of things that we 
can point to, and members have done this throughout the 
hearing, demonstrated that the private market, the insurance 
market on its own certainly hasn't solved any of these problems 
and has gotten increasingly more expensive, so has the provider 
system. The Government systems we can talk about, they have had 
fluctuations in productive outcomes and not so productive. Some 
States have great public health outcomes, some States do not.
    So, for me, I think that I sort of changed how I want to 
approach the panel. One, I agree with the chairman that we need 
to do much more in transparency, and being able to, apples to 
apples, talk about those effective investments, whether that is 
policy, regulatory, oversight, transparency, marketing, 
consumer protection; it is all of those.
    I do want to point out that in the conversations that we 
have had about life expectancy, what we haven't talked about is 
what sort of investments public health has gotten at the same 
time. Because if you look at sustainable effective, that is 
both in terms of amounts and what they are directed at in 
public health, because States also make significant public 
health policy decisions, although the bulk of their money 
largely comes from the Federal Government because States 
haven't picked up that role because in the United States we 
don't put a lot of credence in public health, which is the 
largest effort we could take to do productive, low-cost 
preventative care. And while there are incentives to do that in 
public and community health in the Affordable Care Act, we will 
have to see whether it is, frankly, enough, because like in all 
of the things that we have done in the United States, we have 
seven, eight, nine, ten independent systems of care that we try 
to then roll into one and try to make sense out of it, and I 
don't think that you can. And where we go from here I think 
this committee and others are going to have to play a much more 
significant role in getting that addressed.
    So maybe, given that I only have a couple minutes left, I 
just want to sort of re-ascertain a couple of things from the 
panel. One, that the private market, by itself, in all of those 
aspects that I identified, insurance companies, providers, 
hospitals, for-profit, not-for-profit, by itself has not been 
able, globally, to do any of the things that I just described; 
provide access, lower cost, improve outcomes, provide consumer 
protection, and affect policy in a way that would be meaningful 
from oversight to better regulatory reform. True? Not true?
    Ms. Thomas. True.
    Mr. Calabria. I would say not true.
    Ms. Lujan Grisham. Okay.
    Mr. Winston. Not true.
    Ms. De Rugy. I would say not true.
    Ms. Lujan Grisham. All right. And I believe that it is 
true, and I have 30 years. I don't have any of your expertise 
from your particular aspects, but I navigate healthcare even in 
this job every single day, and no matter what, it is getting 
increasingly more complicated. And I would submit that if any 
of you have--does anybody on the panel have a family member on 
Medicare or Medicaid?
    Ms. Thomas. Yes.
    Mr. Calabria. Yes.
    Ms. De Rugy. My family members are in France.
    Ms. Lujan Grisham. So arguably better than Medicare. So the 
two that have family members on Medicare, if Medicare was gone, 
would you be able to finance that family member's healthcare on 
your own?
    Ms. Thomas. Absolutely not. Both my parents died of cancer 
and their care was subsidized completely by Medicare, and they 
would not have been able to have that care without Medicare.
    Mr. Winston. I don't think we know what the system would 
look like without Medicare. So you are asking me for an 
imaginary world that I don't have an option of really choosing.
    Ms. Lujan Grisham. Right. And I am almost out of time, but 
also the reality is, and that is my point, that we know that 
none of these systems are sustainable as they are. We know that 
without Medicare the private market rates would be much higher 
because we would have to figure out what we would do with all 
of those elderly sick people who would also be increasingly 
accessing emergency rooms and hospitals without any primary or 
preventative or routine care. And that is before you get to 
their acute care or chronic care issues that are covered by 
Medicare.
    We have to start figuring out how all of those systems 
impact the private market, or the lack thereof. The sicker 
people are in the private market, the higher those costs are. 
The higher those costs are, limited access to providers. Rural 
and frontier States are a whole different issue.
    So now that I am out of time, and I really appreciate the 
chairman's support, I would love to see this committee do lots 
more in transparency. I would love to talk about the models for 
dental care. There is in fact oral healthcare in the Affordable 
Care Act; it is pediatric. We are really going to have to talk 
about better integration for all of these models, and I would 
support the chairman and this committee spending much more time 
in healthcare issues such as this hearing than not. So thank 
you very much.
    Mr. Gosar. [Presiding.] You get no qualm from me at all.
    I would like to acknowledge the gentleman from Oklahoma, 
Mr. Lankford.
    Mr. Lankford. Thank you, Mr. Chairman.
    Thank you all for the time and the conversation. Can we 
agree on a principle that is economic-wide, I guess, or 
economy-wide, and that is fair competition is better for the 
consumer than price controls?
    Ms. Thomas. Yes.
    Ms. De Rugy. Yes.
    Mr. Lankford. Can that translate into healthcare?
    Ms. Thomas. Yes.
    Ms. De Rugy. Yes, it can.
    Mr. Lankford. So then the challenge is how does that get 
managed. If the goal is the benefit to consumer, the patient at 
this point, and to provide fair competition and to provide 
multiple voices and as much transparency as you can have in it, 
there are some issues that are coming up currently right now 
with our system that get in the way of that. For instance, I 
know the chairman mentioned earlier this issue of testing 
reimbursement. If you do, right now, in our system, according 
to CMS, if you do a histology test, a test for skin cancer or 
whatever it may be, outside of a hospital, your reimbursement 
is 50 percent less than it is inside a hospital. So the 
incentive there is is to do all the testing for the hospitals 
inside because their rates weren't cut, for the big hospitals; 
they were for every small lab all around the Country, by 50 
percent. Does that promote fair competition?
    Is it cheaper to do that test in a hospital or is it less 
expensive to do that test in an outside lab, typically? I would 
submit it is probably more expensive to do it in a hospital. I 
don't know that anyone would disagree with that. They are also 
reimbursed now 50 percent more. So there is this, again, 
leaning in to the larger hospitals.
    In the Affordable Care Act, it caps the growth of 
physician-owned hospitals. It set a date for them and said 
however many rooms you have at this point, you have to remain 
at that. So physician-owned hospitals are at a permanent 
disadvantage to the hospital down the street forever. Is that 
fair competition? Does that benefit the consumer? Does that 
help us in price and cost and benefit consumers? I don't hear 
anyone saying that would benefit the consumers. No?
    Ms. Thomas. There have been some problems with physician-
owned hospitals that are part of why that measure was passed, 
but I won't----
    Mr. Lankford. Was the problem with the patient or--because 
seven of the ten top hospitals in the Country are physician-
owned hospitals, even still right now. But all of them will be 
capped in the days ahead and refused to grow; they can't 
expand. So while patients may choose to do that, the Affordable 
Care Act steps in and says, no, I don't want more competition; 
I want less competition. To me, that doesn't benefit the 
consumer; that doesn't benefit, in this case, the taxpayer, 
even, who is now paying the bill on it, where we are going to 
pay a higher price at a hospital than we would in the lab. We 
are going to pay a higher price in this facility, this one. And 
I am not denigrating those, it just is a step into it to say we 
want less competition rather than more, and that doesn't seem 
to work anywhere else.
    Durable medical equipment right now, there was a decision 
by CMS to have fewer companies provide durable medical 
equipment because it is easier to oversee fewer companies. A 
large central government can't oversee thousands of durable 
medical equipment companies, so you need to have fewer 
companies so the Federal Government can oversee that for fraud.
    Right now, our payments out to companies where we can't 
verify, or individuals, not fraud, just inaccurate payments, we 
are topping $50 billion in inaccurate payments through Medicare 
and Medicaid at this point. Can you make that more efficient by 
putting the controls for that closer to the payment location, 
closer to those individuals? So that may be a State that 
oversees that, rather than the Federal Government, instead of 
having to track it from Washington, D.C. Does it make it more 
efficient to oversee those things from a State or local 
municipality, or to try to do it all from a central location?
    Ms. De Rugy. The State would make more sense.
    Mr. Lankford. So if we are going to go after inaccurate 
payments, is it better to make those decisions closer, and 
check for fraud and check for inaccuracies closer, rather than 
a centralized location? It seems like everybody is onboard with 
that. These are some of the challenges that we have.
    While we can talk about some of the healthcare issues, 
there is a basic principle of economics that we want fair 
competition and we want to increase competition, and the 
Affordable Care Act is reducing the number of opportunities out 
there, reducing the number of places, so we are actually 
reducing the amount of competition and we are saying, every 
area of the economy, free and fair competition works well 
except in healthcare, where we have to have more price 
controls, because that is ``different.''
    In Oklahoma City right now we have two hospitals that have 
all of their prices online for their procedures. It started 
with one hospital that did it. And the push to get all your 
prices online has now pushed another hospital to say, okay, we 
will put all of our prices online as well, and be able to 
detail out. What was interesting, the first hospital that did 
it, I talked to the gentleman that runs the hospital, he said 
we were surprised when we put all of our prices online. Guess 
who came first? The Canadians. The Canadians came first to our 
hospital. We suddenly became a spot for medical tourism because 
they were tired of waiting six months in Canada for a 
procedure, so they would fly to Oklahoma City, have the 
procedure done there, when they knew exactly what the price was 
and to be able to fly home.
    It is the same thing that is happening right now in our 
Veterans Administration. I have veterans call my office all the 
time. It takes six months for them to get a knee replacement or 
they could cross the street and go to a fantastic hospital, OU 
Medical Center, and get it done on Tuesday. But for some reason 
we have this concept that we have to do price controls and have 
to do central control because this is healthcare, when in 
everything else it seems to work well with free and fair 
competition. We have to find a way to do this.
    Integris Hospital in Oklahoma City is one of the best 
transplant hospitals in the world; fantastic facility, 
incredibly well run. People come from all over the place to 
come to it because of the quality of the services and the 
openness of what they do. We have to be able to push back on 
some of this.
    With that, I yield back.
    Mr. Gosar. I want to take off on that for a second. Could 
you explain to me, Dr. Thomas, why a procedure done out in a 
family doctor's procedure under Medicare is billed under 
Medicare Part A, but then the same procedure by a physician 
under a hospital is billed under Medicare Part B? You can't 
defend that. And that is what is happening. We are allowing, 
willy-nilly, these rules to be unequivocally violated right and 
left. It is the same procedure. Buildings, each office has 
their own space to have to look at in overhead. So there is no 
reason why you have to allow hospitals to get reimbursements 
that sometimes double the price of a Medicare Part A aspect.
    One other thing that I wanted to highlight in your earlier 
testimony. It is not just about emergency rooms, is it, about 
access to care? I thought that was under federally qualified 
health centers, that your ability to pay could not stem you 
from not getting treatment. Is that true? Federally qualified 
health centers have a sliding fee scale in which they have to 
see you, but not based upon your ability to pay. It is. I mean, 
I served kitty-corner from one for many, many years. So there 
are more opportunities out there than meets the eye.
    The gentleman from California, Mr. Cardenas.
    Mr. Cardenas. Thank you very much, Mr. Chairman. I would 
like to thank the panel for availing yourselves to this 
committee so that we can hopefully improve on our understanding 
of what is going on with healthcare in our Country.
    But there has been a lot of discussion today, and I guess 
rightfully so, because the hearing title is The Limitations of 
Big Government, the Rollout of Healthcare.gov. So a lot of 
discussion has been about Government and whether or not 
Government has a role. But earlier in a discussion, as a result 
of a question from one of my colleagues, the three non-
healthcare expert panelists, all of you seemed to agree that 
private sector is more efficient than Government when it comes 
to providing services and/or systems to Americans. Is that 
consistent with what your answers are today?
    Mr. Winston. When the goal is to provide an economically 
efficient product or service, yes. You have to be very clear on 
what you are trying to do. In other words, the market is not 
great at necessarily providing some specific targeted service 
to a particular individual who can't pay for it. The market may 
not do that. So, again, you have to be very clear on what your 
objective is. But generally, if you are talking more about the 
efficient production and provision of goods and services, yes, 
I think the evidence is overwhelming that the market is 
superior for Government. In fact, Government rarely corrects 
those problems.
    Mr. Cardenas. Any of the other panelists want to clarify?
    Mr. Calabria. I would pretty much agree with that and 
clarify the point that certainly the market, I think, has 
proven itself to be of lower cost and have more innovation. I 
think it is incredibly important to parse out that a lot of 
times what we are talking about is an income problem. And 
again, as I said earlier, all resources have cost. If someone 
has zero income, that is not a market failure; they can't 
afford those goods. You could make the same thing about 
Government. If you had a group of people with zero income, 
obviously they can't pay taxes to support Government either. We 
don't call that a Government failure. So I do think we need to 
separate out the difference between are we talking about a 
problem that is purely of poverty? Are we talking about a 
failure of the healthcare system? And those are two separate 
issues and I think we combine them, quite frankly.
    Ms. De Rugy. I agree with what has been said, but I would 
like to add that Government very often, even when there is, 
let's say, we see a role like providing healthcare for low-
income people who couldn't get it on their own, doesn't do that 
very well either. I mean, we have been talking about expanding 
Medicaid, but there has been no discussion about health outcome 
for people who are in Medicaid. And a lot of the things that I 
have read, whether it was the Oregon study, it is like it is 
not a desirable outcome, or it could be improved; and I think 
we need to also talk about outcomes versus just providing 
delivery.
    Mr. Cardenas. Well, I just wanted to clarify. Fortunately, 
all three of you do provide a service when it comes to the 
exercise of trying to understand where Government should or 
should not be playing a role. However, the fundamental problem 
that we have in this Country with the private sector is that 
the private sector has the right to ignore who they serve and 
where they draw the line at how much they are going to charge 
or not serve at all. Yet, in our Government, in this Country, 
in many cases the Government has passed legislation and created 
laws that say we are not going to ignore. For example, an 
extreme case is when somebody shows up to an emergency room in 
this Country.
    I don't know how they do it in other countries, it is a big 
world, but in this Country, if somebody shows up in the 
emergency room, that provider of service, private or public, is 
required to stop the bleeding, regardless of the cost and 
regardless of the ability to pay. And that is the fundamental 
difference that I have with having a discussion that tries to 
have a purity of discussion about how Government doesn't have a 
role in XYZ, yet at the same time the private sector would do a 
better job or perhaps would provide better. But the fundamental 
problem that we have is, especially when it comes to 
healthcare, the private sector has the right, insurance company 
A has the right to tell person B if they approach that company 
and say I would like to apply for insurance, they have the 
right to say, mm-mm, we checked all of what we provide, we 
cannot provide service for you, we are not going to insure you. 
They have the right to do that.
    And fundamentally we have anywhere between 40 to 50-plus 
million people in this Country who, some of them, fall into 
that category that, no matter how hard they are going to try, 
the private industry is not going to provide for them; and that 
is where the Affordable Care Act is trying to thread that 
needle and saying is there a way in which, in this great 
Country, we can actually provide that to some of those 40 to 50 
million people, and not all, to some of those 40 to 50 million 
people that on the natural, as the system is before the 
Affordable Care Act is in full bloom, that those private sector 
corporations have the legal right to say, sorry, we don't have 
a policy for you, go to the next place or do whatever you wish, 
but don't come here.
    Dr. Thomas, is that an accurate portrayal of what one of 
our dilemmas is right now in this Country, that we are trying 
to tackle?
    Ms. Thomas. Yes.
    Mr. Cardenas. I am out of time, so, Mr. Chairman, they are 
welcome to answer.
    Mr. Gosar. The witnesses may answer if they would like to 
answer.
    Mr. Cardenas. Thank you very much.
    Mr. Winston. What you are characterizing is something what 
we call in economics merit goods. That is, these are goods that 
American society believes, goods and services, that people are 
entitled to regardless of whether they can afford them or not.
    I think what has changed over time is, yes, the Government 
can step in and say, given democratic outcomes, we support the 
provision of these goods or services. We are now discussing and 
thinking about, okay, given that that is the case, what is the 
least cost way of providing those goods and services? I think 
people might think it is through the Government. So the 
question about Medicare is saying if we didn't have Medicare, 
what would happen to people? You have to construct what we call 
a counterfactual, that is, really construct what would have 
happened in the absence of the policy. So increasingly people 
are saying, Marty Feldstein is most notably, saying if we had 
private health accounts, that might be able to achieve the 
goals that Medicare is trying to achieve at lower cost. And I 
think the questions we are raising about ACA and I think the 
debate will follow, universal coverage, fine. What now is the 
least cost way of doing that?
    Mr. Cardenas. Mr. Chairman, if I may, I appreciate that 
accurate portrayal of arriving at ideal solutions, but 
unfortunately we live in a very dynamic, humanistic world where 
ideal solutions will perhaps never be attained.
    Thank you. I yield back.
    Mr. Gosar. I thank the gentleman.
    I would like to recognize the gentleman from Pennsylvania, 
Mr. Cartwright.
    Mr. Cartwright. Thank you, Dr. Gosar. I want to thank the 
chairman and Ranking Member Cummings for putting together this 
fascinating panel and allowing this interesting philosophical 
discussion that we have been having. Also thank you to my 
colleague, Mr. Cardenas, for weighing in on that as well.
    For my own part, I will say I think the Government of the 
United States of America has been responsible for some of the 
most innovative and successful programs the world has ever 
seen. When we talk about Social Security, we talk about a 
program that has lifted people out of poverty, as you have 
said, Dr. Thomas. When we talked about Medicare, same thing, a 
program that has enabled regular people to avoid medical 
bankruptcy, to qualify for treatment, as in the case of your 
parents, Dr. Thomas. And so many Americans depend on Social 
Security and Medicare. I will be an unceasing advocate for both 
of those programs, as well as other Federal programs.
    Our interstate highway and rail system transports millions 
of people daily, safely. The Environmental Protection Agency 
ensures clean drinking water and breathable air for Americans. 
Our brave soldiers in the military put together a program that 
is the envy of the free world, our American military, our 
soldiers and sailors. The Consumer Product Safety Commission 
ensures that Americans feel secure in their purchases. The 
Federal grants, loans, and work study funds provided to our 
students enable higher education to become a reality for 
millions of Americans.
    And then when we get to this ACA, absolutely it has been a 
rocky rollout and, in my view, we are going to have further 
work to do on it. We may well be tinkering with the ACA for 
years to come, but my view is and my prediction is that history 
will look kindly back on the Affordable Care Act as just 
another in a long line of examples of American greatness.
    Dr. Thomas, I want to follow up with you. I would like to 
ask you about Social Security a little bit. You touched on it. 
The implementation of that program was hugely controversial at 
the time, in the 1930s, and not without its own challenges, but 
today, like Medicare, it is obviously an extremely admirable, 
successful, and popular program. I have an article here that 
was published on October 28, 2013, and it is entitled What 
About Social Security's Rollout.
    Dr. Gosar, I ask unanimous consent that this article be 
inserted into the public record.
    Mr. Gosar. So ordered.
    Mr. Cartwright. Dr. Thomas, this article describes many of 
the problems facing Social Security in its first several years, 
and it compares them to what we are seeing now in the ACA. For 
example, the article says this: ``After the Nation's major 
social program finally became law, critics regularly blamed it 
for slowing the economy and a swelling of the Federal 
bureaucracy. Fierce congressional opposition led to the 
formation of a blue ribbon panel to overhaul Social Security. 
Obamacare, in 2013? Not quite. It was Social Security in 
1937.''
    Dr. Thomas, it seems obvious, but would you agree that the 
implementation of a large-scale Federal Government program like 
Social Security takes time?
    Ms. Thomas. I would agree, and I would also add that 
anything that is ambitious that will actually enact real change 
is bound to encounter problems.
    Mr. Cartwright. Well, I want to go on quoting the article. 
``Created in 1935, the Social Security program took 40 years 
just to include all working Americans in its basic coverage. 
When old-age insurance program launched in 1937, barely more 
than half of the labor force participated. A series of 
amendments to the Social Security Act gradually expanded the 
coverage and by 1979 it finally reached over 90 percent of 
American workers.''
    Dr. Thomas, the history of Social Security implementation 
seems to support the idea that the Government is in fact 
capable of effectively administering a large-scale program like 
this that helps millions and millions of Americans. Would you 
agree with that?
    Ms. Thomas. Yes. The administration of the program has 
evolved over time, but is certainly working smoothly at this 
point, and Social Security has evolved over a period of more 
than 70 years. For instance, the amendments to include domestic 
and agricultural workers, to make sure that they were covered, 
they weren't passed until, I believe, 1950 because there was 
such political opposition in the south previous to that, when 
the law was passed originally. So over time new priorities are 
brought into the law that improve its function.
    Mr. Cartwright. And I say let's work together and improve 
the ACA and make it work for us over time.
    With that, I yield back, Dr. Gosar.
    Mr. Gosar. Well, I want to let Dr. De Rugy answer a 
question. She wanted to answer one of your questions.
    Ms. De Rugy. What I wanted to say about Social Security 
was, and that is one of the problems with Government, is like 
sometimes Government creates a program because there is an 
actual need, and the problem is you then go back 60 years later 
and that need may not be there for a majority of the people it 
serves, but then the problem stays in place. And that is the 
case. Fifteen Federal agencies have run a state of seniors in 
America right now and you can see that their conditions have 
dramatically improved, and yet this program still serves 
everyone as if everyone is in poverty.
    The other thing I would add is that if Democrats like 
Social Security so much, why not try to reform it? This is a 
system that is bankrupt. In 2035, and probably before, when the 
trust fund expires, the prediction is that benefits will have 
to be cut across the board by 25 percent. The people who will 
be hurt the most are the people, the seniors who, at the time, 
still actually are poor. So I want to say if we think it is a 
program that provides a valuable service to seniors who are 
poor, why not reform to make sure that when that time comes 
they will not be the ones hurt the most?
    Mr. Gosar. Dr. Winston, did you want to make a comment?
    Mr. Winston. No.
    Mr. Gosar. How about you, Dr. Calabria?
    Mr. Calabria. I was going to add. Veronique touched on 
this, but I do think we have talked about the benefits of 
Medicare, Social Security, and these programs, but again, as 
mentioned, I will echo something that the gentleman from 
Illinois, Representative Davis, said about the young and the 
elderly. Programs that leave trillions of dollars of debt for 
the young to pay off, programs that make promises to the 
elderly that cannot be kept, that is not compassion, in my 
view.
    Mr. Gosar. That is creating cripples.
    I just want to ask you, Dr. Thomas--I have a few extra 
moments and the privilege of sitting in the chair--are we 
healthier as a Nation right now?
    Ms. Thomas. Healthier than when?
    Mr. Gosar. Oh, let's talk about the 1930s. Rising rates of 
diabetes? Was diabetes as high then as it is now?
    Ms. Thomas. We have dramatically improved life expectancy--
--
    Mr. Gosar. So let me ask you another question. Compared to 
other industrialized nations, how healthy are we? Let's compare 
diabetes.
    Ms. Thomas. Well, I can tell you off the top of my head 
that the infant mortality----
    Mr. Gosar. No, we are not comparing apples to apples here.
    Ms. Thomas. I am going to agree with you.
    Mr. Gosar. I want to talk to you about obesity.
    Ms. Thomas. Okay.
    Mr. Gosar. Let's talk about obesity. Let's not change the 
subject, let's go directly to apples-to-apples. Obesity.
    Ms. Thomas. Fortunately, the obesity epidemic has leveled 
off and is beginning to improve, but, yes, that is a major 
healthcare problem.
    Mr. Gosar. I would disagree on that. Diabetes?
    Ms. Thomas. Also a major healthcare problem.
    Mr. Gosar. Absolutely. So I want to bring you back to 
talking about----
    Ms. Thomas. They are diseases of affluence.
    Mr. Gosar. What is that?
    Ms. Thomas. They are diseases of affluence.
    Mr. Gosar. I don't know about that. You know, good eating 
policy, I am one of those guys. I am Celiac Sprue, by the way, 
so I am allergic to wheat and gluten, so that is why I am kind 
of the incredible shrinking guy. But we have to have patient 
accountability in this process. For example, for me, as Celiac 
Sprue, I have a seven day greater chance of getting any type of 
lymphoma. Okay? So what we want to do is have prevention. So 
what I want to see is I want an insurance come to me and say, 
listen, Dr. Gosar, we know that early detection of lymphoma is 
the best way and the cheapest way, so we are going to give you 
some incentives to come and have a physical twice during three 
years, and if you do that we are going to give you a kickback 
for doing that. You reincentivize good behavior. It is like our 
eating, our snack program. I have some problems with our snack 
program. Don't you? All that sugary stuff on those? I mean, you 
are public health. Come on, now.
    Ms. Thomas. I would definitely like to improve that, yes.
    Mr. Gosar. Okay, so tell me what is on the WIC program that 
everybody shouldn't be on? Women, infants, and children; 
complex carbohydrates, complex proteins. Why shouldn't we be 
all on that?
    Ms. Thomas. Well, some of us can't eat that without getting 
sick.
    Mr. Gosar. Name one. Name one diet that you won't get sick 
on. I am cautioning you once again, this is my forte, so if it 
is good enough for women, infants, and children----
    Ms. Thomas. Give me some specific examples.
    Mr. Gosar. I am asking you for specific examples. You 
said----
    Ms. Thomas. I don't have the WIC formulary in my head, I am 
sorry.
    Mr. Gosar. Oh, it is complex proteins and complex 
carbohydrates, so there are no simple sugars, maybe outside of 
a few fruit choices. I think if you are on government 
assistance, we should be all on the WIC program. Don't you 
think? If it is good enough for women, infants, and children, I 
am just telling you, those are one of the groups that was 
highlighted today, one of the weakest groups here, that if it 
meets a criteria of meeting that formulation for----
    Ms. Thomas. But they have different nutritional needs than 
everybody else. I am not sure where you are going.
    Mr. Gosar. Not necessarily. No, not necessarily. Can you 
tell me the public health mantra, was it a success in Indian 
Health Services? I mean, you heard about the integration for 
African-Americans. Tell me about the Indian Americans. It was a 
disaster. It has not been great. In fact, part of the trust 
obligations from the Federal Government was to work in concert 
with the Tribes, not to dictate to them. Isn't it true that the 
Tribes have an option out of ACA because of self-determination, 
and they are taking it? They are actually building their own 
hospitals. They are doing their own thing because they want to 
breed the aspect of prevention and patient accountability.
    Ms. Thomas. And you say the Indian Health Service has not 
done that?
    Mr. Gosar. They haven't. I mean, I am from Indian country. 
I can tell you that right now. The Navaho Nation and the San 
Carlos Tribe, they are all privatizing, because Government came 
in and said these are the services we are going to give you, 
regardless of what you want, we are going to do this 
accordingly, and it was a failure.
    Thirty percent of my patient base in my practice came to me 
to pay for my services because they valued them. Because they 
could have got it free from the Federal Government and they 
refused. There is something to learn from that experience 
there, and I hope that you go back and look at your notes, 
because some of the things you are citing aren't exactly 
factual historically.
    Last comments. Dr. De Rugy, from the standpoint of this 
hearing, is there anything that you would like to comment in 
regards?
    Ms. De Rugy. No. I mean, I think that we need to remember 
that even when the Government is well intentioned, a lot of the 
ways that it intervenes actually goes even against the goal 
that they have set of themselves, and we also need to remember 
that it always introduces distortion and that Government 
officials, unfortunately, have a great incentive to listen to 
interest groups.
    Mr. Gosar. So it is not about whether the Government is 
involved, it is a balance, wouldn't you say?
    Ms. De Rugy. Sorry?
    Mr. Gosar. Trying to find a balance of Government 
involvement.
    Ms. De Rugy. Well, I think one of the things that we have 
learned is that Government fails, and one of the best ways to 
prevent them is to actually limit the purview of Government 
intervention.
    Mr. Gosar. And maybe hold people accountable for things 
poorly done.
    Ms. De Rugy. Absolutely.
    Mr. Gosar. Dr. Winston, final comments.
    Mr. Winston. My final comments are that an awful lot of the 
discussion has been looking backward; there has been reference 
to history, Medicare, Social Security, things done in the past. 
The world changes, and I think it is probably more important to 
start looking forward, the future, looking for new ways in 
which we want to try to do things, recognizing that, yes, maybe 
in a different time Government was effective in doing 
something, initiating, doing it, but things change. And if 
there are other ways in which we can try to achieve the goal we 
are trying to do it, particularly with the market, we should be 
experimenting and be more open-minded to the fact that we don't 
have to be wedded to the past and look for new ways of doing 
things.
    Mr. Gosar. I like that aspect. You always have to look at 
your past before you go forward, because you are doomed to 
repeat the past if you don't.
    Dr. Calabria.
    Mr. Calabria. I will end with maybe summarizing a few 
points. First of all, of course, I think sometimes there is a 
bit of a strawman aspect to the market not being perfect, the 
Government not being perfect. Of course, as we know, there are 
no perfect institutions; they all have their flaws, and I think 
we need to find the better that works out of any of those 
institutions.
    I will reiterate a point I made a couple times before, 
which is I do think that there is a confusion between what is 
essentially a poverty problem and a failure of various markets. 
If you have zero income, you can't afford anything. That 
doesn't mean that all of those markets are failing. And, again, 
the way to address that is to try to address poverty directly, 
which I will say, as an aside, I think the overwhelming 
evidence across countries and across history is if you really, 
seriously want to reduce poverty, extending the market is the 
way to do it, and creating wealth in that regard.
    Finally, we often sort of hear a moral argument made. I 
will be very clear that my preference oftentimes for markets is 
not simply an issue of efficiency. But I believe that markets 
are, by and large, based on consensus, where I believe it was 
the gentleman from Virginia made the point about us not getting 
along. Well, the part of us not getting along is you can use 
the Government to force me to do things I don't want to; 
whereas, in the marketplace, for me to sell you something, I 
have to come to a price in agreement and terms on which you 
agree. So my goal as a generality is how do we try to build 
society more on consensus and cooperation, rather than 
coercion.
    Mr. Gosar. And customer service.
    Dr. Thomas, your last comments.
    Ms. Thomas. Well, I would agree with I believe it was Ms. 
Grisham who said that the health system works best when 
Government and nonprofits and for-profits all cooperate in the 
most efficient way, and that is what I am advocating. I also 
agree with Dr. Winston, who said times are changing, and even 
as a historian I don't think that we can do things exactly the 
way they did in 1935. But I think a sign that things really are 
changing is that the American Medical Association, which has 
opposed every national health insurance proposal since 1939, in 
2010, supported the Affordable Care Act, and, in fact the AMA's 
executive vice president, Michael D. Maves, admitted that we 
don't believe that maintaining the status quo is an acceptable 
option for physicians or the patients we serve. I think that is 
a very important turning point that we are at.
    Mr. Gosar. I don't think anybody will disagree that what we 
have as status quo would work. I am here because of that. I 
just don't think the solution that we have on the table works, 
because we didn't get everything on the table put on the table. 
At that time, the AMA represented about 18 percent of all 
physicians across the Country, hardly a vote of acknowledgment. 
And I think they are actually rescinding that aspect now; they 
don't particularly care about that, if I am not mistaken. So 
statistics can be used a certain way.
    The last thing I would like to say is that when we look at 
problems, problem-solvings, we have to look at where our costs 
are spent. You made a comment about we are spending a lot of 
money. In Medicaid and Medicare, the dual eligibles are the 
ones we are spending the most money on, and these are problem-
solvings that we want the best of the best. And there are two 
pools, there are the seniors that are so poor with Medicaid and 
Medicare, and there are the youngers that have real chronic 
conditions like multiple sclerosis and that aspect. It is 
ingenuity that sets us free, and that is why I came back to 
McCarron-Ferguson, okay? I want to turn the insurance industry 
upside down. I want them to be revolutionized to compete for my 
dollars, because I want new incentive programs based on me, 
customer service. That is one of the things that we have to get 
back to. Not Government dictated, but good customer service; 
patient-centered, patient-friendly. When we put all the market 
factors working on behalf of people, not making them cripples 
but to empower them to make health choices, they win.
    Ms. Thomas. But how can you turn that insurance industry 
upside down without an outside force?
    Mr. Gosar. That is why I said McCarron-Ferguson.
    Ms. Thomas. Okay.
    Mr. Gosar. I want choice. My choices are very different, as 
I elaborated, versus somebody else's. So breaking up the common 
denominator, if all of us are physicians here, we can't collude 
on prices. Okay? But insurance companies do. Okay? So what I 
want to do is I want to see the innovation within the insurance 
industry and show me what I don't even know. They are the 
experts in that. I am an expert in dentistry. I want them to 
show me what is possible, because I haven't dreamed it yet. 
Neither have you; neither has anybody here.
    What I see at this panel is the people that bring the 
building blocks of what you can envision as success, and we 
haven't got it. And what I think we saw from this panel is 
Government can't do that. When you talk about monopolies, 
noncompetitive bidding practices, Davis-Bacon, it goes on and 
on and on. I mean, look at the bid process of this website. 
There was no competitive bid. Tell me that a Davis-Bacon job is 
different than a private sector job. It isn't. But it is 22 
percent, on average, higher. It doesn't make any sense today. 
So we should be big people today and ask that all the pieces be 
put on the table. It is not a Republican, it is not a 
Democratic issue; it is an American issue, putting it out there 
and having a transparent discussion. We haven't that. And until 
we do, we are not going to get a solution.
    Thank you very much for this panel and we stand adjourned.
    [Whereupon, at 12:26 p.m., the committee was adjourned.]
























                                APPENDIX

                              ----------                              


               Material Submitted for the Hearing Record


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                 
